TIRANA, Nov. 10 – The International Monetary Fund says the Albanian economy is back on track and the country is expected to be awarded two new loan tranches worth about €74 million in early 2016 after failed mid-year negotiations over poor performance of Albania’s public finances.
Speaking at a joint press conference with Albanian authorities on Tuesday, Anita Tuladhar, the new IMF mission chief to Albania, said Albania had met all quantitative targets set under the economic recovery program supported by a three-year Euro 331 million loan.
“Implementation of structural reforms, such as in the energy sector, remains strong, and is already yielding fiscal savings and setting the foundation for stronger growth over the medium term,” she said.
The IMF remains optimistic Albania’s growth will accelerate in the next couple of years driven by foreign investment, rising domestic demand and a gradual pickup in bank lending, but advises continuing fiscal consolidation. The Fund expects GDP growth to range between 2.5 to 2.75 percent in 2015 and 3 to 3.5 percent in 2016.
“The country needs to continue improving tax compliance and broadening the tax base to sustain fiscal consolidation, and ensure medium-term debt sustainability, while allowing fiscal space for productive spending,” said the IMF representative.
Albania’s Finance Minister Shkelqim Cani said the government had agreed with the IMF there will be no new tax hikes for 2016. The statement turns down request by the business community for a review downward of the key taxes after the corporate income tax and withholding tax on dividends, rents, interest rates were raised by 5 percent to 15 percent in the past couple of years.
Bank of Albania governor Gent Sejko said the central bank will continue following an easy monetary policy and tackle non-performing loans to give a boost to sluggish lending.
The IMF says Albania’s banking sector remains highly liquid and well capitalized and has weathered the Greek crisis well.
The poor tax performance in the first half of this electoral year forced the Albanian government to revise downward its 2015 budget, while the International Monetary Fund postponed its new loan tranche as part of a three-year €331 million loan. To date the IMF has disbursed €153 million, an amount which has mainly been used to support reforms and clear government arrears, with the latest tranche disbursed last May. The executive board of the IMF is expected to discuss the fifth and sixth reviews of Albania’s Extended Fund Facility (EFF) arrangement in early 2016. Their approval would enable the disbursement of another €73.8 million.
Government revenue continued underperforming even in September 2015 when a much-roumoured campaign against informality forced thousands of businesses previously operating informally to register, but closed down thousands of others affecting already sluggish consumption and failing to provide extra revenue.
