TIRANA, Aug. 3 – Poor performance by the tax and customs administrations in the first half of this year when Albania held local election has temporary suspended the deal with the IMF which in early 2014 approved a three-year Euro 331 million loan for the Albanian government to help the authorities clear arrears of around 5 percent of the GDP.
Jens Reinke, the IMF resident representative in Tirana, said the Albanian government had asked more time to improve tax collection under the current system before considering new tax hikes.
“I would like to stress that IMF’s decision not to sign the deal with the government is not a negative reflection on the program because all of the program’s targets have been met and the performance is positive,” Reinke said in a TV interview.
The last time the IMF approved an installment was in May 2015 when the Fund’s executive board okayed a fourth installment of around Euro 36 million, bringing the total disbursements to about Euro 153 million under the 3-year loan.
“What happened is that the government thinks that before mulling over alternatives to change the tax framework, it needs more time to address the issue of the implementation of the law on the payment of all current taxes. The IMF mission will arrive later to assess progress made in improving income under the current framework,” Reike said.
The IMF-Albanian government deal is based on fiscal performance and the reduction of public debt, currently hovering at around 72 percent of the GDP.
“It is up to the Albanian government whether it chooses to reduce spending or increase taxes,” added the IMF representative.
The Albanian government has announced a new nationwide campaign to curb informality next September as public finances are struggling, warning that new legal measures will be adopted to tighten penalties.
“It will be a complex operation. The Parliament will examine at the beginning of its new session a package of tougher criminal penalties against tax evasion, smuggling and the slavery of informal labor,” Prime Minister Edi Rama has said.
After the electricity campaign which has brought the government around 100 million euros in extra income, the Albanian government intends to undertake a similar campaign on running water to curb massive thefts and distribution losses.
Albania’s average water supply in 2014 ranged from 4 to 24 hours a day, with the average supply at 11.5 hours, says the Water Entity in its annual report.
The IMF concluded its permanent mission to Albania in January 2009 when relations with the Fund were reduced to an advisory role. The renewed deal in 2014 followed by tighter control on public finances and tax hikes came after the country’s economy slowed down to growth rates of 1 to 2 percent in the past three years.
