Revenues in the first half of this year rose slightly to 155 billion lek, up only 1.1 percent, a situation which forced government to make mid-year budget cuts for the second year in a row
TIRANA, July 19 – The budget deficit continued its rising trend even in June 2011, while revenues during the first half of the year remained almost unchanged compared to a year ago; and expenditure rose by 7.4 percent. Ministry of Finance data show the budget deficit from January-June 2011 rose to 26.3 billion lek (USD 263, Euro 189 million), up from 21 billion lek last year.
Revenues in the first half of this year slightly rose to 155 billion lek, up only 1.1 percent, a situation which forced government to make mid-year budget cuts for the second year in a row. Expenditure in this electoral year also rose to 182 billion lek, up 7.4 percent compared to the first half of 2010.
Ministry of Finance data show a poor performance in some of the main taxes. The value added tax (VAT) and the excise tax, which measure domestic consumption did not meet even last year’s levels. VAT collection during the first five months of this year dropped by 252 million lek (2.5 million dollars) while the excise tax was down 626 million lek.
Last week, the Democratic Party-led majority approved in Parliament a bill which raises wages and pensions but cuts budget by 18.3 billion lek (USD 183 million, Euro 130 million) for the rest of the year to keep budget deficit at 3.5 percent and the public debt at 60 percent of the GDP. The new revised budget will cut investments by 8.9 billion lek (89 million dollars) for the remaining half of 2011
The International Monetary Fund advised the government to freeze wages and pensions and increase the social security contributions and the flat tax if it wants to lower the public debt to 50 percent of the GDP in the medium term. “As in 2010, the budget finds itself again under pressure. On current trends and policies, the deficit is projected to rise to 4⅔ percent of GDP in 2011 and above 5 percent in the medium term. This would push public debt up very close to the legal ceiling. As was the case last year, another mid-year budget review is thus imperative. It should target cuts of some 1ݠpercent of GDP (20 billion lek). Moreover, further consolidation efforts will be required in the following years,” said the IMF mission during a visit to Tirana last June.
