IBNA Analysis/The increase of salaries and pensions and financial effects in Albania

IBNA Analysis/The increase of salaries and pensions and financial effects in Albania

Tirana, 7 October 2016/Independent Balkan News Agency

By Edison Kurani

Government in Albania will make the first increase of salaries for state administration employees next year. There will also be an increase on pensions. Thus, a few months ahead of the June 2017 parliamentary elections, the Albanian government decides to increase salaries and pensions.

Prime Minister Edi Rama had announced several times in public appearances that he was in favor of an increase of salaries and pensions, but he announced this decision in the meeting of the National Assembly of the Socialist Party, by saying that taxes will not go up and salaries will see an unprecedented rise.

“What the citizens need to hear from us is that first of all, there will not be a rise in taxes and secondly, with next year’s budget, we will increase salaries and pensions. I can say without a shred of doubt that we will increase salaries more than the previous government has increased them in any given year. Thus, it will be the highest annual increase.

Rama said that the government has allocated a 100 million USD fund for an increase of salaries and pensions.

IMF’s and World Bank’s consent is requested for the increase of salaries and pensions

The highest representatives of financial institutions in Albania, have travelled to Washington where they will hold meetings with heads of the International Monetary Fund to discuss among other things about next year’s budget.

There is no official information as to the rate of increase for salaries and pensions. However, IBNA learns that this increase will be 10%.

Minister of Finance, Arben Ahmetaj, although he doesn’t offer any details, admits that salaries and pensions will see a real increase. He says that the government has the necessary funds to increase salaries and pensions, namely 100 million USD a year. According to him, this increase is based on the consolidation of budget incomes in the past 2-3 years.

But everything is expected to be decided after the meetings that will be held in the USA between representatives of the IMF, minister of Finance and governor of the Bank of Albania, Gent Sejko. Meanwhile, the increase of salaries and pensions has received the “consent” of the World Bank.

How does BoA see the government’s move?

How this raise would affect the monetary policy; do we expect inflation and the interest rates to increase? Is there a coordinated plan between the Bank of Albania and the government about this raise?

The governor of the Bank of Albania, Gent Sejko answers these questions. He says “the Bank of Albania has been informed in advance about the government’s intention to raise wages and pensions”.

At first glance, this increase will affect the level of consumption, Sejko says, adding that  “the Bank of Albania’s accommodative monetary policy alone – aimed at credit, consumption and investments growth – is not enough without structural reforms”.

But, on the other hand, the Bank of Albania, however, is interested in maintaining the macroeconomic balances, decrease of the budget deficit and continuation of fiscal consolidation.

Mr. Sejko says that the Bank of Albania has not seen the government’s plans for the raise in wages and pensions yet.

“Thus, we do not have a final draft of the budget. We will need to look at this draft before we give a more precise opinion and evaluate if the raise in terms of figures would be acceptable, always in relation with Bank of Albania’s parameters and objectives: maintaining fiscal consolidation, continuation of the decrease of the budget deficit and decrease of the debt levels”.

Sejko stresses that  “for as long as these parameters are maintained, then obviously the raise in wages and pensions is a right and an attribute exclusive to the Albanian government”. /balkaneu.com/