Annual comparison shows the 1.1 percent increase in total revenues during the first nine months of this year is the lowest in the past decade and even worse compared to the 2009 recession when the country’s economy still managed to grow by 3.3 percent and revenues rose by 5.7 percent
TIRANA, Oct. 17 – Government revenues during the first three quarters of this year are facing their poorest performance in the past decade, making the 2011 targets government revised last July’s budget cuts impossible to meet and underlining the need for further budget cuts. Official Finance Ministry data show total government revenues during the first nine months of this year have grown by only 1.1 percent compared to the same period last year, but remain 2.5 percent below the revised targets. With only three months to go before the 2011 fiscal year closes, government revenues for sure won’t be able to meet even the 5.9 percent growth target set last July after the budget was cut by 18.3 billion lek (USD 183 million, Euro 130 million) in an effort to keep rising public debt and budget deficit levels in check. Government had initially predicted government revenues would rise by 11.5 percent this year after the 8.6 percent rise in 2010. The situation is mainly a result of poor progress in tax collection, with revenues reported 3.4 percent up year on year, but 3.1 percent down or around 7 billion lek less compared to the target for the first 9 months of this year. VAT and excise tax revenues, which account for 50 percent of total tax revenues and are indirect indicators to measure domestic consumption, have grown by only 0.5 percent and 1.7 percent, respectively during the first three quarters of this year. Annual comparison shows the 1.1 percent increase in total revenues during the first nine months of this year is the lowest in the past decade and even worse compared to the 2009 recession when the country’s economy still managed to grow by 3.3 percent and revenues rose by 5.7 percent. Monthly data show that the September 2011 revenues, at 7.4 percent down year on year, is one of the worst indicator since 2001, ranking better only compared to September 2008, when monthly revenues dropped 7 percent y-o-y as the global financial crisis broke out. Meanwhile, total expenditure during the first nine months of this year has been at 2.8 percent less than planned or 7.9 billion lek lower. In September alone, the budget registered a surplus of 457 million lek, compared to a deficit 1 billion lek in September 2010. The budget deficit for the first nine months of this electoral year stands at 30.7 billion lek, 27 percent up on the year, mainly because of 3.7 percent increase in current expenditure while capital expenditure has been at 45.9 billion or 4.4 percent less compared to the first three quarters of 2010. The pension scheme continues suffering with revenues accounting for only 57 percent of expenditure on social security contributions. Data show government collected 35.7 billion lek in social security contributions but spent 62.8 billion lek, registering a deficit of 27 billion lek for Jan-Sept. 2011. Few weeks ago, government announced it was considering raising the retirement age, currently at 65 for men and 60 for women, but ruled out increasing social security contributions rate. For 2011, government expects the GDP to grow by 5 percent, up from 3.8 percent in 2010, which is twice higher compared to what the IMF projects for Albania. Keeping the high public debt levels, currently at the threshold of 60 percent of the GDP under control remains the key challenge for the Albanian government. The IMF expects Albania’s public debt levels to increase to 59.4 percent this year, compared to 58.2 percent in 2010 and the peak rate of 59.8 percent in 2009. Facing poor performance with revenue targets even after mid-year budget cuts, experts suggest government should draft a more conservative and realistic budget for 2012. The Finance Ministry is already working on the final details of the draft which is expected to approved by government within this month before being discussed in Parliament and receiving the final approval by next December. The International Monetary Fund has also suggested that it is better that the year starts with a more realistic and mature projection in order to make its implementation easier. Last July, government cut expenditure by 18.3 billion lek or 5 percent. The priority health and education sectors were the most affected. A government decision dated July 2 foresees a freeze in new hiring in the public administration sector and a suspension in public procurement funds after July 1طith the exception of food and medicine purchases. The disciplining of funds also foresees a cut in rewards and allowances for trainings and trips abroad.
