Draft to cut budget by 160 mln USD under examination

TIRANA, June 7 – The Ministry of Finance says the government spending for the second half of this year will be reduced by 16 billion lek (160 million U.S. dollars, 114 million Euros) following lower revenues and sharply increased spending during the first four months of this electoral year. The draft with the proposed changes to the 2011 budget has already been compiled and sent to government for approval. Finance Ministry sources quoted by local media this week say the changes foresee lower revenues and spending for the rest of this year to keep the soaring budget deficit in check and meet revenue targets which at the current pace are not even at last year’s levels. The cuts will mostly affect current expenditure but not wages and pensions which are still expected to undergo increases next July. Investments will also undergo cuts in several sectors, such as education and health, to prioritize road infrastructure. The budget cuts account for 3.9 percent of the 2011 budget worth 409 billion lek (4.08 billion USD) and with revenues at 362.2 billion lek. The budget deficit at the end of 2011 is expected at 46.8 billion lek, up from 38.1 billion lek in 2010 or 3.5 percent of the GDP. Latest Ministry of Finance data show that the government’s budget deficit rose by 12 times to a record- 15.8 billion lek (158 million USD) in the first four months of this electoral year, mainly due to higher expenditure and a slowing of total revenues. Back in mid-2010, lower tax and customs revenues forced government to make significant budget cuts, of 39 billion lek, reducing spending by 25 percent and lowering its GDP growth for 2010 to 4.1 percent, down from an expected 5.5 percent at the beginning of 2010. Under current estimates, the government projects that the Albanian economy will grow by 5.5 percent in 2011, up from an estimated 4.1 percent in 2010. The government had expected the 2011 budget revenues to grow by 11 percent, 2 percent more than under the revised 2010 budget.