TIRANA, March 29, 2007ؔhe World Bank Board of Executive Directors approved a $10 million Development Policy Operation for Albania. The credit is the first in a series of three Development Policy Operations (DPOs), designed to support some of the key aspects of the Government’s National Strategy for Development and Integration aimed at tackling the twin challenges of sustaining growth (primarily through private sector development), and improving delivery of public social services. A third objective, improving governance and strengthening accountability mechanisms, will be the main cross-cutting objective of the DPO.
Sustaining growth
Over 1996-2005, Albania grew at an average rate of 5.7 percent, while the poverty headcount declined from 25 percent in 2002 to 19 percent in 2005. However, sustaining this fast growth and improving social outcomes will require continuation of significant reforms in several areas. The DPO program is structured around three components, improving the investment climate for private sector-led growth. This component will support Government plans to reduce constraints to growth by strengthening the regulatory environment for business, improving the functioning of land markets, and improving the oversight of the non-bank financial sector.
Fiscal sustainability and effectiveness of public service delivery.
The focus here will be on the health, social insurance and water sectors. Actions will address health financing, the health sector regulatory framework, the pension policy and its implementation, and the policy and incentive framework in the water sector. Improving public finances and public administration, which is the third component aims at improving public financial management, furthering reforms in public administration, and advancing decentralization by supporting the strengthening of local finances.
Technical details
Expected program outcomes include a reduction in business costs, more productive public expenditures and investments, improved management of the civil service, and progress towards more sustainable and effective public services in water, health and pensions. Over the longer term, the program should also lay some of the key foundations for and thus contribute to increased exports and private sector investment, sustainable growth and reduction in corruption. “The DPO supports a strong reform program of the Government of Albania. The approval of the DPO will provide important signaling effects and credibility for the Government in terms of its structural policy agenda,” says Sanjay Kathuria, Lead Economist and program leader for the DPO. “We are very pleased and congratulate the Government on the approval of the DPO, which represents the flagship program of the World Bank’s four year (FY 2006-09) Country Assistance Strategy,” says Nadir Mohammed, Country Manager for Albania.
The credit has a maturity of 20 years, with a 10 years grace period. Albania joined the World Bank in 1991. World Bank commitments to the country to date total approximately $925 million for 64 operations.
