Govt owes $100 mln to construction companies

TIRANA, Dec 1 – The Albanian Constructors Association has warned dozens of companies operating in this crisis-hit sector are going bankrupt because of huge debts government owes them since 2008 for the public works they have carried out. Speaking to reporters on Tuesday, Maksim Muci, the executive director of this association, said government owed 10 billion lek (100 million dollars) to construction companies and had not foreseen funds for the payment of the outstanding debt in the 2011 budget. According to him, the situation is severe for many companies which borrowed from banks to complete the public projects and are facing difficulties paying off debts.
The Association threatened they would block the roads they have built with their own funds and suspend works in ongoing projects in case government does not issue a decision within this month to pay them off by June 2011.
The Association also called on government to cancel a decision banning Albanian construction companies to participate in public tenders if they have not completed 70 percent of the works in a previous tender.
Finance Ministry sources quoted by local media said government owes only 70 million dollars to construction companies, which is expected to be paid off within next year.
The construction sector was the hardest-hit during the first half of this year shrinking by 20 percent in the first quarter and 29 percent in the second quarter.
Construction has been one of the most dynamic sectors in the country contributing to more than 10 percent of the GDP in the past years and employing 18 percent of people working in the private sector.
The central bank said in its recent monetary policy report, the situation in the construction sector whose performance has been worsening since the second quarter of 2009, was mainly further deteriorated by contraction of private constructions.
The worsened situation in the second quarter of this year was a result of low domestic demand, ongoing tight standards applied to home loans and low level of scheduled public investments, accounting for a negative contribution of 4.6 percentage points in the economic growth.
The decrease in demand and rising construction costs further deteriorated the financial situation of the construction sector which has been suffering liquidity problems and problems to repay loans. Construction companies expect the situation in the fourth quarter to remain pessimistic and producer prices to undergo another slight increase.