TIRANA, Sept. 5 – Government revenue performed well in the first eight months of this electoral year, although slightly missing monthly targets in June and July as Albania held general elections, but public investment apparently suffered a drastic cut this summer as the government suspended all public tenders for about three months until a new government takes over in early September.
Finance ministry data shows government revenue was up by 6.5 percent compared to the same period in 2016, while public investment missed their target by about 18 percent, although being considerably higher compared to January-July 2016.
The situation is uncommon for electoral years in the past decade when government revenue has in general underperformed ahead of the elections and public investment soared apparently serving incumbent governments to gain an electoral advantage.
The tighter discipline this year is a result of a mid-2016 law setting a fiscal rule with a long-term debt target of 45 percent, also disciplining spending in electoral years.
Albania’s public debt hit a three-year low of 66.8 percent of the GDP at the end of the first half of this year, down from about 70 percent during the same period last year, also slightly reducing the country’s debt servicing, but is unlikely to achieve its 63.3 percent debt target for this year.
When it comes public investment, the sharp cut for June and July compared to initially scheduled targets is also a result of the suspension of all new public tenders and PPPs ahead of the June 25 general elections following a late May political deal breaking a three-month political deadlock that paved the way for the opposition’s participation in the elections. The deal, also accompanied by the appointment of some opposition-proposed caretaker minister, was aimed at curbing the misuse of public administration and its human, financial and logistics resources during the electoral campaign.
Last July, Socialist Prime Minister Edi Rama who won a second stronger consecutive term out of the June 25 elections, renewed the freeze in public tenders as the opposition proposed technocrat ministers remain in duty until a new government is formed next September.
Official finance ministry data prove the tough situation public investment faced in June and especially in July with a negative impact on private companies engaged in public works and services, and potentially affecting the 3.8 percent GDP growth target for 2017.
Public investment in June and July totaled about 6.4 billion lek (€47.6 mln), almost half of what the government had planned to invest in these two months under the initial 2017 budget.
The cut was more drastic in July when public investment failed to meet the target by 67 percent following a government decision renewing the freeze in public procurement and allowing only small purchase and emergency procurement as well as previously signed contracts in force.
Public investment hit a nine-year low of about 57 billion lek (€422 mln) in 2016 at about 4 percent of the GDP compared to 4.5 percent to 5 percent of the GDP in the previous years.
However, the 2017 budget has envisaged public investment at about 74.4 billion lek (€545 million) at about 4.7 percent of the GDP.
A considerable part of public investment in the past few years has gone to transform city centers, calling into question the efficiency of investment at a time when basic public services such as water supply, waste and sewerage disposal and the public health and education sectors remain inefficient.
While public finances seem on track to meet their annual target, the 2017 budget was revised last August under a normative to increase support to state run electricity companies following a prolonged drought-triggered crisis in the country’s wholly hydro-dependent domestic electricity generation, increasing reliance on costly imports.
The 2017 budget is expected to undergo a new revision as a new smaller Socialist Party government assumes power this month.
For the next four years, newly re-elected Socialist Prime Minister Edi Rama has cut the number of ministries to 11, down from a previous 16, merging several ministries, while the number of government agencies is expected to be cut by a quarter to 104, from a current 141, triggering hundreds of job cuts in the public administration.
