TIRANA, Nov.21- After day-long debates in the parliament, the MPs have voted on the budget draft and approved it in principle. The general level of investments is 105.5 billion leks with internal investment reaching 38.8 billion. The opposition has voted against increasing the debt level by an extra $ 675 million. The general expenses within the budget reached 369 billion leks, while the budget deficit will exactly double. The major part of the debt will cover the huge infrastructure project of the Durres – Kukes road. Revenue totals are estimated at 283.7 billion while the total level of debt reaches 85.3 billion leks.
Investment
Investment levels for 2008 are estimated at a total of 105.5 billion leks, out of which internal financing will be responsible for 38.8 billion leks and foreign investment will be 66.7 billion leks. According to the Finance Ministry, capital expenses under this category are 50.6 percent higher than in 2007, out of the increased level of foreign financing and the new debt structure. Major investments will again target mostly infrastructure in the main road segments of the country.
Operational expenses
Operational expenses in the 2008 budget have increased 12 percent compared to 2007, and the priority for more funds has been given to those sectors that oversee the implementation and maintenance of investments.
Contingency funds
The draft budget of 2008 has predicted a considerable fund of 10.6 billion leks to be kept on reserve. The structure of this fund will be 2 billion leks as reserve funds for the Council of Ministers, 4.6 billion for the financing salary and pension increases and 4 billion for the deficit fund.
Debt and interests
The most debated category of the budget has been the debt increase. For 2008, foreign debt reaches $675 million, while internal debt rose to $354 million. Budget deficit in total for 2008 will be 7.9 percent of the GDP, double the amount in 2007. The administration has decided to invest more than savings can permit, something that has worried the IMF, which is skeptical about how this initiative is going to be implemented. There has also been concern raised by the government not announcing which banks it will borrow from. Also, the main use for this fund will be for financing the Durres-Kukes road, though the final cost for this project has not been disclosed.
Opposition reaction
The opposition has reacted fiercely in opposing the increased debt levels in the budget of 2008. Important representatives have argued that this budget appears to be more a commercial business plan than an economic policy plan. Former Economy Minister, Arben Malaj, has accused the government of not properly studying the proposed tax policies and, according to international reports, the tax level will not affect foreign investors as much as labor costs. Malaj has cited “Forbes” and “MIGA” magazines, whose studies have concluded that only nine to eleven percent of the companies consider taxes as the main indicator of their future investments. He also repeated the declaration of the IMF mission head some days ago that claimed that cost for business has increased and that inflationary pressures can be directly attributed to this. Other critics have targeted the rise in energy costs and the priority areas of education and health care that allegedly have not received enough attention.
The level of realization of investments has also been targeted since, according to Malaj, it has been only 20-25 percent for 2007.
IMF
The head of IMF mission said last week that the risk of the eight percent budget deficit is that it surpasses the optimum level of 5 percent of GDP, which would provide for the temporary acceleration of important expenses in infrastructure projects and still preserve macroeconomic stability. It also would respect financial indicators and leave room for other important public investments
