TIRANA, Oct. 4 – Warnings by the International Monetary Fund over the threats some concessions and public private partnerships pose to the country’s public finances and the risk of creating new hidden debt have sparked a series of reactions by the country’s central bank, experts and opposition politicians.
Commenting on the IMF concerns, central bank governor Gent Sejko said he sees no risk as long as the investments are well-studied and profitable.
“If well-studied and with projects of high profitability and clearly determined priorities which would prove successful, the implementation of the concession or PPP program, would have a positive impact on the country’s economic growth and the acceleration of the country’s European integration,” Sejko told a press conference this week.
The comments came as governor Sejko announced the central bank had decided to keep the key interest rate at a historic low of 1.25 percent in an ongoing easier monetary policy as credit struggles to return to positive growth rates amid high levels of non-performing loans and poor demand by both businesses and households.
“I would like to underline that Albania needs capital investment and these projects would have an impact on the development and acceleration of Albania’s EU integration as well as the country’s growth and improving the Albanian citizens’ welfare,” said Sejko, adding that these projects and their costs must be transparently reflected on public finances.
Introducing the Euro billion PPP project in early 2017, Prime Minister Edi Rama who was elected for a second consecutive term with his Socialist Party last June, said the program targets putting into motion considerable capital “to trigger with higher intensity a process of all-inclusive reconstruction that has already kicked off, but needs greater financing throughout the country on the road, education and health infrastructure.”
The Arbri Road linking Albania to Macedonia, some 150 schools, hospitals and healthcare facilities are on the PPP agenda.
However, economy experts are rather skeptical over the project benefits and even fear drugs money could be used in the concession.
Economy expert Selami Xhepa is worried the PPP project will lead to higher debt and increased corruption.
“That can lead to an increase in public debt and a result the imbalance in public finances can pose a danger and compromise future economic developments,” Xhepa says, describing the PPP costs as a really serious issue the government must examine before making decisions.
“Considering that these kind of projects are not procured under the rules, this might be another source of corruption for already widespread practices,” he added.
Meanwhile, economy expert Zef Preà§i is also worried the PPPs could serve as money laundering schemes for drug trafficking money following rising cannabis cultivation in the past couple of years.
“The public-private partnership has been criticized for its implementation method and non-transparent action that has been undertaken, as well as lack of efficiency,” Preà§i, who heads the Albanian Center for Economic Research, has said.
“Regarding future plans, I think the government should quit its non-transparent decisions and follow other policies to promote private sector and attract investment,” says Preà§i.
“The government should not borrow this way, but if it judges it needs to borrow, then it should address the already familiar methods. There is risk of money earned from drug trafficking entering the public-private partnership programs and deforming markets,” he adds.
The main opposition Democratic Party has also expressed concern over the government’s €1 billion PPP project.
“The Euro 1 billion concession project the government has launched is of great concern because of the concentration of public funds in few hands, but what is more critical is the impact they will have on the public debt,” opposition Democratic Party leader Lulzim Basha said after meeting an IMF mission.
“Under these circumstances the Democratic Party will support another deal with the IMF under which control must be tighter because of the economic situation and the fiscal imbalances with the corruptive concession project,” added Basha.
The now opposition Socialist Movement for Integration, who served as kingmaker from 2009 to 2017, have called on the Socialist Party majority to pave the way for the examination of its early 2016 bill increasing transparency on PPPs and making their approval compulsory in Parliament.
“We have bad experience with concessions in the health sector. The IMF confirmed that they are a real threat and could lead to higher public debt. The IMF was clear when it said the Euro 1 billion project is bad news for Albanians, but good news for government officials,” said Petrit Vasili, the SMI deputy head who served as a former health minister, complaining that the ruling Socialists had blocked their legal initiative for one and a half years.
In early 2016, the Socialist Movement for Integration, the former junior ally of the ruling Socialists, proposed some legal changes to increase the transparency of public-private partnerships by thoroughly analyzing them and increasing the number of stakeholders in the decision-making process, including Parliament. Important changes include the involvement of the Albanian Parliament in the approval of PPPs whose term exceeds four years, the same as the mandate of a majority from general elections, in a bid to seek cross-party consensus.
