Albania downgraded on ratings due to pre-election spending fear

TIRANA, April 20 – JCR Eurasia Rating, a Turkish based rating agency, changed its evaluation on Albania’s public debt from “stable” to “negative outlook” as a result of a deteriorating macro-economic situation in the country, a clear sign of the challenges that the country is facing.
“JCR Eurasia Rating maintained the long term sovereign rating of the Republic of Albania at ‘BB+’ (double B plus), while the short term rating has also been re-affirmed for the period at ‘B’ (single B).
A ‘negative’ outlook has been placed on all ratings due to the deteriorating macro-economic indicators of the sovereign as well as the global financial recession which is having an overall slowdown effect on the economy,” the company said last week in a press release.
“High trade and current account deficit to GDP ratios and the expected populist expenditures in anticipation of the June 28 general elections may adversely affect the country’s macroeconomic environment, going forward,” the agency added.
JCR was contracted by the Albanian Ministry of Finance in 2008 to evaluate the quality of public debt of the country. Several international financial institutions have already warned the Albanian government on pre-election spending.
The IMF advised a few weeks ago that the government should postpone or cancel a wages and pensions increase projected for May 1 while Albania’s central bank urged the government to cancel some of its projected investments for this year and also the IMF for financial assistance to cope with the effects of the global financial crisis.
The Ministry of Finance opened an international bid to ask for a 300 million Euros loan in January, but the first tender failed due to lack of offers. Minister of Finance Ridvan Bode declared early this week that he hopes to receive the loan in mid May. Albania is already facing a strong increase in interest rates for the local currency denominated debt.