Soaring spending increased the budget deficit to a record 46 billion lek for the first six months of this year, at around 90 percent of the 50 billion lek deficit targeted for the whole of 2013
TIRANA, July 17 – Affected by soaring pre-electoral spending, Albania’s public finances are facing their worst situation since the 1997 turmoil triggered by the collapse of pyramid investment schemes. Preliminary data obtained by local media but not yet officially announced by the Finance Ministry show government has used up almost the whole annual budget deficit targeted for 2013 in a situation caused by underperforming revenue and high spending mainly in public works ahead of the June 23 general elections.
In the first half of 2012, government failed to collect around 13 billion lek USD 130 million, failing to meet its revenue target by 8 percent. Soaring spending increased the budget deficit to a record 46 billion lek for the first six months of this year, at around 90 percent of the 50 billion lek deficit targeted for the whole of 2013. Year-on-year, the deficit has increased by 157 percent.
Data show key taxes like VAT, excises and profit tax registered sharp decreases unveiling the difficult situation both households and businesses are experiencing but also a neglect by the tax administration ahead of the elections.
Reacting to the situation, Ilir Beqja a senior Socialist Party official called on the country’s President, central bank governor and head of the High State Audit to raise the issue so that the country’s national security is not endangered by a financial collapse.
Beqja, who is the SP’s Secretary for the Programme, said the outgoing government had caused the state budget 17.5 billion lek in damage because of exceeding spending targets and failing to collect 13 billion lek in revenues.
Public debt climbs to 62.4 percent
Fuelled by rising budget deficit, public debt has climbed to 62.4 percent of the GDP in the first half of this year, says central bank governor has Ardian Fullani. In its 2013-2015 macroeconomic framework, the Albanian government expects public debt to climb to 63.8 percent of the GDP in 2013, up from 61.9 percent in 2012, when the 60 percent debt ceiling was lifted.
Latest data published by the Finance Ministry show – Albania’s public debt stock climbed by another 31 billion lek (Euro 216 million) to a total of around 860 billion lek (around Euro 6 billion) in the first quarter of 2013.Total debt service in 2012 climbed to 52.16 billion lek, up from 48.7 billion lek in 2011, accounting for 3.88 percent of the GDP, up 0.12 percent compared to 2011.
Albania’s public debt, a sizable part of which is domestic, has a large short-term component, implying risk of rollover,” warn the international financial institutions.
What puts the Albanian public debt more at risk is that it accounts for more than double the annual revenues, while interest expenditure has risen to 3.4 percent of the GDP, compared to an average of 1.3 percent in the SEE 6, the IMF has warned.
