Budget deficit exceeds target by 5 times

TIRANA, June 4 – Budget deficit jumping by five times compared to what government had planned for the first four months of this year, and revenues continuing underperforming are the key reasons government will be forced to make mid-year budget cuts for the third year in a row. Finance Ministry data show the budget deficit in Jan-April 2012 was -11.5 billion lek, compared to a target of only -2.3 billion lek. Government revenues also failed to meet targets by 5.4 percent, rising by only 2.5 percent. Facing higher current expenditure, government cut public investments by 30 percent in the first four months of this year. Government has planned budget deficit will drop to 3 percent in 2012 down from 3.5 percent in 2011.
Sherefedin Shehu, a ruling Democratic Party MP and former deputy Finance Minister says the budget will not undergo major cuts due to expected revenue from privatizations. According to him, cuts will be at around 7-8 billion lek (euro 56 million) which is 2 percent of the total budget for 2012.”I think there is a lot of space not to affect investments because privatization revenues will be destined 100 percent for investments,” Shehu told local media this week.
“The items that will be affected by the budget cuts are administrative and other operational expenditure. Other priority sectors and public investments will be the last items that could be affected and could be replaced by privatization revenues.” Domestic consumption continues suffering as shown by the performance of VAT and excise taxes which are indirect indicators measuring it. VAT collection in Jan-April 2012 rose by only 1.46 percent to 35.3 billion lek while excise taxes rose by only 0.4 percent to 10.3 billion lek.
Profit tax also continued registering negative rates, unveiling the difficult situation businesses are facing. Profit tax shrank by 18 percent to 6.3 billion lek in Jan- April, according to Finance Ministry data.
Government expects revenues to increase by 7.8 percent and the economy to grow by 4.3 percent for 2012, which is twice higher compared to what international financial institutions forecast.