Hashani: Suspending the salary law does not solve the consequences of high budget costs
The decision to suspend the Law on Wages by the Constitutional Court does not solve the consequences of the rather high cost of this law, which worsens the budget situation, as well as stops public investments or puts the country into public debt.
This was said today in the debate "Wages in the public sector in Kosovo and the possible implications for macro-fiscal stability and cohesion", organized by the 'Riinvest' Institute.
Muhamet Mustafa from 'Riinvest' said that the new wage law worsens the budgetary situation, therefore it has an impact on the trend of increasing public debt that could create problems in macro-fiscal stability, while adding that the new government will have precisely this wage problem.
"When the cost of wages is too high, the government is left with the instruments to either damage certain sectors of vital importance, such as education, health and public investments, or to incur debt. For public debt, we have seen a very dynamic trend of increasing domestic debt, although the debt share in GDP is still not critical. However, such a trend worsens these ratios and can create problems in macro-economic stability. Therefore, one of the most serious problems that the new government that is coming now will face is precisely this problem," said Mustafa.
Alban Hashani, executive director at Riinvest, said that decisions to increase salaries have created large differences with private sector salaries and that the new law has no basis for "same work - similar salary."
Hashani said that over 40 percent is the difference between the average salary in the public sector and that of the private sector.
He raised his concern about the high salaries of Kosovo deputies, which are higher than in the countries of the region.
"Kosovo has a high percentage of salaries in the budget and in relation to regional countries it leads, followed only by Montenegro, and the others have a lower level, while in 2020 this participation reaches 31 or 32 percent of the budget. Compared to capital expenditures, they do not exceed 26 percent. In the case of MPs, the salary of 1 thousand 912 euros as the basic salary of MPs in Kosovo is higher than in the countries of the region, it is almost double the average. In fact, if we compare these salaries in relation to the minimum salary of the respective countries, it results that in Kosovo the salary of an MP is 11.25 times higher than the minimum salary, which is more than 2.5 times this proportion in other countries in the region," Hashani declared.
Hashani also mentioned the statistics on the implications of this law for macro-fiscal stability, according to which, this law will affect the rate of increase in salaries, judged according to the Medium-Term Expenditure Framework in 2020, they will increase between 5,4 percent and 11,2 .730 percent, and in the extreme case, if the wage scale reaches 17,7 million euros, the increase will be XNUMX percent compared to the previous year.
According to Hashani, this will reduce the space for increasing the budget for other purposes, in particular for capital investments, investments in education, health and increasing the competitiveness of the economy.
The executive director of Riinvest said that the large number of civil servants in Kosovo is large and has been growing continuously. While in 2010 there were 77 thousand civil servants in 2019 there are 85 thousand 963 or an increase in civil servants, as Hashani said, more accelerated than the population growth.
He also commented on the decision of the Constitutional Court, according to which the suspension of the wage law does not solve the consequences.
"Regarding the issue of suspension, this neither solves the problem, nor does it really deal with the problem. The problem already exists, we are dealing with the logic through which this law came into force and now I am dealing with the consequences. The consequences are that it has been temporarily suspended, probably the court will soon make a decision on this matter, but the problem is not being solved. The problem exists, we are dealing with the consequences", said Hashani.
Even Berat Thaçi from the GAP Institute emphasized that the increase in wages risks the increase in taxes and the cost of living of those who are at the poverty level.
"Another scenario is that investments will decrease or we will have an increase in taxes. And in this case, if the government wants this scenario, the Value Added Tax will most likely increase, a tax that citizens will pay. So, the cost of living will increase and we as a society, in order to maintain the high salaries of those who work in the public sector, will be forced to impoverish all those who are outside the public sector. The cost of living will also increase for those who live on the poverty line or who are poor," declared Thaçi.
Among the recommendations from the debate was that the Parliament and the Government should accurately assess the effects of the new Law on Salaries and take the necessary measures to avoid its negative impact on budgetary stability. /I. Shabani/
