Fullani: Consensus needed on public debt, pension threats

TIRANA, May 1 – Bank of Albania governor Ardian Fullani has appealed to Albania’s political class to undertake two major reforms related to public debt and pensions in order to give the Albanian economy more space for growth in these times of global crisis. “I invite you to work together on two major reforms that will give the Albanian economy more space, the determination of the fiscal rule by Parliament and the law on pensions,” said Fullani, introducing the central bank’s annual report at the parliamentary economy committee this week.
Currently, the public debt legal ceiling of 60 percent of the GDP is sanctioned only in the state budget law and the idea of sanctioning it under constitution has also previously been launched. At 58.7 percent of the GDP, public debt stood only 1.3 percent below the legal ceiling at the end of 2011, making Albania one of the most endangered countries in the region. The International Monetary Fund has warned Albania’s public debt, currently at the legal limit of 60 percent of the GDP, will rise to 64 percent by 2016 under current fiscal policies.
A reform in the country’s pension system is also considered vital for Albania as the deficit in the scheme continues widening and social security contributions remain low. A further increase in the retirement age and raising social security rates are some of the options recommended by international financial institutions.
Governor Fullani also expressed concern about economic growth not producing the expected welfare. “I honestly invite you not to avoid the pitfall of economic growth and look beyond. We need to look toward employment and we must use economic growth as an instrument for employment and clear well-coordinated moves are needed for this.”
“2011 and 2012 constitute a period full of challenges arising from the external environment and the internal structure of the economy. In particular, the increase in productivity, the continuation of restructuring and the strengthening of economic growth requires the drafting and implementation of structural reforms supporting domestic production and increasing its competitiveness in domestic and foreign markets,” said Fullani.
In addition, economic policies must target the further improvement of free market conditions in order to strengthen the structure of market economy and increase efficiency in our economy.
“Global and Albanian experience in these decades of development has shown that the coordination of policies by different institutional stakeholders is a crucial condition to ensure continuous progress of a country’s society and economy. In this respect, only the continuous cooperation and coordination of efforts by all stakeholders will ensure sustainable economic growth and welfare in Albania.”
Despite having preserved an annual 3 percent growth rate from 2009 to 2011, compared to an average of 6 percent in the pre crisis period, the Albanian economy lags behind almost every EU aspirant, including Bosnia Herzegovina in GDP per capita and purchasing power indicators.
Prospects become more pessimistic this year when international financial institutions expects Albania’s growth to range between 0.5 to 2 percent compared to government’s overoptimistic projection of 4.3 percent.