Government to act to limit excess cash in circulation

TIRANA, May. 22 – In a press statement, government spokesperson and Minister of Integration, Majlinda Bregu, explained the latest initiative of the government to reduce the amount of cash circulating throughout the economic sector. Among the first actions to be taken, the government will soon limit foreign exchange transactions on the streets, a common feature of urban centers in Albania, since the creation of licensed foreign exchange agencies that function as legitimate businesses. Prime Minister Berisha had previously spoken of the street transactions belonging to the early years of the transition from communism and increased poverty and should remain in the past given that Albania is advancing with its integration efforts. Hence, BoA and the Finance Ministry will promote opportunities for interested parties to receive a license in the trade of foreign exchange. Up until now there are 58 offices of forex out of which 36 operate in Tirana. Average daily volume of forex transactions is $1.6 million. In the first quarter of 2007 the total amount of foreign exchange reached $104.9 million.
Second, the banking system will be the main channel through which money will circulate given that it is already developed with the presence of important foreign owned banks such as Raiffeisen Bank, San Paolo, IFI Group etc. Despite this, Albania has the highest rate of cash circulation and cash transactions in the entire region, and more than twice the rate in Serbia and Macedonia. Hence, in a measure to tackle informality, the administration has presented a new legal draft that requires businesses to make any transactions worth more than 300,000 lek through the banking system. Moreover, all salary transactions will now go through the banking system as well or they will not be recognized as expenditures on the balance sheets presented to tax authorities. Difficulties that are predicted include the limited banking facilities in rural areas as well as the frequency of the transactions given the small-limit sum.
Bregu also mentioned the recent initiatives to alleviate some of the fiscal tax burden on the social categories with lower revenues. Hence the government has approved a regulation that allows salaries under the level of 10,000 leks not to be taxed. Bregu said that the government will also plan further measures to address the problem of social categories in economic distress prior to the implementation of the flat tax rate of 10 percent.