Editorial: Economic salvation cannot depend on banks

Tirana Times
By Tirana Times March 20, 2020 15:31

Editorial: Economic salvation cannot depend on banks

TIRANA TIMES EDITORIAL

In the midst of the public health emergency of the Covid-19 the horror of a severe and crippling economic crisis is just a few days away, when at the end of this month many salaries will go unpaid, rents uncollected and all sorts of small revenues that keep households and small businesses going come to a halt. Almost all will be struggling.

The economic recession is coming all over the world however it is small and weak economies in transition such as Albania which are the most vulnerable. Therefore all eyes and ears were yesterday on the announcement of an economic salvage package by Prime Minister Rama.

First and foremost everyone is clear that the circumstances are extraordinary and the hand dealt is the worst ever. Therefore none is entitled to claim that the job of the government or of the Prime Minister is either easy or obvious at this point. However the economy plan put forward is fraught with some key deficiencies some of which can and should be revised.

This includes a 7 point list of measures: 25 million USD to the needs of the healthcare system, 100 million USD sovereign guarantee for loans that should be made available to the private sector for survival, 20 million USD to the defense sector for rescue and humanitarian missions, a reserve fund of 10 million USD for the Council of Ministers and an amnesty of late fees for the electricity bills for both individuals and businesses. An additional 65 million USD are planned for miscellaneous use of unemployment benefits and people most in need (likely people with disabilities and so on). 

First of all the plan, even if we forget for a moment the skimpy figures,  is neither clear nor reassuring not even at the short term and not even as an alternative or as the PM calls it ‘plan A’. 

While setting aside some required funds for sectors such as healthcare and humanitarian missions, is good and necessary the only other injected guarantees in the system depend on the banking sector. This measure indeed is the only one addressed the heart of the economic problem: the fact that small business which to estimate employ and basically feed about two thirds of Albanians will very soon be unable to do that anymore. 

However by enabling the bank to be the sole and ultimate decision maker this measure compromises its own effect. First the banks will not consider a sovereign guarantee as a strong risk minimizing option in the conditions of severe economic downturn and second the practical processing capabilities of banks for the moment are at minimum. Banks are struggling to service individuals in only 4 working hours and with limited staff let alone handle loan applications.

Perhaps it is not possible to hand out cash to citizens as other more robust economies are planning to do. However if the administration really wants everyone to behave as if at a war it should give its own example first. All current and future planned investment projects, even those deemed as good for the midterm future, should be reconsidered and the public funds repurposed for the immediate needs.

Halving ministers and MPs salaries is a façade move that will yield peanuts. Halving concession fees and urban renewal projects (which can be postponed at later better times) might do a bit better. 

Experts argue that the hour of truth is coming: that unfortunate moment when decision- makers will have to choose between saving most lives and destroying the economy or accepting a human toll and attempting to rescue the livelihood of many others.

The Albanian administration and especially those at the helm of public finances should think this through very carefully because that hour of reckoning may come to their door before they have time to transition to any plan B.  

Tirana Times
By Tirana Times March 20, 2020 15:31