The value added tax (VAT) and the excise tax, two of the most important taxes which also indirectly measure domestic consumption, registered slight decreases of 363 million lek and 8 million lek respectively
TIRANA, Aug. 15 – The government’s budget deficit continued rising even in July 2011, when it reached 30.4 billion lek, (USD 304 million, Euro 217 million), up 7.6 billion lek compared to the first seven months of last year, according to Finance Ministry data. The situation was a result of the ongoing poor performance in tax revenues and increased current spending.
Data show total government revenues during the first seven months of this year reached 182.4 billion lek, up only 2.3 percent compared to the same period last year while spending rose to 212.8 billion lek, up 11.7 billion lek.
Although tax revenues rose by 4 percent in January-July 2011, the value added tax (VAT) and the excise tax, two of the most important taxes which also indirectly measure domestic consumption, registered slight decreases of 363 million lek and 8 million lek respectively.
Government spending during the first seven months of this year rose by 5.5 percent mainly as a result of higher expenditure on staff, social security and health insurance and compensation of ex-land owners.
The Albanian government financed the budget deficit from domestic borrowing mainly through treasury bills of 25.4 billion lek, some 125 million lek from privatization revenues and around 5 billion lek from foreign borrowing.
Capital expenditure during this electoral year has been only 643 million lek higher at 37.8 billion lek or 1.7 percent higher compared to the first seven months of 2010.
The poor performance came a few weeks after the Democratic Party-led majority approved in Parliament a bill which raises wages and pensions but cut the budget by 18.3 billion lek (USD 183 million, Euro 130 million) for the rest of the yearةn an attempt to keep the 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 raise the social security contributions and the flat tax if it wanted to lower the public debt to 50 percent of the GDP in the medium term, but the scenario was turned down by government.
The budget cuts will also severely affect public administration. A government decision dated July 2 foresees a freeze in new hiring in the public administration sector and a suspension in public procurement funds after July 1طith the exception of food and medicine purchases. The disciplining of funds also foresees a cut in rewards and allowances for trainings and trips abroad.
The 18.3 billion lek (183 million dollars) budget cuts that the majority approved in Parliament will mostly affect the Public Works Ministry whose funds will be cut by 2.8 billion lek (USD 28 million) for the remaining half of this year. Funds in the Ministry of Education and the Ministry of Defense will also be cut by 2 billion lek and 1.8 billion lek respectively.
Several independent institutions such as the President’s Office, Parliament, the State Intelligence Service, the Supreme State Audit and the Prosecutor’s General Office have also undergone slight budget cuts.
The government expects the country’s economy to grow by 5 percent after the budget cuts– almost double compared to the International Monetary Fund officials’ estimates which were announced during their latest visit.
