Budget revisions in Albania

Budget revisions in Albania

Besides reviewing the budget several times during a year, the government seems to be doing this with the budget for the next 2 to 3 years too

Not only the current budget, but the budgets for the next 2 to 3 years too. The government seems to be reviewing these ones too, with the aim of guaranteeing economic stability for the country. This is what has recently happened with the medium-term budget program for the years 2018-2020. Thus, this document has once again been reviewed by its experts, by providing fresh figures in relation to the revenues, but also the expenses that the government will make during this period. So, according to the new document, revenues that will go into the state budget will remain the same for the next 2 to 3 years, at least based on the percentage that they occupy as part of the Gross Domestic Product, namely 28.1%. It can be even said that during this year, they will account for 28.2% of GDP although in monetary terms, from one year to another, revenues will go up. This year they will be 464.7 billion lek; in 2019 they will account for 493.8 billion lek and in 2020 they will account for 527 billion lek. Referring to a country’s normal economic developments, this is a routine thing, where revenues go up every year, but what makes the difference is the extent they contribute to growth and economy. Such logic also applies to expenses. Thus, referring to the document mentioned above, it looks like expenses will account for the same percentage of GDP in the years to come, around 29% to 30%, aiming for a decline from one year to another, but by the looks of it, it will not be a significant decline. Meanwhile, experts of the ministry of Finance say that expenses this year will be 497 billion lek, next year they will be 523.6 billion lek while in 2020 they will amount to 549.7 billion lek. As it may be seen, these are all growing figures which are not a positive thing.


Causes that lead to frequent changes in the state budget

According to government experts, there are several reasons that lead them to make frequent changes in the state budget. Here we can mention election years and where expenses are different to other years. But these cases also include new incentives that a government may undertake, such as the program known as the “1 billion euro”, which aims at realizing a number of infrastructural projects in the country through public-private partnership. Let us recall that the changes in the law for budget management made a year ago, brought new rules that prevent budget mismanagement. These changes enable more control over expenses when there are elections and also extra-budget activities including PPPs. Meanwhile, this year, the government also applied the new reform which has to do with the reformatting of the country’s institutions and this will enable a new map, but also new expenses for the public administration of this country.


Public debt, revision of expenses to prevent increases

 In the coming years, experts of the ministry of Finance will show extra care in regards to public debt, in order not to allow its increase. This is also noticed in the figures regarding the medium-term budget program for the years 2018-2020. Thus, the government will allocate a contingency fund for the protection of public debt from the changes in interest rates at a level of 0.7% of total expenses. This year, budget expenses will be 467 billion lek, therefore the contingency fund will be 3.2 billion lek. Meanwhile, in the years to come, this figure will be over 4 billion lek, as net expenses are expected to be higher. According to the macro-economic and fiscal framework 2018-2020, each year, the budget will include a special item called “Contingency for the impact of changes in interest rates on public debt”. This contingency will be over 0.7% of total expenses, the ministry of Finance has explained in the new medium term macroeconomic document.

These funds are needed to compensate for potential threats coming from fluctuations in the exchange rates or interest rates on the level of debt.