For 2012, interest expenditure is expected to climb to 3.6 percent of the GDP, up from 3.4 percent in 2011, according to the Finance Ministry
TIRANA, Feb. 21 – Despite huge spending on electricity imports and underperforming revenues, government has assured public debt will remain within the legal limit of 60 percent of the GDP even for 2012. Xhentil Demiraj, the debt director at the Finance Ministry says the public debt will remain within the legal limits as long as the budget deficit will be at 3 percent of the GDP as approved last December in the 2012 budget law.
“Government has not planned or hinted anything about increasing the budget deficit for 2012 and as a result public debt will not grow for 2012,” Demiraj told reporters this week.
According to him, government will proceed with long-term loans at favourable interest rates to increase investments as the only way to keep the economy growing in this time of crisis.
However, with public debt costs on the rise and revenues stagnating, several public investments especially in the education and health sectors are expected to be affected by inevitable mid-year budget cuts for 2012.
Albania’s public debt in 2011 performed better than government had planned rising by only 0.8 to 58.9 percent of the GDP, 0.4 percent less than government had projected.
Under the 2012-2014 macroeconomic framework, government expects public debt to remain within the 60 percent legal limit; at 59.4 percent for 2012, at 59.1 percent for 2013, and at 58.4 percent for 2014.
According to the Finance Ministry, government spent 5.7 billion lek less on debt interest rates for 2011. Interest payments, which represent about 13.4 percent of total current expenditures, dropped to about 3.1 percent of GDP, down from about 3.4 per cent in 2010.
However, from 2012 to 2014, interest expenditure is expected to remain at an anual 3.6 percent of the GDP
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.
