Tirana, 30 May 2016/Independent Balkan News Agency
By Edison Kurani
The International Monetary Fund has approved the revision of seven agreements entered with Albania, saying that the government has met all the objectives of the joint program. The approval by the board of executive directors in Washington gives way to the allocation of the next installment of 36,1 million euros.
IMF says that Albanian economy is marking a quick recovery, while it encourages the government to continue with structural reforms to include the business climate.
According to IMF, the reform in the justice system is the main focus. IMF says that this will be critical for the progress of the Albanian economy. According to IMF, the approval of this reform may boost the productivity of the Albanian government up to 35%.
The seventh review of Albania’s economic performance
The Executive Board of the International Monetary Fund (IMF) completed the seventh review of Albania’s economic performance under a program supported by the Extended Fund Facility (EFF). The completion of the review enables the authorities to draw an additional amount equivalent to €36.1 million, bringing total purchases to €263.7 million.
Albania’s economic recovery is gaining strength
David Lipton, First Deputy Managing Director and Acting Chair, identifies an economic growth in Albania and offers explanations: “Albania’s economic recovery is gaining strength. The medium-term outlook remains favorable, provided the reform momentum is maintained. The authorities’ strong program ownership and implementation of ambitious and difficult structural and fiscal reforms are commendable. However, other reforms critical for improving the business environment are lagging”.
However, Mr. Lipton has several suggestions for the Albanian government:
“The authorities’ commitment to press on with fiscal consolidation is crucial, in order to continue lowering fiscal vulnerabilities and ensure debt sustainability. The authorities’ plans to continue focusing their fiscal adjustment efforts on the revenue side are appropriate. The consolidation strategy should aim to broaden the tax base, by limiting tax exemptions and strengthening compliance and revenue administration.
Stopping on the tax reforms, Mr. Lipton says that “The authorities’ determination to implement structural fiscal reforms to reduce fiscal risks is encouraging” and adds: “Strengthening the medium term budgetary framework and public investment management is critical. Fiscal risks from PPPs should be limited by subjecting each to a cost-benefit analysis and by accounting for PPPs transparently in line with international norms”.
The clearance of arrears to businesses is praised
IMF officials have also praised the clearance of arrears that the state has accumulated through the years toward businesses for the services that have been contracted.
“The authorities have made impressive progress with arrears clearance at the central government level. The arrears at the local level compiled from the recent stock-taking exercise should be audited and addressed swiftly without introducing moral hazard”.
Positive effects in the financial measures
IMF has identified another positive element. Mr. Lipton says that continued monetary easing is appropriate.
“The authorities’ continued monetary easing is appropriate. Greater exchange rate flexibility would support the monetary policy framework, but should be weighed against financial stability risks. To revive credit to the private sector, it is critical to speed up the implementation of the authorities’ comprehensive NPL strategy, including the approval of the Bankruptcy Law and the Private Bailiffs Law”.
IMF also says that it is critically important to have a new package of reforms in order to improve the business climate in Albania.
“Further structural reforms to improve the business environment would be critical for strengthening Albania’s competitiveness. The focus should be on early implementation of judicial reform, strengthening of property rights, and upgrading infrastructure and education. These steps will help pave the way towards EU accession and sustainable growth”, Mr. Lipton says.
The Executive Board approved a 36-month extended arrangement under the EFF for Albania on February 28, 2014 in an amount equivalent to €330.9 million, or 212.1 percent of the country’s current quota in the Fund. /balkaneu.com/