Government Fails To Attract Foreign Investments

Tirana, May 19 – The Albanian government has promised that it is going to present its supplementary budget in July. However, according to sources at the Ministry of Finances, the supplementary budget is not going to increase the public investments or reduce the budget deficit. As usually, the Albanian government has failed to attract significant foreign investments. Therefore, ALL 12 billion, available in the supplementary budget, are going to be used to finance the project that were planned to be financed by foreign investments. It seems that the Albanians government has arrived at the conclusion that it cannot secure these funds from foreign investors. The Albanian government is complaining that the difficulties are result of bureaucratic procedures used by the international investment institutions.
The vice minister of Finances, Sherefedin Shehu declared to the Albanian daily Shekulli that the supplementary budget is around ALL 15 billion. Around 90 percent of these funds are going to be used for capital expenditures, while the rest is going to finance other projects. ALL 12 billion are going to be used for investments in infrastructure. The government is planning to use between ALL 5 and ALL 10 billion for the road Durr촩- Morina. The rest will be spent on other the construction and the improvement of secondary roads.
For the year 2008, it was planned to use ALL 105.6 billion for public investments. The Albanian government has never used this amount of money for capital investments. Prime Minister Berisha is always very proud to speak about the huge investments planed for this year. From these, ALL 38.8 billion were going to come from domestic sources, while the rest, or ALL 66.7 billion were going to come from loans from IMF, WB, EBRD, and commercial banks. The supplementary budget does not increase the amount of public investments. However, according to the new budget, the Albanian government is going to use around ALL 50 billion from domestic sources and is planning to loan in total from foreign investors ALL 55 billion.
However, for the first quarter, the Albanian government has managed to realise only 12 percent of the foreign investments. It had planed to use ALL 6.58 billion, but has used only ALL 800 million. During the first quarter of 2007, the Albanian government used around 15 percent of the foreign investments. In total, the Albanian government has realised during the first quarter of 2008, only ALL 5.1 billion, or 4.91 percent of the total investments planned for the current year. During the same period last year, i.e. first quarter, the Albanian government managed to use 8.23 percent of the total investment funds.
The sharp increase of public investments raised the budget deficit to 7.9 percent of country’s GDP. The IMF warned last week that the Albanian government should take active measures to reduce the budget deficit to just 5.2 percent of country’s GDP. Otherwise the combination of significant budget deficit, inflationary pressures, and the slowdown of the world economy can destabilise the Albanian economy. One possible way is to increase the tax revenues and use these to finance the road Durr촩- Morina, Albanian Power Corporation, etc and keep substantial funds in reserve. However, for the moment, the Albanian government has instead decided to use the surplus in the tax revenues to fill up the missing foreign investments. Such measures are not going to reduce the budget deficit as advised by IMF.