TIRANA, Sep 30lbania’s finance ministry said it has proposed to increase government spending for the current year by 17 billion Lek (124 million euro) to 34% of the projected gross domestic product (GDP) under a supplementary budget bill moved to parliament. Previous spending was set at 32.3% of GDP.
The extra revenue comes from the privatisation of major state-owned assets this and last year, Finance Minister Ridvan Bode said in a statement. He introduced the supplementary budget bill to Albania’s 140-seat parliament on Thursday.
The parliament will vote on the proposal at a session that is still to be scheduled. If it is enacted, it will be the fourth year in row that Albania has had a supplementary budget.
“We had revenue from last year we can use this year. We knew that this year there will be pressure from the global crisis. We have sped up the privatisation process and created an opportunity to ensure the stability of the Albanian economy with millions of euro in additional money,” Bode said in the statement.
In June 2008 Albania sold a 85% stake in its oil refinery and distributor ARMO to a U.S.-Swiss consortium for 129 million euro. In April this year the government endorsed the sale of a 76% stake in electricity distributor OSSH to Czech CEZ for 102 million euro and of its residual 12.6% stake in Albanian Mobile Communications (AMC) to the AMC majority owner, Greek wireless operator Cosmote, for 48.2 million euro.
“Everything will be allocated for public investment projects,” Bode said, mentioning also the utilisation of a 250 million euro syndicated loan that Albania borrowed last year from Deutsche Bank and Greece’s Alpha Bank.
Albania had a 39.92 billion Lek consolidated budget deficit in the first seven months of the year, compared to a 5.56 billion Lek deficit in the same period in 2008. Revenue totalled 171.5 billion Lek through July 2009, 11.8% below plan, while spending totalled 211.37 billion Lek, 4.5% lower than planned.
Bode further said in the statement that the proposal for a budget revisional so lowers the 2009 tax revenue forecast by 7.5 billion Lek to 340 billion Lek or down by 2.0% compared to the initial target.
Domestic debt is proposed to be lowered by 0.2 percentage points to 4.0% of GDP.
Bode said that Albania’s economy will grow by a real 5.0% this year, despite the global economic crisis. He said that in the first quarter of 2009 the economy grew by a real 6.0%.
Albania’s economy grew by a real 7.2% in 2008 and by 6.0% in 2007. The country has a forecast of 6.3% of GDP growth in 2009.
Fullani against the budget deficit increase
Bank of Albania reacted to government’s decision to increase it’s budget spending for 2009 calling the decision a negative factor in the preservation of the microeconomic stability in the country
Ardian Fullani, the Bank’s governor, said that public debt interest rates are up and growing and the fiscal expansionism of the government is boosting such a trend. Fullani called for the government to project a more balanced budget in 2010 as the only for the country to regain its monetary stability and for BoA to follow up with its liberal monetary policies.
This is not the first time BoA warns the government to keep its spending in check, but the latest decision by the authorities means that the budget deficit will increase to 6.4% of the GDP. Many experts blame the high levels of public spending as the culprit behind the tremendous devaluation of Lek (the national currency). The Lek pitfall in 2009 reached 10% last toward Euro. What is more, Fullani doesn’t believe that a devalued Lek has an impact on easing the government’s burden in paying back its accumulating debt and higher interest rates.
