Government is expected to lower the GDP growth target to 3 percent down from 4.3 percent and cut the budget by 15 billion lek (Euro 106 million) or 4 percent.
TIRANA, July 3 – While government should have already reviewed the budget identifying the sectors which will undergo budget cuts and lower its overoptimistic revenue and GDP growth targets, expected privatization revenue from the sale of some hydropower plants and oil giant Albpetrol could postpone the cuts.
“A possible scenario is that the new package of budget with a series of reviewed expenditure and revenue measures is submitted to government next September, hoping for a positive result of privatizations in July,” Finance Ministry sources told local media this week.
Government will hold a tender on the privatization of four small and medium-sized hydropower plants on July 7 to 9 and open bids for Albpetrol’s sale July 25, expecting to collect USD 150 million and another USD 300 million from Albpetrol’s sale.Data show government collected 607 million lek in privatization revenues during the first five months of this year, up 274 percent compared to a year ago.
Finance Minister Ridvan Bode has earlier announced government will wait for the June fiscal performance before deciding on the expected budget cuts.
Unofficial sources say under the new mid-year review which will be the third in a row, government will lower the GDP growth target to 3 percent down from 4.3 percent and cut the budget by 15 billion lek (Euro 106 million) or 4 percent. Although the cuts seem too small considering the stagnating trend of budget revenues and rising budget deficit, privatization revenues will be a significant too in hand.
Poor performance in government revenues in May 2012 reconfirmed the need for budget cuts government plans to make in mid-July for the third year in a row. Finance Ministry data show total government revenues in the first five months of 2012 decelerated to 2 percent failing to meet the targets by 6.2 percent. Data show government failed to collect 8.7 billion lek (Euro 62 million) in the first five months of 2012. Government is also facing difficulty in preserving the deficit which at -19 billion lek for the first five months of this year stands 3.4 times above the target.
Under the current budget, government expects revenues to increase by 7.8 percent and the economy to grow by 4.3 percent for 2012, which is twice higher compared to what international financial institutions forecast. Experts have earlier noted that a mere 1.75 percent growth in government revenues for 2011, the lowest in the past 11 years and failure to meet revenues targets by 4 percent even after mid-year budget cuts in 2011 is the clearest sign government has drafted an overoptimistic budget for 2012 and will be forced to make sharp mid-year cuts as global crisis impacts become tougher and the Eurozone is expected to face mild recession.
State-owned oil company Albpetrol, Insig insurer, five small and medium-sized hydro power plants and remaining minority stakes in fixed line operator Albtelecom and Armo oil refiner are the key remaining assets government plans to privatize this year.
Back in early 2011, government identified 1,280 public assets including strategic enterprises it intended to privatize as soon as possible. The privatization list includes remaining state owned shares in strategic oil, and phone companies, small hydropower plants, military facilities and small and medium-sized enterprises, except for big hydropower plants and dams, schools, hospitals and public buildings and offices which will remain under state ownership.
The Albanian government has collected a total of around 90 bln lek (USD 833 mln, Euro 632 mln) from the privatization of state-owned assets since the early 90s when the country’s 47-year communist regime collapsed. The data are made available in a study carried out by the Open Data Albania research centre covering the 1993-2011 period.
The study based on Finance Ministry data shows that most privatization revenues were collected during the past decade from the sale of key assets in the banking, telecommunication and energy sectors. What’s particular about privatizations in Albania in the post 2000 period is that they have peaked in general elections years or pre-election years such as in 2001, in 2004 and in 2009. The study finds out that privatization revenues in these years have covered 20 to 30 percent of budget deficit.
