Prime Minister Sali Berisha described the IMF’s suggestions as well-intended but said Albania had a deal with the IMF only on keeping public debt in check
TIRANA, June 27 – Prime Minister Sali Berisha has rejected suggestions by the International Monetary Fund to raise taxes and freeze wage and pension increases in order to lower the country’s high public debt levels and keep the budget deficit under control. Speaking at Wednesday’s government meeting, Prime Minister Sali Berisha described the IMF’s suggestions as well-intended but said Albania has to answer to the IMF only on keeping in check public debt, which is expected to remain at 59.4 percent of the GDP this year. “There is no violation to the agreement with the IMF. We don’t have a deal with the IMF on not increasing wages or raising taxes,” said Berisha assuring that the budget cuts were being made exactly to keep debt levels under control. Earlier on Monday at a party meeting with his Democratic Party lawmakers, Berisha said Albania’s economic model had been a success story with revenues doubling during the past four years like in no other country despite lowering taxes. “The International Monetary Fund unreasonably demands tax increases, we should be realistic, but our economic model works. We need businesses and they’re flourishing and we will remain the country with the lowest taxes in Europe,” said Berisha. “We have undertaken big investments in infrastructure, and modern infrastructure generates growth turning into an important tool for economic growth,” added the Prime Minister. According to him, keeping taxes unchanged means helping businesses and creating more jobs. Illustrating the low tax benefits, Berisha said that some 20 new textile and footwear companies had opened in Albania during the first five months of this year after the government decision to remove customs duties for raw material these companies import. The number of new companies during the same period in the previous years was 5 to 10. Speaking of wages, Berisha said Albania was the only country which had doubled average wages during the past four years as Europe experienced its worst crisis. He reiterated his promise to increase wages and pensions even this year. Konfindustria opposes higher tax policy The higher tax policy the IMF proposed has also been opposed by the business community which says the measure would lower Albania’s competitiveness to attract more foreign direct investment in the region. Gjergj Buxhuku, the administrator of the Konfindustria business association said increasing taxes would put the Albanian economy into a vicious circle, lowering internal demand and purchasing power as a result. “The frequent change of taxes in few years proposed by IMF would be a negative signal for the domestic or foreign investors in Albania and the stability of government’s fiscal policies with severe long-term consequences for the country’s economy,” said Buxhuku. The IMF chief, Gerwin Bell said last week Albania could lower its public debt to 50 percent in the next five years only if it freezes wage and pension increases, increases social security contributions again, or raises the flat tax to 12 or 15 percent, up from 10 percent currently. He also suggested increasing budget cuts to 20 billion lek, up from 16 billion lek which the Finance Ministry had projected.
