WB: Albania needs more commitment towards lowering public debt

Tirana Times
By Tirana Times September 3, 2019 08:35

WB: Albania needs more commitment towards lowering public debt

TIRANA, Sept. 2- Albania and Montenegro need more commitment to enforce the fiscal rules they set, which aim at reducing debt or keeping the deficit under control.

In many cases the rules that countries impose are deviated while a lack of general public information reduces the political pressure to implement them.  A document by the World Bank’s Macroeconomic and Global Investment and Trade Practices Department addresses in particular the fiscal rules in the Western Balkan countries.

Thus, this document states that the countries of the Western Balkans are different in many respects, so each one according to the report must apply different rules to achieve the same goal.  Albania and Serbia have the highest public debt. Albania has as objective to reduce public debt to 45 percent of GDP. This objective is complemented by other rules such as the deficit level that in the event of a 5 percent economic growth, it should not exceed 2 percent of GDP, as well as another rule on current expenditure or the 0.7 percent funded by contingencies. Another spending rule states that the deficit for the first quarter of the year cannot exceed 30 percent of the deficit planned for the whole year.

“Albania’s debt target is prudent but the debt rule does not provide any particular pace to reach this target.  Making good progress will need to be more than just implementing the rule over the years. On the other hand, the rule can be very demanding during recessions that are not severe enough to circumvent the clauses,” the document wrote.

The report also stated that analyses show that in some countries minimum compliance with the deficit rule will not reduce debt to levels that are considered prudent. Albania will need to have a surplus of 0.8 percent of GDP each year to reach its 45 percent debt target by 2025 which is much more than required by the deficit rule.

The same underlines in the main summary that policies towards fiscal rules are an important issue in the Western Balkan countries (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, Northern Macedonia and Serbia). According to a rough estimate countries with rules (all except northern Macedonia) have met the part about the public debt rule and generally about the deficit in just over half the time. The report stated that an online survey conducted as part of this study suggests that public understanding of these rules is limited which may reduce political pressure for compliance. “To reduce debt to a prudent level, Albania and Montenegro will need strong commitment to meet their fiscal rules and will often need to do more than require their deficit rules, perhaps more commitment than has been demonstrated in recent years,” the report said.

 

Tirana Times
By Tirana Times September 3, 2019 08:35