Low tax revenues preventing growth

TIRANA, Oct. 13 – Total government revenues increased by only 11 billion lek year-on-year during the first eight months of this year, mainly because of poor performance in tax collection which remained at standstill. Data published by the Bank of Albania (BoA) referring to the Finance Ministry preliminary statistics on the main fiscal indicators show total revenues for the January-August 2010 period reached 206 billion lek (around 2 billion dollars), up from 195 billion lek during the same period last year.
Meanwhile, tax revenues registered 187.8 billion lek in Jan-August 2010, up only 100 million lek (1 million dollars) compared to Jan-August 2009.
Total expenditure was considerably cut down compared to the electoral year of 2009, dropping to 229.2 billion lek, down from 242.5 billion lek in Jan-August 2009.
Meanwhile, capital expenditure, (money spent to acquire or upgrade physical assets such as buildings and machinery) increased by around 15 billion lek year-on-year, registering 192 billion lek at the end of the Jan-August period this year.
Capital expenditure was also reduced by around 25 billion lek, dropping to 40 billion lek.
Most importantly, deficit halved to minus 23.17 billion lek, down from minus 47.6 billion lek during the first eight months of 2009.
Under the new budget cuts adopted by parliament on 19 July, 2010, the budget re-balancing aims at reducing the deficit to 3.1% of GDP against a lower expected economic growth of 4.1% in 2010. The lower budget deficit is planned to be achieved through expenditure restraint. Compared to the original budget, current spending is planned to be reduced by 0.8 percentage point of GDP, while capital outlays are expected to be 1 percentage point lower. This is expected to neutralise revenue which has also been revised downwards by the same amount.