TIRANA, Sept. 13 – An International Monetary Fund (IMF) mission led by Istvan P. Szekely held a four-day visit to Albania Sept. 11-14 to discuss with the Albanian executive the 2007 budget. The mission met with prime minister, minister of finance, Bank of Albania Governor, members of parliament, advisers to the prime minister and other senior government officials, as well as with representative of the international community and media, according to a statement. The mission and the government reached broad agreement on the key parameters for the 2007 budget,m including net domestic borrowing, the overall cash balance, revenue projections, and priority spending areas, as well as on the macroeconomic and fiscal policy assumptions. Revenue projections for 2007 will be based on the 2006 projected outcome and will not include future improvements in revenue administration. As in 2006 any extra revenue from further improvements in administration and proceeds from any strategic privatization that might materialize in 2007 can be allocated in a supplementary budget. In the second half of 2007 tax reduction policy initiatives might be undertaken at a measured pace in order to ensure the sustainability of the revenue improvements achieved so far, based on any extra revenue collected. The priority spending areas remained health, education and infrastructure investment. The 2007 budget will also set aside sufficient funds for capital maintenance in order to safeguard investment already made. Budget contingencies will be on the same scale as this year. Such contingent expenditures,which will be assigned for wage increases in the health and education sectors and pension increases, will be released on a quarterly basis in accordance with revenue performance. To further safeguard the proper execution of the budget, cash management will be strengthened and a performance-based bonus-penalty system for allocation of investment will be introduced.
Another IMF review mission will visit Tirana Oct. 25-Nov. 6 and it is expected that the second review under the current combined Poverty Reduction and Growth Facility and Extended Fund Facility will be presented to the IMF’s Executive Board in Jan. 2007.
The IMF and Albania have signed a deal, which covers the 2006-2008 period. The agreement must be renewed every six months to ensure the government is meeting growth, spending, taxation targets. Albania’s gross domestic product is projected to grow 6 percent in 2006.
Finance Minister Ridvan Bode said that the new budget, for the first time presented to the government and parliament this early so that it may take effect Jan. 1 next year, projects $360 million more. Bode, however, could not say whether the government had planned to make further tax cuts as it had promised because some $232 million would cost the tax cuts it had made this year. Then Albania would also start the implementation of the Stabilization and Association Agreement with the European Union, which would low taxes and tariffs and cost the government up to $50 million annually. Bode said they would work to consolidate the already applied policies. Szekely confirmed that saying that the government would first check how its present policy would work. He said the IMF would welcome any suggestions, initiative or other action that would support their basic goal in the country: employment.
‘Albania 1 euro’ project and IMF
The IMF official formally supported the idea of ‘Albania 1 euro’ project offered by Prime Minister Sali Berisha but also was cautious in statements on its success. Szekely said they were aware of the project but they were still collecting details on its application. “There’s a saying that ‘Devil lies in details’,” said Szekely, who also cautioned the government that if they wanted to make changes in the tax system they should be for everyone, including domestic businesses, and not only for the foreign investors. If they come single-handedly they might not work, as their experience from work in 180 countries in the world had shown, said Szekely.
