| Summary: | Improving the efficiency and equity of public spending and strengthening revenue mobilization remains a priority in all Western Balkan countries. Public sector wage bills and pensions constitute the largest share of public spending in the region. Tighter controls on wage bills, reducing tax expenditures, and better targeting of social benefits would open space for more public investment, improve equity, and enable the build-up of fiscal buffers to mitigate rising risks. As outlined in this report, fiscal rules can help anchor spending and fiscal sustainability. However, their credibility in the region needs to be restored after they have been repeatedly breached in some countries. Fiscal management reforms are needed as a part of broader structural reforms that help increase the region's export competitiveness. This includes strengthening state institutions that protect the rule of law and private sector competition to unleash productivity growth and innovation by enabling a level playing field between firms. Together, these reforms would help unlock stronger, more equitable, and more sustainable growth, ensuring faster convergence with EU income levels. A strong commitment to sound macro-fiscal policy and structural reforms was always important-rising uncertainties have made it an imperative
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