By Ardit bejko
TIRANA, June 17 – The government has failed to successfully manage public expenditures for the first four months of this year, according to the second report of the 2008 Budget Monitoring program, funded by the Open Society Foundation for Albania (OSFA).
Although state revenues increased, investment levels at some of the main ministries are unsatisfactory. The report mentions the high cost of the Rr촨en-Kalimash road, the lack of complete evaluations of the costs of the project, the unfavorable situation of the Albanian Power Corporation (KESH), and the additional expenditures after the G쳤ec blast being some of the fiscal obstacles the government may face. The authors of the report advised the Ministry of Finances to “seriously think of procuring ample contingency funds.”
Low levels of investments
The current levels of investments are jeopardizing the objective of the budget to double all state investments. The Open Society Foundation for Albania noted concern that this might bring about a scenario similar to last year’s, when 50 percent of the annual investment plan was funded only in December. The report ranks the ministries of Health, Education, and Public Works, Transportation and Telecommunications as the lowest in terms of completed investments. For instance, the Ministry of Health has completed only 2.2 percent of the annual plan, the Ministry of Education 6.3 percent, and the Ministry of Transportation 8.3 percent.
The three ministries which were evaluated had unrealistic and poor investment plans, the report says. Further, the investment plan does not follow sound and well-designed projects. The initial plan, approved by the parliament, went through various reallocations of funds and deviations. The Ministry of Transportation has been responsible for the most reallocations of funds, totaling 340.
The main project that benefited from the reallocations is the construction of the Rr촨en-Kalimash road. Giving priority to this project impaired the progress of other important projects like the construction of the Qaf롐llo諭 Kor諠road segment and the Trans-Balkan road, the report says. Another project that has enjoyed excessive attention from the Ministry is the Durr쳭Kuk쳠road. The reallocations made for this project decreased the gap between the real expenditures and the initial estimation. The report says that the reallocations on the Durr쳭Kuk쳠project show that the Ministry is “working with short-term plans, monthly and weekly, and is not following complete long-term projects.”
High state revenues
The government managed to draw “satisfactory” amounts of money as state revenue for the first four months of 2008. The collected revenue was 103.5 percent of the predicted amount, bringing ALL 2.7 extra billions to the budget. The tax revenue and customs government agencies exceeded the targeted levels of revenue with 9.3 percent, or ALL 5.3 billions.
The highest surplus in state revenues came from the revenue tax and the income tax. The revenue tax exceeded its predicted target by 50 percent, and the income tax surpassed the target by 70 percent. The report says that the surplus is caused by the government’s “unrealistic forecasts for the first four months.”
Macroeconomic concerns
Inflation has floated around the four percent mark for the first four months of the year. The report noted that they hope inflation is kept to the same mark, on average. The report supported the International Monetary Fund (IMF) recommendation “to avoid internal pressure towards demand” and to pursue prudent budgetary and monetary policies.
The report focused on the electricity situation and referred to it as “an acute problem and a threat to macroeconomic and fiscal stability.” According to the report, the main weakness of KESH is the inability of the company to collect unpaid power bills. Unpaid bills are increasingly coming from state institutions, as well as private customers. The report says that some ministries and other public institutions have already consumed an amount of electricity that would be enough for all of 2008, as specified in the budget. This means more debt is being carried by KESH from public institutions.
The 2008 Budget Monitoring program began in January 2008, and will continue analyzing the budget until April 2009. The first report focused on the growing budget deficit caused by the financing of projects like the Durr쳭Kuk쳠road and the construction of the Rr촨en-Kalimash segment. The report questioned the ability of the government to pay back the loan borrowed to finance part of these projects.
