The budget cuts during the second half of the year will affect infrastructure projects which have not started yet such as roads and water supply systems, government officials say
TIRANA, July 6 – The wage and pension increases will cost the Albanian government 12 billion lek (around 110 million dollars) in a year, the Finance Ministry said through its spokesperson this week. The changes, which government has currently approved only for pensions, will be followed by a budget review cutting public spending by 25 percent.
Prime Minister Sali Berisha has called the initiative a measure to preserve the country’s macroeconomic indicators.
“As warned we will send the budget to Parliament to considerably cut spending by 25 percent in all fields,” said Berisha in a government meeting.
The cuts, bigger than the 20 percent figure Berisha had earlier announced, will affect all state institutions, including government and its agencies.
The budget cuts during the second half of the year will affect infrastructure projects which have not started yet such as roads, water supply systems, as well as maintenance expenses, said ruling Democratic Party deputy Selami Xhepa this week.
He said that the cuts would not affect priority sectors such as health and education, where investment projects will normally continue.
“Many countries chose to increase taxes in order to lower the budget deficit while we chose to reduce expenses.”
Meanwhile, the pension increase which has entered into force starting from July 1 this year will cost the Albanian government 25 million dollars for the remaining six months of this year. The wage increases varying from 2 to 12 percent will cost 3 billion lek until the end of the year, according to the Finance Ministry.
Wage increases vary from 2 percent for high wages to 12 percent for doctors. The minimum wage in the public sector will also increase by 5.6 percent, said Finance Minister Ridvan Bode in a speech addressing Parliament.
Some 540,000 pensioners will benefit an extra monthly pension from the increase while 50,000 teachers will get additional 30,000 lek in the course of one year. More than 30,000 doctors and nurses will also receive an extra wage, according to the Finance Ministry.
Government says the increases are made possible through improved performance in the customs administration, reflecting the positive situation of the country’s public finance.
Finance Minister Bode has also announced that that the country’s budget deficit, 49 billion lek, around 4 percent of the GDP, will be reviewed under a law to lower it to 3.5 percent by the end of this year.
According to the ministry’s 2010 data, the deficit will be financed through domestic borrowing of 39.3 billion lek and 300 million lek of privatization revenues.
The remaining 10 billion will be secured in long term foreign loans on projects.
Last January, government decided to cut the 2010 budget by 30 billion lek (around 300 million dollars, or 2.5 percent of the GDP to preserve the medium term macroeconomic framework.
The Albanian economy saw a significant decline in its growth rate in 2009, from 7.9 per cent in 2008 to an estimated 3.3 per cent in 2009, but remained one of the few European economies which did not suffer a recession.
The European Bank for Reconstruction and Development (EBRD) says Albanian GDP will grow by 1.4 percent this year while the IMF expects 2.3 percent growth in 2010 and 3.2 in 2011.
