IBNA Special report
Tirana, November 26, 2014/Independent Balkan News Agency
By Edison Kurani
A special mission of IMF (International Monetary Fund) stayed a week in Albania and issued its conclusions late on Tuesday. The mission was chaired by Nadeem Illahi and held discussions about the second and third revision of the program in the framework of the Extended Fund Facility. The focus of this mission was to program the necessary measures to minimize fiscal risks, especially those in the energy sector.
According to IMF, Albania’s economic program is going as planned. Economic growth is expected to be around 2%. IMF’s conviction is based on the strong increase of exports and production of oil, the payment of arrears by the state and a modest recovery of aggregate demand. IMF says that production continues to be under potential and inflation is expected to be low.
The IMF staff mission supports the authorities’ policy and structural reform efforts and views them as providing a credible basis for restoring economic growth and maintaining macroeconomic and financial stability.
“The Executive Board of the IMF is expected to discuss the second and third reviews under the EFF in late January 2015. Approval of the reviews would enable the disbursement of 53 million euros.
Albania’s 36-month EFF arrangement was approved on February 2014. The Executive Board of the International Monetary Fund (IMF) approved a 36-month 330.9 million euros arrangement under the Extended-Fund Facility (EFF) for Albania in support of the authorities’ reform program.
The fiscal consolidation aims at reducing the threats against Albanian finances and economic growth from keeping public debt in a relatively high level.
IMF agreement facilitates a smooth transition in order to meet this target, namely, to start and reduce the level of public debt, thus meeting investors’ expectations.
Illahi: Electricity reforms are urgently needed
The head of IMF mission for Albania, Nadeem Ilahi stops at the fiscal system and economic situation in the country, judging by what he discussed with Albanian state officials.
“Fiscal performance during the second and third quarters of 2014 was broadly in line with program targets. The authorities remain committed to achieving the fiscal deficit target for 2015 as well as limiting expenditure within the programmed envelope. Despite significant energy-related spending, the 2015 budget is expected to achieve a reduction in public debt as a share of GDP for the first time since 2010”, – Ilahi said.
Ilahi also talks abort inflation and crediting: “Inflation expectations appear well-anchored and monetary policy should continue to be supportive of economic recovery, consistent with the Bank of Albania’s mandate of maintaining price stability. Credit growth is recovering but remains low, affected by high non-performing loans and weaknesses in contract enforcement”.
As far as the energy reform is concerned, Mr. Illahi considers it as urgent: “Electricity reforms are urgently needed to end the sector’s fiscal burden. The authorities have begun to take important first steps in implementing their electricity sector reform plan, developed in consultation with the World Bank. This includes curbs on electricity theft, proposals to restructure tariffs by end-2014, and institutional reform of the government-owned enterprises involved in the sector. Staff welcomes the plan to compensate the poor through targeted cash compensation”.
Ahmetaj: Full agreement with IMF about the entire macro-financial framework
Minister of Economic Development, Arben Ahmetaj, says that there’s a full agreement with IMF in the entire macro-financial framework. Mr. Ahmetaj says that the loan agreement with IMF is yielding its results. “Today, a year after agreeing for this program, I have the pleasure to say that it has been one of the best decisions and one of the most daring ones that the Albanian government has undertaken, because today, we see that economic recovery in the country has started”.
Ahmetaj also talks about the reform in the energy sector. According to him, IMF fully supports the reform in the electric energy sector, as one of the instruments which will also improve our fiscal situation and economic development.
“Reform in the energy sector is crucial and 2015 is the year which will correct all the 22 years of poor management in the energy sector in Albania. This is a very daring measure and a highly responsible one by the Albanian government and we’re convinced that we’re doing the right thing”, says Ahmetaj.
Cani: The main objective is to reduce debt
Minister of Finance, Shkelqim Cani says that the Albanian economy has started to recover and that the reforms undertaken by the government are going in the right direction. “Economic growth has been sustained by an increase of aggregate demand and improvement of exports. Consumer and investor confidence has grown as a result of the policies applied by the government, cooperation between public institutions with the businesses and the payment of arrears by the government to businesses”, Mr. Cany points out.
The minister says that “we remain committed to continue with the fiscal consolidation in order to reduce public debt in 2015”. He says that this is achieved by intensifying the reforms in the tax administration and by applying a balanced package of fiscal measures which aims at preserving economic growth.
Mr. Cani also says that 2015 will see the creation of the fiscal cadastre, which is an important step in collecting property tax, which will help in efficiently handling one of the taxes where the government is expected to collect a significant amount of money.
Head of the opposition informs IMF on the “government’s selective action” on energy
Leader of the Democratic Party, Lulzim Basha received the two representatives of IMF, Mr. Nadeem Illahi and Mr. Jens Reinke. He said that in the meeting held with them, he shared his “concern on the situation of the energy sector in the country”.
Basha has condemned what he considered to be “government’s selective actions” and “the fact that the PM threatens and punishes the citizens who have financial difficulties, instead of offering them a possibility to pay their obligations”.
Basha said that there’s no reform in the energy sector, but simply an austere measure at the detriment of Albanians, by increasing the price of power supply, by cutting off power for those who are unable to pay, due to unemployment and economic misery.
The leader of the Democratic Party also expressed his concern about the lack of transparency that the government is showing in relation to the increase of the price of power supply.
“The government itself doesn’t say what the increase of the price will be, while KESH, OST and OSHE are the state agencies which have requested the increase of prices. On one hand, the government requests a rise in price and on the other, it’s not telling to Albanian people what this increase is going to be”, said Basha.
Leader of opposition reminded to IMF representatives that the government came into power full of promises such as: reduction of the energy price, removal of VAT on energy, adding that: “But they didn’t do anything, on the contrary, they increased the price of energy”. /ibna/