Finance Minister Bode assured the budget cuts would not be followed by tax increases
TIRANA, July 14 – IMF representative Gerwin Bell has hailed government initiative to review the budget but warned not to underestimate external risks which continue remaining high. Speaking in a joint press conference with central bank governor Ardian Fullani, and Finance Minister Ridvan Bode, the International Monetary Fund’s official said the budget cut was a necessary step to lower the high deficit and public debt rates.
In its latest report on Albania, published this week, the IMF Executive Board stressed the need for continued vigilant supervision in face of worsening domestic credit quality and rising external risks, in particular potential spillover risks related to recent developments in Greece. Albania was expected to issue its first ever 400 million Eurobond by the end of last April but abandoned it in the face of soaring bond yields caused by the Greek debt crisis.
The senior IMF official who stayed in Albania for one week monitoring changes to the budget and the country’s macroeconomic situation, said the IMF expected a GDP growth between 2 to 3 percent this year. He said Albania avoided recession in time of global crisis because of prudent macroeconomic monetary and fiscal policies.
Bell said IMF was willing to financially assist Albania, but the offer was refused by Finance Minister Bode who said Albania was now in a more advanced development stage and could not turn back to IMF loans.
Bode assured the budget cuts would not be followed by tax increases.
“Government successfully contributed to preserving the macro-economic stability, abandoning a considerable amount of expenditure and it is out of the question that taxes will increase in the future,” said Bode.
Central bank governor said economic developments in the past few months contained encouraging signals.
“The performance of the Albanian economy during the first half of 2010 was in line with our projections, characterized by a positive but slow growth of the economic activity,” said Fullani attributing the growth to the fast increase of exports.
In its latest report on Albania, IMF said that the budget must achieve a significant turnaround to bring down the current account deficit and make space for credit extension to the private sector.
IMF executive directors emphasized the importance of lowering public debt to sustainable levels in the medium term and welcomed the authorities’ commitment to cut public debt levels significantly.
Directors also welcomed progress on structural reforms, while emphasizing the importance of further improvements in the business environment and investor protection to improve competitiveness and broaden sources of growth. They recommended tackling obstacles to the effective operation of privatized industries, establishing a clear property rights system, strengthening rule enforcement, and addressing weaknesses in economic statistics.
