WB: Energy prices to grow 8-15%

TIRANA, April 15؆rom 2010, energy prices might increase by 8-15% according to World Bank. However, WB has proposed the reduction or the complete elimination of VAT for electric energy to cope with steep prices.
Parliamentary Commission of Economy and Finance approved on Tuesday the privatization of OSSH by CEZ, a Czech company operating in Central and Eastern Europe, for the sum of 102 million EUR. One of the main problems of OSSH, which clearly affects the energy prices, is the low collectability rate of energy bills. According to a WB study a month ago, Albanians paid less than 50% of their electric bills. Estimations note that CEZ will be able to collect only 68% of the possible revenues from its newest purchase. Losses from unpaid bills amounted to 60 million EUR. Indeed, one of the conditions in the privatization process, to cut such losses. CEZ aims to cut its losses to only 15% for the next 5 years.
With the privatization of Albania’s Distributing System Operator (OSSH), the Albanian government concluded a deal with CEZ not to increase prices before 2010.
Future prices will also depend on energy imports and prices in the global market in 2010.
“Energy prices in the region and levels of rainfall will reflect on domestic prices next year. A minimal increase of 8-9 per cent is predicted if global prices stay the same as this year. If, however, global crisis grow in the same levels of 2008, then energy prices in Albania could grow as high as by 15 per cent,” said Demetrios Papathanassiou, a World Bank economist, in front of the Albanian Parliament.
Where there is a problem, there is also a solution. According to Papathanassiou, the government can ease the burden of future energy bill by ways of manipulating VAT.
“When consumers pay the bill, it is important they understand that 1 in 5 ALL of what is paid goes to the state, not to the company. Of course, this is a political argument and it is a government’s decision,” said Papathanassiou. “What it can be done is to replace VAT with a different tax which benefits both the consumer and the provider.”
However, IMF has always opposed a VAT reduction, which is considered important revenue for the state budget when other revenue sources are suffering the effects of the global economic crisis. Strangely enough, World Bank excludes IMF from the debate without reservations.
“I think, there’s no present agreement between Albanian and IMF, therefore you can do whatever you like,” said the WB representative.
For all the loans taken by the government from the World Bank or other financial institutions, IMF served as authority guaranteeing Albania’s ability to repay those loans. While the latest WB declaration might not sound as striking, it is still worrisome by way of historical experience. If mommy and daddy (the institutions can pick the gender of their choice here) are quarreling, it is the kid (Albania) taking the blows.
Meanwhile, Customer Advocacy Office (CAO) protested through a press release the current statement from the World Bank. According to CAO, WB is openly favoring foreign businesses in robbing Albanian customers.
“In no other country can a country interfere with the state and demand the increase in energy prices on behalf of a foreign company,” stated the press release, adding that, “No other country would have tolerated WB presenting itself in front of the Parliament with demands that are an exclusive right of a governmental agency.”
CAO accused World Bank of being part of a foreign officials lobby that has created private financial domains during the last 18 years in Albania by corruptive interferences in privatization processes.