Gov’t to clear 141 mln in arrears in 2015

“For 2015, the government plans to pay off 20 billion lek (Euro 141 mln) to clear government arrears, compared to 35 billion lek (Euro 247 mln) in 2014,” says Finance Minister Shkelqim Cani.
TIRANA, Nov. 11 – At a time when public investments have sharply contracted during this year, the stimulus injected into the economy by the government has partly been compensated with the clearance of arrears, says the government in its report on the 2015 budget and fiscal package.
Finance Ministry data shows that at around 30 billion lek (Euro 210 million) for the first three quarters of 2014, public investments were down by 43 percent compared to the same period last year, hitting a record low for the past seven years.
In its 2014 budget and fiscal package, government says some 26 billion lek (Euro 183 mln) has been cleared in unpaid bills to the business community which has improved the liquidity of the private sector.
“For 2015, government plans to pay off 20 billion lek (Euro 141 mln) to clear government arrears, compared to 35 billion lek (Euro 247 mln) in 2014,” says Finance Minister Shkelqim Cani.
“The process of paying off accumulated unpaid bills has had a positive impact on the country’s economic development considering that a major part of these arrears was owed to the big enterprises. Through this process, private enterprises have been able to pay off debts to suppliers, employees and banks. The payments of arrears has also had an impact on the fiscal obligations these companies owed to tax authorities and the expansion of their activity,” says the Finance Ministry.
The payment of government arrears, a process initiated in December 2013 has been suspended since the end of July when government reported it had paid off around 35 billion lek (Euro 247 million in accumulated unpaid bills, fulfilling its target set in the 2014 budget.
The Finance Ministry says it has paid off more than 40 percent of accumulated unpaid bills to private companies, estimated at $720 million or 5 percent of the GDP. In an update to the process of the clearance of arrears, a process which started last March after loan deals with the IMF and the World Bank, the Finance Ministry says it paid a total of around 30 billion lek (Euro 211 million) until late July 2014 in accumulated bills to private companies, of which Euro 67 million for public investments, Euro 45 million for supply of goods and services in current expenditure, Euro 74 million in VAT refunds and Euro 31 million in the energy sector. Around 5 billion lek was paid to clear arrears to people with disabilities and infrastructure works.
The Finance Ministry has prepared a draft strategy which foresees the payment of a total of 72.6 billion lek (Euro 500 million) in government arrears over the next three years. The arrears, estimated at 5.3 percent of the GDP include unpaid bills to the business community for finished public works and services, VAT and profit tax refunds as well as bills from court decisions against the Albanian government, expropriations and payment of social assistance to people with disabilities.
In its latest report on Albania, the IMF said “addressing the problem of unpaid bills and arrears would enhance the government’s credibility and boost liquidity and confidence. Clearance of these liabilities would strengthen private sector balance sheets, facilitate the resumption of credit growth by helping lower nonperforming loans (NPLs) and support domestic demand.”
The left-wing Socialist Party-led government expects economic growth to gradually recover to 3 percent in 2015 and accelerate to 4 percent in 2016 and 4.5 percent in 2017. For 2014, government and the IMF which is assisting with reforms to achieve sustainable growth, expect growth at 2.1 percent despite the economy having registered sluggish growth in the first half of this year.
The Albanian government expects a 12 percent increase in revenue in 2015 with total income at 414 billion lek (euro 2.92 billion), up 50 billion lek compared to the projected 2014 budget.
Government plans to spend 475 billion lek (Euro 3.35 billion) in 2015. The budget deficit is expected to drop to 4 percent of the GDP, down from 6.6 percent in 2014 while public debt will for the first time in the past global crisis years slightly drop to 70.6 percent down from 71 percent. Public investments estimated at 80 billion lek (Euro 564 million) or 5.4 percent of the GDP will focus on tap water, energy, innovation and ICT, tourism and road infrastructure.