IMF pleased with Albania’s results

TIRANA, Nov. 6 – The International Monetary Fund on Monday said it was pleased with Albania’s economic policies and results until now urging the country to accelerate the privatiation of its strategic public companies next year. An IMF mission visited Tirana October 24-November 6, 2006, to conduct discussions for the second review under the current PRGF/EFF arrangement. “Overall, the program is on track and progress in the implementation of agreed structural reform has been satisfactory,” said s statement. “Macroeconomic developments are in line with previous projections and the fiscal performance is solid. The authorities have taken important steps to maintain financial system stability. Continued structural reforms, however, remain essential to the success of the government’s economic program supported by the IMF.”
The IMF and Albania have signed a US$24.7 million (19.4 million euro) three-year deal earlier this year to help the Balkan countries economy. The agreement must be renewed every six months to ensure the government is meeting growth, spending, taxation targets and the next meeting of the IMF board was expected in Jan. 2007.
“Overall, the program is on track and progress on agreed structural reform has been satisfactory. The mission reached understandings with the authorities regarding program targets and structural reform measures for the coming year. The IMF’s Executive Board discussion on the review is scheduled for January 2007. Macroeconomic developments are in line with previous projections. Real GDP growth is expected to be at least 5 percent this year and to return to its trend rate of 6 percent next year supported by strong growth in services, public investment, and mineral exports. The external current account balance is projected to narrow in 2006 reflecting strong exports but widen somewhat next year reflecting increased imports of capital goods. Inflation has remained within the Bank of Albania 3ѱ percent target range so far in 2006 as increasing pressures on non-tradable prices have been mitigated in part by the increase in the policy rate in July. The fiscal performance is solid. Revenues are in line with increased projections of the supplementary budget thanks to continuous improvements in tax and customs administration. Net domestic credit to government, the key fiscal target in the program, is projected to stay within the agreed program target in 2006. The 2007 budget is based on realistic revenue projections and contains adequate contingencies to protect priority spending. As in the past, receipts from strategic privatization will be allocated in equal shares to investment and debt reduction, with the part allocated to investment financing the Durr쳭Kuk쳭Morin롣orridor.”
The IMF said Albania had to continue structural reforms it considered as “essential to the success of the government’s economic program supported by the IMF”, and also further strengthen tax collection process. It also said in 2007 it expected acceleration of the privatization of large enterprises like fixed-line telephone company Albtelecom, insurance company INSIG, and the distribution arm of power corporation KESH. Albania’s gross domestic product is projected to grow five percent this year and back on previous track of six percent in 2007, while inflation at the 2-4 percent rate fixed from the central bank of Albania.
The mission held discussions with the authorities for the second review under the IMF program. It met with the President, the Prime Minister, the Minister of Finance and several other key Ministers, the Governor of the Bank of Albania, members of parliament, leaders of opposition parties, and representatives of the international community, local businesses, academia, NGOs, and media.
“Discussions are ongoing with the authorities on the limit on non-concessional external borrowing for 2007 and the necessary measures to further strengthen budget contingencies in the medium term. Looking ahead, the medium-term fiscal strategy remains unchanged, with a focus on enhanced revenue mobilization and expenditure efficiency, including through the introduction of mid-year budget reviews,” according to the statement. The authorities have taken important steps to maintain financial system stability. The Bank of Albania has formulated the regulatory and supervisory measures necessary to maintain the stability of the banking system in face of rapid credit growth, and initiated a discussion with commercial banks on this matter. The establishment of a new integrated Financial Supervisory Agency will help improve the supervision of nonbank financial institutions. Looking forward, the establishment of a credit bureau in 2007 will help reduce credit risk in the banking system. Continued structural reforms remain essential to the success of the government’s economic program supported by the IMF. Revenue administration reforms will focus on further strengthening the Large Taxpayers Office and reviewing the role of the Tax Police. Privatization of large enterprises is expected to accelerate in 2007, particularly regarding Albtelecom, INSIG, and the distribution arm of KESH. Notwithstanding encouraging progress in many areas, stronger efforts are needed to improve public debt management and official statistics.
There was an optimistic tone from the Finance Minister Ridvan Bode who said they had agreed with the mission that the country was ‘allowed’ to look for commercial loans up to 380 million euro in the next year. That means that the executive may find it easy to look for loans to fund the Kukes-Morini road, in which only one part, the most difficult one Rreshe-Kalimash would cost $518 million.