Prishtina The Effect Of Covid-19 Pandemic in Kosovo COVID-19 FINANCIAL EFFECT IN LOCAL GOVERNMENTS Besides the principal fiscal effects of the pandemic in the central level in Kosovo, COVID-19 has seriously affected municipalities. The local level governments have been in the forefront of adopting responsive and preventive measures with the purpose of ensuring a proper functioning despite the pandemic crisis. Additional to business-as-usual policy actions, the thirty eight(38) municipalities in Kosovo have intensified their work to provide emergency services and communicate to the citizens to contain the outburst of the virus. The coordination between the central and local level has also become more eminent in ensuring effective responses during crisis management. With the increase in the number of infected citizens and aggravation of the economic situation, the role of municipalities in Kosovo has become essential in all parts of the social and economic system. Municipalities have played a crucial role in implementing public health measures such as enforcing confinement policies, population monitoring, care for vulnerable populations, crisis communications, and ensuring public order and safety. Furthermore, the local level has been a key factor in guaranteeing social protection, sustaining local services and providing financial support for citizens. 8 8 Study on Emergency Needs and Socio-Economic Impact of Covid-19 on Local Government in Kosovo. The Association of Kosovo Municipalities 9 The Impact of the COVID-19 Pandemic on Local Government. GAP The reduced economic activity as a result of the pandemic coupled with the necessary reactive measures undertaken by the local governments are largely affecting the financial outlook at the local level in Kosovo. Upsurges in the local government expenditures and collapses in revenues caused by pandemic-related effects are creating an asymmetric relation between expenditures and revenues for municipalities. To see this asymmetric relation and have an overview of the municipal economic outlook, in the following sections, we will analyze the effect of the pandemic in government spending and own-source revenues. GOVERNMENT SPENDING The outburst of the COVID-19 pandemic has led to increased government spending, especially with regards to the purchase of goods and services. There has been an evident, increased spending to address supplementary needs and shortfalls of the health care system in municipalities, especially the demand for medical equipment and disinfectants as preparedness for responding to an outbreak of COVID-19. Given that a significant proportion of the local budgets is amounted to non-discretionary spending, mainly related to wages and salaries, there is very little space for municipalities to address additional expense coming from the controlling of the pandemic. As such, the limited space for maneuver and high dependence on the grants from the central government, has limited local governments from undertaking public procurement procedures, public investments, and sufficiently addressing socioeconomic challenges deriving from the pandemic. 9 11