Majority approves budget cuts, opposition walks out of Parliament

TIRANA, July 19 – Parliament approved in principle on Monday some changes to the 2010 budget which cut spending by 25 percent in an effort to keep the country’s high public debt and budget deficit under control. The changes were approved in a marathon session of more than 10 hours of debates with only the majority’s 71 votes while the opposition MPs walked out of Parliament just before the vote in sign of protest, accusing government of mismanagement and hiding the real financial crisis.
In a session where government’s highest officials including Prime Minister Sali Berisha, Parliament Speaker Jozefina Topalli and deputy PM and Foreign Minister Ilir Meta were absent, the budget was defended by only Finance Minister Ridvan Bode. He described the significant cuts as necessary measure to preserve the country’s macroeconomic stability.
Arben Malaj, a former Finance Minister and current opposition Socialist Party deputy reiterated the opposition’s stance that government is hiding the financial crisis and warned that the public debt level could increase to 65 percent by the end of 2013.
The budget changes which come immediately after a wage and pension hike of 2 to 12 percent, will cut spending by some 39 billion lek (380 million dollars) for the rest of 2010.
Government has also lowered its GDP growth forecast to 4.1 percent, down from an expected 5.5 percent at the beginning of this year, which is still almost twice higher compared to what international institutions such as IMF and the EBRD expect in 2010.
The new changes are aimed at preserving the country’s public debt at 59.5 percent of the GDP for this year and lower it to 54 percent by 2013 when government’s term of office ends. The budget deficit is also expected to lower to 3.1 percent of the GDP, down from a record 7 percent last year.
However, the IMF, which has hailed government measures, expects the 2010 public debt to be at 63 percent and increase by another 0.8 percent in 2011.
Under the revised plan, budget revenues will decrease by 27.2 billion lek, lowering their annual growth rate to 11.4 percent, down from the expected 20 percent at the beginning of the year. Meanwhile, public investments will be cut by 19 billion lek. The contingency fund has been left unchanged at 5.2 billion lek.
The changes are expected to be finally approved next week after being re-examined in detail again at the economy and finance parliamentary committee.