Following repeated recommendations from the EU, Serbia formally developed a public investment management framework, starting one operational level below national development and investment planning. The system, centred in the Ministry of Finance, was established in 2019 and substantially amended in 2023. However, it has not become effective in essence: a single investment pipeline is still missing, and required decision-making steps are not always undertaken in a timely or meaningful way. Full and genuine implementation of this system is a key governance reform under the Reform Agenda, but given the expected time horizon, complementary measures would be highly desirable to minimise the negative effects in the meantime.
VII.1 Public Investment in the Reform Agenda
Strengthening public investment management has been identified as one of the priorities tackled by the Reform Agenda under the Private Sector Development and Business Environment heading. The reform objectives are formulated in broad terms: first, the adoption of a policy paper and adjoining action plan that will define the path of reform, and then the adoption of the improved legal framework (Table 11). The aim is to resolve deep and long-standing challenges that weigh on the decision-making framework below the absent national development and investment plans.
Table 11: Reform Agenda — Public Investment Management
| Reform Measure | Reform Indicator | Deadline | Baseline | Sources of verification |
|---|---|---|---|---|
| 1. A Policy Paper and an adjoining time-bound Action Plan for the improvement of public investment management, following consultations with the EC, has been adopted and their implementation started | Extent to which measures designed for public investment management are implemented | December 2026 | Decision on Amendments and Additions to the PFM RP 2023–2025 | Policy Paper and adjoining time-bound Action Plan adopted by the Government and information delivered to the EC |
| 2. An improved legal framework for public investment management, which establishes a unified, comprehensive and transparent mechanism for prioritising all public investments regardless of type and source of financing, following consultations with the EC and in line with best international standards, is adopted | Extent to which measures designed for public investment management are implemented | December 2027 | Decree on Capital Projects (Official Gazette of the RS, no. 79/2023) | Adopted legal acts published in the Official Gazette of the RS |
Source: Reform Agenda for Serbia, Annex (2024).
Presently, the problem is much more one of genuine implementation than of regulatory framework — which is probably why the milestones are open-ended. The reform needs to be comprehensive, tackling policy — above all establishing a single project pipeline, i.e. inclusion and comprehensive consideration of all potential investment projects (including those funded under bilateral credit contracts) from the very first selection steps to final implementation. All specific aspects of implementation also need to be tackled, from institutional strengthening and capacity building to effective implementation mechanisms, so that project appraisal and selection, environmental and social sustainability, institutional capacities, transparency, and access to financing for public investments are improved.
By end-2025, no steps had yet fallen due. Even so, there was no publicly available indication that preparatory work on the policy paper or action plan had begun, while the preconditions identified by the EU Delegation — stronger appraisal and selection, institutional capacity, and transparency mechanisms — remained largely unaddressed in practice. The draft Public Finance Management Reform Programme published in November 2025 also does not contain explicit commitments in this area (see Text Box 5).
Text Box 5: Public Investment Management in the Draft PFM Reform Programme
In the draft Public Finance Management Reform Programme (Ministry of Finance of the Republic of Serbia, 2025), public investment management is considered under a single measure I.4. The draft speaks of strengthening institutional capacity and introducing amendments to the legal framework in general terms. In the accompanying Action Plan, the measure is operationalised primarily through capacity-building activities, improved and standardised reporting and the preparation of methodological manuals.
Progress is measured through gradual increases in the share of budgeted projects subject to appraisal, from 60% in 2025 to 80% by 2028. The only reference to legal change is framed as unspecified amendments by end-2026, with no indication that recurrence to exemptions, lex specialis, or intergovernmental arrangements would be reduced or eliminated. Taken together, the Strategy and Action Plan envisage incremental administrative improvements rather than the change in approach repeatedly called for by external assessments.
VII.2 Diagnosis
Serbia's public investment management framework is relatively developed on paper, but not in practice. The 2023 Decree on Capital Projects established the Public Investment Management and Information System (PIMIS), a digital platform for project documentation, assessment, and implementation from identification through ex post evaluation. Formal responsibility for project prioritisation sits with a ministerial-level Commission for Capital Investments chaired by the Prime Minister, with a Sub-commission handling projects financed or co-financed from EU funds or other international sources (Republic of Serbia, 2023a). This architecture should allow projects to be managed through a unified, rule-based system from conception to completion. In practice, however, expert analyses all point to the same limitation: important exemptions and parallel procedures continue to weaken effective coverage, so that the system does not yet exercise full control over the projects with the greatest fiscal and developmental significance, while allowing certain procedural requirements to be completed only formally, after a project has already advanced (Fiscal Council, 2024, 2025; World Bank, 2025; SIGMA, 2023).
Successive European Commission reports testify to its long-standing efforts to encourage improvements. The comments on successive Reports from 2020 onwards centre on the absence of a unified system and the need for a single mechanism for prioritising all investments regardless of type and source of financing (European Commission 2020, 2021, 2022). The government responded with the 2019 Decree on Capital Projects Management (Republic of Serbia, 2019b), amended in 2022, and then the 2023 Decree. Over time, the Commission's observations became more precise in identifying shortfalls, rather than more positive: the 2025 Progress Report observes that Serbia has yet to develop a genuine single pipeline for capital investment management (European Commission 2023, 2024, 2025a).
These shortfalls carry measurable long-term costs, especially now, when Serbia is undertaking capital spending at historically high levels, including large projects that cannot be justified by self-evident infrastructure needs, such as those related to EXPO 2027. When large projects proceed outside standard appraisal and monitoring, the fiscal and opportunity costs become correspondingly larger. A significant share of current and future public resources are locked into commitments whose fiscal, economic, and spatial effects will extend well beyond the medium-term budget framework and the completion of the current Reform Agenda. These future costs come on top of ongoing efficiency losses: World Bank estimates place Serbia's public investment efficiency at around 65.6%, above the Western Balkan average but below aspirational peers at around 70% (World Bank, 2025).
VII.3 Recommendations
As the reform milestones extend into the medium term, improvements during the current investment cycle will depend largely on how existing rules are applied in practice. A substantial advocacy and independent monitoring effort should be invested in raising transparency. Stakeholder participation needs to be encouraged, and the evaluation capacity of all interested parties enhanced, also to be ready for the time when reforms are fully applied.
This will reduce the scope for resource misallocation not only until the reforms are in place (December 2027) but also until the ongoing projects that at that moment will be too advanced to stop are fully implemented. It will also improve the effectiveness of full alignment, as stakeholders will be readier when the time comes. For more specific examples of policies and measures, see the Appendix.