At the center of its economic program, the Vetëvendosje government has often projected the creation of two public institutions, the Development Bank and the Sovereign Wealth Fund. At first glance, both seem attractive and modern. They seem to promise to accelerate the process of catching up with advanced economies. However, a logical question that can be asked is whether their creation will make our financial architecture more coherent, or is the government perhaps trying to create yet another confusion in public opinion?
Written by: Fadil Sahiti
In contemporary development literature, but also in practice, such institutions become a tool for progress only when they operate within a clear mandate. Development Banks mobilize capital to invest in productive projects. They correct market failures and support strategic sectors. The role of the Sovereign Fund, on the other hand, is to manage public financial assets that are accumulated from fiscal surpluses or from natural rents. They have a clear goal, to preserve and increase their value, as well as to create macroeconomic stability in times of crisis. So, except in the light of structural surpluses, as is the case for example in Norway, or in areas with clear natural resources, the creation of such funds sounds paradoxical. If a Sovereign Fund were to function as a development instrument, as is often promoted by the government, then what is its difference with the Development Bank? In a context like ours, without clarifying this mandate, its creation creates overlap. And when this is not clarified, we will have two names for the same ambiguity.
It needs to be clarified. Kosovo needs such institutions, especially a Development Bank. But with a clear mandate. The decision to establish this bank should be taken after the government has answered a simple question: is the new institutional architecture integrated into a coherent strategy of structural transformation? Without a clear answer to this question, the political rhetoric of economic development risks degrading into a semantic phrase: too many institutions, too little work capacity.
There is a second, deeper risk. In the context of institutional capacity constraints (as is the case with Kosovo’s institutions), the addition of new institutions does not guarantee increased government effectiveness; it often produces a greater fragmentation of responsibilities and a lack of accountability. Experience shows us that where there is no clear mandate, responsibility becomes more flexible; and when responsibility becomes flexible, performance becomes even more relative. Meanwhile, when performance becomes relative, success is measured by statements, not facts.
Therefore, a Development Bank without strong professional standards and without protection from political interference is likely to become a political instrument in the hands of regimes. Meanwhile, a Sovereign Wealth Fund without clear transparency rules and without a clear separation between development and fiscal objectives can easily become an institution with a big name but little small business. In both situations, form will prevail over substance.
Meanwhile, if the Vetëvendosje government's goal is to truly catch up with the pace of development of advanced economies, then priority must be given to strengthening existing economic governance mechanisms, increasing transparency, and creating an integrated governance framework where each sector has a clear and measurable role. Otherwise, this government, like others before it, risks creating the same paradox of creating institutions for development, but governing a process without a head.
This government needs to understand one thing. Good governance has nothing to do with the names of institutions. Good governance has more to do with the capacity it has built. And, capacity is not built by putting more signs on doors, but by governing with fewer institutions, but ones that function.
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