Macroeconomics and Monetary Economics - 1

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Abstract

The aim of this paper is analyze the impact of irregular receipts (one-time receipts such as
dividends from public companies and privatization proceeds) in budget deficits that are partially
financed by public debt (internal and external) in Kosovo. Kosovo is experiencing both a budget deficit
and public debt burden, so it is important to analyze the very beginnings of these tendencies. There is
extensive literature on the causes of a budget deficit, its definition and measurement. The literature
review method is adopted for this study, and research is refined by including empirical and theoretical
studies of budget deficits and public debts. Using this line of reasoning, we have defined and measured
special-purpose deficits, so-called “regular” budget deficits that consider only regular receipts and
outlays. This analysis leads to the conclusion that irregular receipts used by government to engage in
large infrastructure projects and/or politically motivated increases of wage and salary bills and social
transfers created future liabilities that had to be financed through public debt. This is a case study of
Kosovo. Research has been carried out using primary data drawn from Kosovo’s annual financial
reports and annual bulletins on public debt. Budget deficits in Kosovo are results of continuous outlays
based on initially high cash balances and irregular receipts that could not be met later by regular
receipts. All this was supported by lack of legal infrastructure or fiscal rules for several years. The
implications of this paper will be of high importance for policy-makers and academics. This is a unique
approach to the issues of Kosovo's budget deficit and debt.

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Published

2021-06-25

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