“The repeated budget slippages underscore the need for more realistic macroeconomic framework,” the International Monetary Fund has warned
Tirana Times
TIRANA, Oct. 3 – 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.
The latest IMF mission visiting Albania last June just before government cut the budget by 5 percent suggested that government assigns independent apolitical fiscal councils or professional forecasters.
“The repeated budget slippages underscore the need for more realistic macroeconomic framework. Weaker economic activity has pressured revenue, but the shortfall compared to the initial budget mainly reflects its overoptimistic forecasts. More realistic projections could be achieved by assigning them to an independent and apolitical fiscal council, or by aligning them with those of independent professional forecasters. Any positive revenue surprises should be allocated to debt reduction,” said the IMF.
Promoting competitiveness, improving public services and keeping the high public debt levels in check should be the priorities of the 2012 budget, according to Albanian economy experts.Under the 2012-2014 macroeconomic and fiscal framework, government expects the 2012 budget to be at 408.7 billion lek, around 18 billion lek more than the reviewed 2011 budget. Revenues are expected at 367 billion lek compared to 344 billion lek for this year and the deficit at 41.5 billion lek or 3 percent of the GDP. Capital expenditure or investments are expected at 72.2 billion lek, or 17 percent of total expenditure, registering a decrease of 1.5 billion lek.Government expects the 2012 GDP to grow by 5.1 percent, up from 5 percent in 2011, which is twice higher compared to what the IMF predicts for Albania. The GDP per capita is projected to grow to 3,150 Euros, up from 2959 in 2011. Government also expects the unemployment rate to drop to 11.6 percent in 2012 down from 13.3 in 2010 and the current account deficit at 10.2 percent down from 11.9 percent in 2010.
Meanwhile, inflation rate is expected to drop to 3 percent down from 3.5 percent this year.The 2011 budget risks facing another review next November following the continuing poor performance in tax collection. Latest Finance Ministry data show total government revenues during the first eight months of this year reached 206 billion lek, (USD 2.06 billion) 1.5 percent less than planned under the mid-year reviewed budget and only 2.2 percent up y-o-y.
If this trend continues, government revenues 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 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 growing by 8.6 percent in 2010.
Under the review which was made soon after the budget cuts in mid-July, the Albanian government expects the country’s economy to grow between 5 to 5.2 percent from 2011 to 2014 down from 6.2 percent in the report approved earlier this year.
However, what’s more concerning is that the public debt which had been forecast to be lowered to 54 percent by 2013 is now expected to lower to only 58 percent of the GDP by 2014 under the new 2012-2014 macroeconomic framework
