The issue of transparency and public consultation on new fiscal legislation remain important challenges to be addressed in the future, says the report.
TIRANA, Jan.7 – The 2014 budget is slightly overoptimistic in its target of a double digit increase in revenue target and the public debt at 74 percent of the GDP will be a heavy burden for Albania’s finances, say experts of the Open Society Foundation Albania in a report on the 2014 budget and fiscal package.
“The 2014 budget was prepared based on macroeconomic indicators under a new philosophy of public financial management. This draft-budget is based on the expansion of taxpayer base and an economic growth forecast at 2 percent. The draft budget is based on the payment of the unpaid bills and arrears to third parties and is accompanied by a fiscal package which applies progressive taxation and replaces the flat tax. ”
Government expects revenue to reach 26.1 percent of the GDP and climb to 364 billion lek, an increase of 14.3 percent compared to 2013.
Commenting on government’s statement of a realistic budget, the report says experience has shown that there is often over-optimism in revenue forecasts and the fulfillment of the revenue target in the 2014 budget is one of the most controversial issues and the main challenge.
OSFA experts say revenue saved from the application of the progressive taxation which lowers the tax burden for low and middle-income earners, risk being used to cover inflation effects and additional costs created from the increase in excise taxes and national taxes.
Experts described the budget deficit which is expected to increase to 6.6 percent and the public debt at 74 percent as a heavy burden for Albania’s economy, requiring careful management to bring them down in the next two to three years.
“These indicators of the public debt and the deficit take Albania even further away from meeting the convergence or Maastricht criteria which foresee a deficit of 3 percent and public debt at 60 percent of the GDP., says the report.
The 2014 budget will continue supporting traditional priority sectors such as education, health, agriculture and transport.
Interest groups estimate the 2014 budget was characterized by huge delays and lack of transparency and consultation. “The issue of transparency and public consultation on new fiscal legislation remain important challenges to be addressed in the future,” says the report, adding that the budget was drafted without taking into consideration the 2014-2016 mid-term budget and the national strategy for development and integration.
The payment of 35 billion lek in arrears, which is one of the reasons of the increase of public debt and deficit is expected to bring a positive impact to the economy during 2014 through the payment of loan and creation of new jobs, says the OSFA report.
