Budget deficit rises ahead of elections

TIRANA, April 25 – Government’s budget deficit rose to a record – 11.7 billion lek (117 million dollars) in the first three months of this electoral year, registering the highest first quarter level in the past 12 years. Finance Ministry data published by the Bank of Albania show the deficit in March 2011 was up 11 billion lek year-on-year due to significant higher expenditure.
The budget deficit is even higher compared to 2009 when Albania was heading to general elections. Data show budget deficit in the first quarter of 2009 was at -3.8 billion lek compared to -11.7 billion lek in March 2011, forty days before the May 8 local elections.
Government revenues during the first quarter of 2011 remained almost unchanged to the same period a year ago increasing by only 362 million lek to 77.5 billion lek. Meanwhile, expenditure rose by 15 percent to 89.3 billion lek, up from around 76.5 billion lek in March 2010. The biggest increase was observed in the current expenditure indicator which rose from 62.4 billion lek in March 2010 to 69.7 billion lek in March 2011, mainly due to higher wages and pensions since July 2010.
Capital expenditure, which includes investments in roads, hospitals and schools also rose by more than 5 billion lek to 19.6 billion lek at the end of March 2010.
Finance Ministry data show tax revenues rose to 70.15 billion lek in the first quarter of 2011, up from 65.17 billion during the same period in 2010. Non-tax revenues dropped to 6.9 billion lek compared to 11.8 billion in March 2010.
Despite revenues growing by only 8 percent to 324.9 billion lek, up from 299.5 lek at the end of December 2009, the country’s budget deficit continued narrowing. Ministry’s preliminary data show the budget deficit more than halved to -37 billion lek compared to a record – 80.3 billion lek at the end of 2009, taking the deficit to 3.1 of the GDP, down from a record 7.4 percent.
With budget revenues expected to grow by 11 percent, 2 percent more than under the revised 2010 budget, government projects the Albanian economy will grow by 5.5 percent in 2011, up from an estimated 4.1 percent in 2010, which is almost twice higher compared to what international financial institutions expect.
The Finance Ministry’s main priorities in 2011 will be keeping the high public debt under control, currently at 59.5 percent and expected to drop to 59 percent of the GDP by the end of this year, keeping inflation rate within the central bank’s 3ѱ percent and further reducing current account deficit to preserve the country’s macroeconomic stability. The 2011 budget, considered the biggest ever at 4 billion dollars will continue supporting wage and pension increases, and keep deficit in check. The 2011 budget, worth 409 billion lek (4.08 billion dollars) and with revenues at 362.2 billion lek, will take budget deficit to 46.8 billion lek, up from 38.1 billion lek in 2010 or 3.5 percent of the GDP.
Unemployment rate is also expected to be brought down to 12.5 percent down from 13.6 percent in 2010.