2014 budget to be revised upward by $32 mln

Prime Minister Edi Rama announced the state budget will be revised upward by $32 in extra income collected during this year which will help the Albanian government bring down public debt already hovering at around 70 percent of the GDP and the budget deficit at around 6 percent of the GDP.
TIRANA, Sept. 17 – For the first time in the past five years when the budget was regularly cut due to overoptimistic forecasts and underperforming revenues affected by the Eurozone crisis, the state budget will be revised upward as public finances have register a double-digit growth rate during this year, overtaking even forecasts by the Albanian government and the IMF.
Speaking in a press conference this week, Prime Minister Edi Rama announced the state budget will be revised upward by $32 in extra income collected during this year which will help the Albanian government bring down public debt already hovering at around 70 percent of the GDP and the budget deficit at around 6 percent of the GDP.
“There is 3.2 billion lek or $32 million above the ambitious target set with the IMF which gives us the opportunity to start reducing the deficit and the public debt starting this year, even though the target set along with the IMF was that the reduction of the deficit and debt should start by next year,” said Rama, stressing that the budget was being revised upward for the first time in the past five years.
The Prime Minister also announced $43 million would be made available to people with disabilities to clear unpaid bills. Meanwhile, $152 million will go to public investments, mainly in road infrastructure projects.
Speaking of the reform in the tax system which has initiated with a working group on the unification of the tax and customs administrations, Rama said local government units, which have been considerably cut under a new territorial reform, will also be stripped of their tax officials but pledged this would not affect their revenue.
Fuelled by a strong recovery in the value added tax and the shift to progressive taxation which has sharply increased revenue from corporate income tax, Albania’s budget revenues rose by 11 percent year-on-year in the first seven months of 2014, reaching a record high 205 billion lek (Euro 1.43 billion), registering the best performance since 2008 just before the onset of the global financial crisis when Albania’s decade of an annual 6 percent GDP growth rate came to an end, according to Finance Ministry data.
With public debt standing at a record 70 percent of the GDP and a renewed deal with the IMF in place, the Albanian government continued following a tight fiscal policy despite public finances having significantly recovered compared to 2013. The under-execution of public investments during this year remains a concern also for the IMF mission which is assisting the Albanian government to recover the ailing economy supported by a Euro 334 million loan to pay off accumulated unpaid bills.
Public investments in the first seven months of this were down by 47 percent to around 24 billion lek (Euro 168 million) compared to the same period in 2013 when public investments soared in the run-up to the June 2013 general elections, according to Finance Ministry data. Public investments during the first seven months of this year were also down by 26.4 percent compared to the target set for this period.
Lending back to positive growth rates, a slight recovery in domestic consumption and private investments, budget revenues up by double digits and the clearance of arrears progressing are positive signals that the Albanian economy is heading toward moderate recovery in 2014 after growing by an average of 1.2 percent in the past couple of years. However, public debt at around 70 percent of the GDP, bad loans at around a quarter, exports having dropped to a single-digit growth, deteriorating competitiveness on a regional and global level and huge deficits in the pension and energy system continue posing significant threats to the country’s economy and public finances.
Data published by the country’s state institutions show both domestic consumption and private investments, the two key drivers of the Albanian economy, registered a significant recovery in the first seven months of this year while lending returned to positive growth rates after a 12-month moderate decline of around 2 percent.