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Tirana, December 21, 1999
Mr. Michel Camdessus
Dear Mr. Camdessus:
1. Despite the strains of the Kosovo crisis, the authorities of the Republic of Albania have continued to pursue the policies that are being supported by an arrangement under the Poverty Reduction and Growth Facility (PRGF). All end-September quantitative performance criteria were met, inflation is effectively at zero, and output is expected to grow by 8 percent in 1999. Structural reform and progress in improving law and order and governance have continued. Of the two structural performance criteria that were not observed as of end-September, one, submission of the draft law for the privatization of the Savings Bank to parliament, has now been met. The other, the sale or liquidation of all but 50 small- and medium-sized enterprises, should be met shortly.
2. We remain committed to the macroeconomic and structural objectives of the PRGF-supported program, and the attached Supplementary Memorandum on Economic and Financial Policies describes the progress made and the additional measures we will implement to achieve those objectives. On the strength of these policy measures, we would like to request waivers for the nonobservance of the above-mentioned structural performance criteria as of end-September 1999.
3. We have reached understandings with IMF staff on the key parameters of our 2000 budget, and the budget has now been passed by parliament. This budget could serve as a basis for completing the second review of the second annual arrangement currently being supported under the PRGF, and for agreeing on a third annual arrangement under the PRGF in support of our economic program for April 2000–March 2001. We welcome the added emphasis on poverty reduction under the PRGF and intend to involve civil society in a national dialogue on the design and implementation of our poverty reduction strategy. The World Bank and IMF staff, as well as interested international donors, will be invited to participate in, and contribute to, this effort.Sincerely yours,
1. Macroeconomic developments in 1999 have remained favorable despite the strains of the Kosovo crisis. We have successfully coped with the temporary massive influx of refugees without being deflected from our economic policy objectives. Real GDP growth for the year is expected to reach the targeted 8 percent, reflecting continued recovery from output losses in 1997, but also strong export growth. End-year inflation is now expected to be only ½ percent, compared to the programmed 7 percent, in part because of special factors, including the effects of sizable inflows of humanitarian aid in the form of goods. In the external sector, a lower than projected current account deficit, strong private inflows, and generous official financing have pushed official reserves some US$100 million above the original target for end-1999 and contributed to an appreciation of the lek. Official foreign exchange reserve cover is a relatively comfortable 4 ¾ months of imports of goods and services.
2. Financial policies have also been on course and all quantitative performance criteria for end-September 1999 were met (Table 1). For the full year, the domestically financed fiscal deficit is projected to be below the targeted 5½ percent of GDP and 1½ percentage points of GDP lower than in 1998. Tax collection will be below budgeted levels by more than 1 percent of GDP, in large part due to continued problems in customs administration as well as lower inflation and stronger exchange rate, while delays in project implementation have contributed to a similar shortfall in expenditure. The projected overall fiscal deficit in 1999 of 11 percent of GDP is about 3 percentage points of GDP lower than projected at the outset of the program because the early resolution of the Kosovo crisis has reduced related expenditures and because investment financed by foreign donors and official creditors has been less than planned. The government has begun to report Kosovo-related expenditures incurred by the budget—now estimated at about 2 percent of GDP in 1999—on a regular basis. As regards the monetary program, the large inflows from abroad have been reflected in stronger-than-anticipated broad money growth. Despite increased activity by private banks, private credit expansion has fallen short of projected amounts, owing to the continuing need to restrict lending by state-owned banks.
3. Structural reform has continued. The buyers for the National Commercial Bank (NCB) are negotiating terms with the government, and the privatization process is expected to be finalized in the first half of 2000. The law to privatize the Savings Bank was submitted to parliament only a few days after the end-September deadline for this structural performance criterion. The deadline for selling or liquidating all but 50 of the remaining small- and medium-sized enterprises (structural performance criterion) was also missed, although the removal of reservation prices should ensure that the requisite number of sales are completed by end-December. Significant progress has been made in most areas monitored by structural benchmarks (Table 2).
4. We remain firmly committed to maintaining macroeconomic stability, advancing structural reform, and strengthening governance. Economic policies will continue to be conducted in the framework of a program for April 1998–March 2001, for which the IMF is providing financial support under the PRGF arrangement. The remainder of this memorandum details the macroeconomic and structural policies for the period ahead. The government believes that the policies set out below will be sufficient to achieve the program objectives, but it will take additional measures and seek new understandings with the IMF should there be divergence from specified targets.
5. Macroeconomic policies will be kept consistent with maintaining low inflation and a sustainable balance of payments in order to provide a stable environment for economic growth. With the end of the Kosovo crisis relieving a key uncertainty in the region, and also relieving the strain on public administration, the government projects that growth will be 8 percent, assuming structural reforms and improvements in governance and law and order continue (see tabulation below). Inflation is projected to increase modestly to 3 percent in 2000 as earlier special factors unwind. External reserves are projected to decline slightly, but still exceed the equivalent of 4 months of imports of goods and services at end-2000.
6. The government has reached understandings with IMF staff on the key parameters and policies of the draft 2000 budget. Parliament has approved a budget that is consistent with these understandings (prior action). The budget envisages a reduction in the domestically financed deficit from 5¼ percent in 1999 to 4½ percent of GDP, of which ½ percentage point will be covered by privatization receipts. Including foreign financed expenditure, the overall budget deficit is projected to be 8¾ percent of GDP in 2000. This would be 2¼ percentage points of GDP below the 1999 figure, which included sizable Kosovo-related expenditures. While the government intends to meet the deficit target through the measures described below, if necessary it is prepared to intensify tax collection efforts further and cut non-interest expenditures.
7. The government intends to meet its fiscal objective mainly through strengthening tax collection. This will raise tax and social security revenues by close to 1½ percentage points of GDP to a total of 17½ percent of GDP in 2000. The government does not intend to raise tax rates nor introduce any new exemptions from direct or indirect taxes. Tax collection will be monitored by quarterly indicative floors on taxes (Table 1). A separate indicative target on customs revenues has been added in order to reinforce monitoring. Non-tax revenues are projected to decline by about 1 percent of GDP as lower interest rates will reduce the profit transfer from the central bank.
8. On the domestic side, efforts to strengthen tax administration will focus on past collection shortfalls of VAT. In particular, to combat double invoicing, the Tax Directorate will issue to businesses by end-1999 special invoicing forms designed to prevent falsification. At the same time, it will step up its efforts to control VAT payments through implementing stronger controls on wholesale transactions where underinvoicing appears to be a significant problem. The government will, however, review the VAT law with a view to speeding up VAT reimbursements. Improved cooperation between the Tax and Customs Directorates to monitor the domestic taxation of imported goods, which started in the last quarter of 1999, will be continued. The government is committed to improving the efficiency of the Tax Directorate, in particular by providing new accommodation for the Tirana branch, and by training tax inspectors with donor assistance. The law on fiscal procedures, which will regulate relations between taxpayers and the tax authorities, as well as the law on tax police, will be finalized with Fund technical assistance and presented to parliament before the end of 1999.
9. With regard to tax collection from imports, the government will ensure that the customs code is comprehensively implemented. The new customs code was introduced in May 1999 and many of its beneficial features are taking time to implement. The fight against fraud and smuggling was also complicated in 1999 by the deluge of tax-free humanitarian goods associated with the Kosovo crisis; the inflow of such goods will be greatly reduced in 2000. Full implementation of the customs code will more than compensate for the reduction of the top customs tariff rate from 20 percent to 18 percent. In order to combat the undervaluation of imports, working groups on customs valuation are being established in each customs office and in the General Customs Directorate to review and correct the reference valuation file based on market prices (prior action). The implementation of customs valuation in accordance with the customs code will be monitored continuously by the internal audit units in the regional and the general customs directorates (structural benchmark). As a prior action for completing the mid-year review of the program, the internal audit units, with assistance from the EU's Customs Assistance Mission (CAM-Albania), will produce at least four, weekly reports documenting cases in which customs valuation was not applied in accordance with the customs code, and the Director General of Customs will take corrective actions in such cases and produce at least one report to the Minister of Finance and Prime Minister describing the corrective actions taken. The internal audit units will continue to produce weekly reports on violations of customs valuation rules and the Director General of Customs will continue to take corrective actions and to submit monthly reports to the Minister of Finance and the Prime Minister on corrective actions taken (structural benchmark). The General Customs Directorate will speed up the collection of customs debt and by end-1999 will have collected in full the customs debt of 30 cases, starting with the largest debtors. It will, with assistance from CAM-Albania, by end-December 1999 also complete the review of all companies benefiting from special provisions under the customs code (temporary regime and admission) and disqualify those companies that are found to be in non-compliance with the criteria specified in the customs code.
10. The government's tax collection efforts will give particular focus to addressing corruption in the customs administration and smuggling. The General Customs Directorate, with assistance from CAM-Albania, will review the results of the work of the Anti-Smuggling Unit and identify and adopt a set of measures agreed with Fund staff for its improvement (prior action). The authorities will continue to assess and strengthen the performance of the Anti-Smuggling Unit. Also, the newly established independent personnel commission will review appointments, dismissals, appraisals, and rewards of the customs staff and submit a report on its findings to the Director General of Customs who will implement the commission's recommendations before end-1999. Moreover, in order to increase the incentives for customs inspectors to fight smuggling and corruption, by January 1, 2000 the General Customs Directorate, with assistance from CAM-Albania, will introduce merit-based bonus payments and enhancement payments in line with workload and conditions (prior action).
11. The expenditure program in the draft budget underlines the government's focus on strengthening spending in crucial areas such as investment, health, and education, while containing personnel expenditures. Total expenditure is budgeted at about 29 percent of GDP, or about ½ percentage point of GDP lower than in 1999, excluding Kosovo-related expenditures. The decline is more than accounted for by a decline in interest payments due to substantially lower interest rates, while non-interest expenditures rise by about 1 percent of GDP. The budget allows for an 8 percent increase in wages for budget sector workers, effective July 1, 2000, to help address disincentives to performance created by relatively low pay in the public sector. However, personnel expenditures will be restrained by cuts in budget sector employment of a least 6,000. The level of employment will be reduced to below 126,000 by end-March 2000 and to below 124,000 by end-October 2000 (structural benchmark). At the same time, spending on social assistance and on subsidies is budgeted to decline. In the case of social assistance, the economic recovery will help to reduce the number of recipients while the ineffective public works program, initiated in 1997, will expire. The savings will help to accommodate an increase of 37 percent in domestically-financed government investment, although at 2.5 percent of GDP it will remain relatively low. The budget also projects that foreign-financed investment will increase by 32 percent.
12. The government will strengthen the budget planning and execution process with a view to improving the quality of spending on investment and operations and maintenance and increasing absorption of foreign financing. To strengthen the planning and budgeting process, the government during 2000 will transfer the investment budget preparation function from the Ministry of Economic Cooperation and Trade to the Ministry of Finance and will integrate the recurrent and investment budget preparation processes. With technical assistance from the IMF's Fiscal Affairs Department, it will also introduce a new GFS-based revenue classification and economic classification of expenditure during the first half of 2000 in time to be used for the 2001 budget (structural benchmark). Measures to strengthen budget execution will focus on removing procedural obstacles to project preparation and management. First, by March 2000, the government will, with World Bank assistance, amend the procurement law. Among other things, the law will provide for the regular publication of a list of reference prices for key commodities and products procured by state agencies. The government will also implement the Council of Ministers' decision on accelerating procurement procedures. Second, to enhance the government's flexibility in approving projects by foreign donors, the Budget Law will provide the Ministry of Finance with the right to reallocate funds within the investment budget so that counterpart funds can be provided for foreign projects that had not been anticipated at the time of budget preparation. Third, adequate funds for the reimbursement of VAT on donor-financed imports will be provided for in the budget and disbursed in a timely fashion. Fourth, the government will review the experience with block grants to local authorities in 1999 and evaluate the scope for granting them additional spending authority for operations and maintenance.
13. The authorities will also undertake a number of initiatives to improve the targeting and effectiveness of expenditures, and help alleviate poverty. First, an expenditure tracking exercise in the Ministries of Education, Health, Public Works, and Local Government, which is being carried out in cooperation with the World Bank, will be completed by end-June 2000. Second, the government will use the database of social assistance recipients installed in 1999 to improve targeting of budget funds. Third, a public expenditure review to be conducted with World Bank assistance will be initiated in the first half of 2000. Fourth, in cooperation with the World Bank, the government will examine options to improve the sustainability of the public pension system. Fifth, the government in cooperation with the World Bank, will collect data with a view to building up a better understanding of poverty issues. These initiatives, along with the inputs from an open consultative process, will help the government to formulate next year a comprehensive poverty reduction strategy. We would envisage the preparation of an interim Poverty Reduction Strategy Paper by the time of the next program review.
14. The Bank of Albania (BoA) will continue to gear monetary policy toward maintaining low inflation. The timing and amount of changes in minimum deposit interest rates for state-owned banks will be based on an assessment of price developments, the demand for lek deposits, and conditions in the foreign exchange market. The BoA will continue to operate under a flexible exchange rate regime, generally limiting intervention to that necessary to smooth excessive fluctuations in the exchange rate.
15. The monetary program is consistent with budgeting financing needs and allows private sector credit growth equivalent to 1¼ percent of GDP in 2000. Following a sharp decline in 1999, velocity is projected to be broadly stable in 2000 implying broad money growth of about 10 percent. Revised end-1999 indicative targets and quarterly indicative targets for key monetary and credit aggregates for end-March 2000 are shown in Table 1. End-March 2000 ceilings and floors for, respectively, NDA and NIR of the BoA, and ceilings on net credit to the government are performance criteria for the end-year review of the second annual PRGF arrangement. The monetary program for 2000 will be reviewed at the time of the discussions for the third annual arrangement supported by the PRGF.
16. The BoA is continuing to phase out instruments of direct monetary control. Given progress in strengthening its supervisory capabilities (see paragraph 18), the BoA removed bank-by-bank credit ceilings in November 1999, although for prudential reasons it will continue to enforce lending limits on banks with a high proportion of non-performing loans, including the two state-owned banks. The BoA will continue to enforce minimum deposit rates on state-owned banks until these banks are closer to privatization and/or a liquid and competitive T-bill market is developed. The government and the BoA will enhance coordination of public debt management and monetary policies through stepping up the work of the Joint Committee set up for this purpose. The BoA will attempt to monitor the informal financial sector on a more systematic basis.
17. Privatization of the two state-owned banks remains a priority. Following initial delay, the sale of the NCB is advanced and the government has agreed on final terms with the buyers and aims to conclude the handover in the first half of 2000. To facilitate the sale, the government will take the necessary steps to reach an agreement for the transfer of NCB's shares in the Italian-Albanian Bank to the Ministry of Finance. With the law on the privatization of the Savings Bank (SB) expected to be passed by parliament by end-1999, the government, with assistance from the World Bank, is proceeding with the technical preparations for the privatization. To continue improving governance in the bank and facilitate the restructuring and privatization process, the government will, upon the expiration of the current advisors' contract at end-1999, hire a chief operations officer (COO) through international bidding. The COO will report to the General Manager of the SB and will be responsible for overseeing the SB's operations, and will contribute to the preparation of strategic options for privatization and the selection of a privatization advisor by end-April 2000 (structural benchmark). In the meantime, the government will carry out the following tasks: (a) complete instituting by end-December 1999 transparent accounting practices and commercially-based fees for all fiscal agency and payments functions performed by the SB on behalf of the government (structural benchmark); (b) prepare by end-March 2000 a thorough analysis of the profitability of individual bank branches based on the preliminary work already carried out (structural benchmark); (c) strengthen accounting practices more generally at the SB, including through computerizing accounting records, and complete an external audit by end-June 2000; and (d) in consultation with the World Bank and the privatization advisor, streamline the bank's operations, which may include closing unviable branches and shifting loss-making payments services in remote areas to the post office. The financial performance of the SB has improved in 1999 and any post-tax profits will be used to increase the bank's reserves. The government does not intend to recapitalize the SB until the late stages of the privatization process. The government will advertise for tenders for the SB by end-September 2000 and select a buyer by end-2000 (structural benchmarks), somewhat later than the original deadline, which with hindsight was overly ambitious.
18. Bank privatization will be complemented by a wide range of further measures to develop financial markets and increase the availability of sound credit. To strengthen the legal framework for lending, the Law on Secured Transactions and associated changes in the Civil Code and Civil Procedures Code have been approved by parliament and will come into force in January 2000. The law, which provides a modern legal framework for secured financing, requires the establishment of a registry at the Ministry of Finance by January and the training of the judiciary by the consulting company over the next 18 months. A draft Law on Money Laundering incorporating comments from IMF staff has been presented to the Ministry of Finance and is expected to be enacted by end-March 2000. Enforcement of the Companies Law and the Bankruptcy Law is being improved through additional training of the judiciary, with assistance from the World Bank and other donors. To make transfer of information among banks easier and to facilitate lending to creditworthy customers, the BoA is setting up a Credit Information Bureau with assistance from foreign experts. To develop a liquid and competitive T-bill market, which is necessary for the removal of floors on deposit rates, the government will, by end-March 2000, complete the implementation of the measures agreed with MAE staff in July 1999, including those for strengthening the functioning of primary auctions, improving the marketability of T-bills, and fostering the development of a secondary market for government securities (structural benchmark). The BoA has made significant progress in the area of banking supervision and regulation. A legal framework and a set of core prudential regulations broadly in line with the Basel Core Principles have been adopted, and licensing requirements for new banks and capital adequacy requirements for all banks are being strengthened. The BoA will continue to improve technical supervisory skills through ongoing training programs in banking supervision. To improve the payments system, the BoA will begin implementation work on a real-time gross settlement system in the first quarter of 2000.
19. The government will intensify its efforts in the area of enterprise privatization. In addition to completing the sale or liquidation of all but about 50 SMEs (prior action), the government will press hard to complete privatization in strategic sectors. First, in the telecommunications sector, the government will aim to select a buyer for Albanian Mobile Communications (AMC) by end-February with a view to concluding the sale shortly thereafter. Further licenses to operate competing mobile telephone systems in Albania will be given through a tender process on a strictly competitive and transparent basis to companies with experience as mobile telephone operators. By end-February 2000, the government will present to parliament the privatization law for the fixed line telecommunications company (Telekomi Shqiptar) and intends to select a buyer by end-September 2000 (structural benchmark). Second, in the mining sector, the government has agreed to a 30-year concession of Albbaker (copper) to an American company and the laws for the privatization of Albchrom (chromium) and for Albbaker have been submitted to parliament. The government intends to privatize Albchrom through tender or concession by end-June 2000. All small copper and chromium mines have either been closed or given to employees. Third, in the petroleum sector, all gas stations have been leased to private operators and the government has taken a decision to privatize the service company of Albpetrol with a view to completing the process by end-September 2000. The law to privatize the refinery will also be presented to parliament by end-March 2000. A decision on the sale of the government's share in Albpetrol's upstream operations, which are currently being operated in a joint-venture, will be taken in consultation with Albpetrol's international partners during 2000. To cut costs, the government will close unviable operations and reduce employment in the petroleum sector by 2,000 to 7,500 by end-March 2000. Fourth, with the assistance of the World Bank and EBRD, the management assistance contract for the electricity company, KESH, will come into effect by end-March 2000.
20. The government will continue its efforts to complete the registration of land and encourage a well-functioning agricultural land market. Progress will continue to be monitored by quarterly benchmarks on the number of cadastral zones for which first registration should be completed (Table 2). The government intends to speed up registration in 2000.
21. The government will speed up the reform of public administration and the civil service. As discussed in paragraph 11, budgetary sector employment will be reduced further in 2000. At the same time, with World Bank and EU assistance, the government will implement by April 2000 key results from the functional reviews of the Council of Ministers and the Ministries of Finance, Justice, and Local Government. Parliament has passed the revised Civil Service Law and implementing regulations will be finalized within the first half of 2000. New salary scales designed to increase transparency and performance orientation have been introduced for teachers and implementation for all civil servants is expected by April 2000.
22. The government is accelerating its efforts to wind up the pyramid schemes and plans to liquidate and distribute all the assets seized so far in the first half of 2000. It has already received the final reports from the international auditing companies and intends to publish them by end-1999. In the meantime, the government has initiated the distribution of the so-far realized sales proceeds of the seized assets of the 12 smaller pyramid schemes companies, and will complete the process for these companies by end-January 2000.
23. The government is determined to continue its fight against corruption. In addition to the measures to strengthen the customs administration (see paragraph 10), the government will implement its anti-corruption strategy fully. To strengthen the judiciary, the government has tested judges with less than 10 years experience and is removing those that have failed. In addition, we will devise further steps to improve governance and root out corruption in collaboration with the World Bank.
24. Albania's balance of payments remains on a sustainable path, although official external financing needs will remain sizable in the medium term. Whereas import demand increased in 1999 and private remittances declined somewhat in the face of the Kosovo crisis, the quick resolution of the crisis and the strong growth in exports of goods and services restricted the deterioration of the current account deficit to 8½ percent of GDP, from 6 percent of GDP in 1998. A further strong increase in imports is expected in 2000, as Albania's investment and reconstruction needs remain large. The export base is projected to continue to strengthen in response to improvements in security and public order, structural reforms, and macroeconomic stability, while private remittances are expected to grow steadily. The current account deficit is projected to remain broadly stable in 2000 and is fully financed on the basis of projected inflows of foreign direct investment and official bilateral and multilateral support. Projected residual financing needs in 2001 and beyond are small.
25. The government will take decisive steps to regularize relations with external creditors. It aims to conclude bilateral agreements under the July 1998 Paris Club Agreement for rescheduling Albania's debt in arrears to Russia and Italy within the deadline agreed upon with the Paris Club and seek at least comparable treatment from non-Paris Club official bilateral and commercial creditors with outstanding claims on Albania. The External Debt Committee will prepare a timetable and form working groups for reconciliation and rescheduling of debt in arrears to official bilateral and commercial creditors by end-December 1999. The Committee will meet monthly to monitor progress toward regularizing relations with external creditors and removing the remaining restrictions subject to IMF approval under Article VIII, Section 2(a) of the IMF's Articles of Agreement, in the form of outstanding debit balances under inoperative bilateral payments agreements.
26. The government remains committed to liberalizing the trade regime further. The medium-term aim is to maintain a simple and transparent tariff structure, with low dispersion of rates, and to reduce the average unweighted tariff rate to 10–12 percent, compared to over 14 percent at present. Following a reduction in the maximum tariff rate from 30 percent to 20 percent in April 1999, the government intends to lower the maximum tariff rate to 18 percent on January 1, 2000, and at that time the tariff on diesel will also be lowered back to 10 percent (prior action). The last remaining export bans (on skins, hides, and scrap metals) were removed in September 1999. The government will refrain from introducing any new quantitative restrictions on exports or imports. The licenses for fuel-importing that were introduced on the grounds of the application of technical standards will be granted in an automatic fashion.
27. The government is working to improve aid monitoring in conjunction with its efforts to strengthen aid absorption and raise project investment (see paragraph 12). The government appointed an external grant officer to monitor grants in July 1999. With technical assistance from UNCTAD/UNDP, the government will make an external debt and aid database fully operational by end-March 2000. The government will ensure timely and accurate reporting of external debt, including commitments by state-owned enterprises. The government will also formalize the procedural, institutional, and legal framework for monitoring and servicing external credits and grants by end-March 2000
28. To improve the quality, coverage, and timeliness of economic and financial data, the government and the BoA will continue to implement the work program that was prepared in collaboration with the multisector statistics mission from the IMF in February 1999. Work is being coordinated by an inter-agency Statistics Council headed by the Institute of Statistics (INSTAT) and including representatives of the Ministry of Finance, the BoA, the General Customs Directorate and other agencies. A key objective of the Council is to prepare the ground for Albania's participation in the General Data Dissemination System (GDDS). A preliminary inventory of the quantifiable objectives of the GDDS undertaken during the February 1999 mission revealed that, with the exception of the national accounts, Albania is within the GDDS specifications for all macroeconomic sectors. Accordingly, the government is making use of a short-term expert in the national accounts unit, who will assist the authorities in formulating a phased program for the development of national accounts statistics. The authorities will update the basket for the calculation of the consumer price index in 2000 with a view to introducing a revised index on January 1, 2001. The government will reorganize INSTAT by end-June 2000 and ensure that sufficient resources are provided for the development, compilation, and dissemination of statistics in line with international standards (structural benchmark).
29. During the remainder of the second annual PRGF arrangement, the program will be monitored based on indicative quantitative targets for end-December 1999 and quantitative performance criteria and indicative targets for end-March 2000, set on a cumulative basis from end-December 1998, and implementation of structural benchmarks (Tables 1 and 2). The government will conduct with the IMF an end-year review of the program no later than end-May 2000. The quantitative targets include: (i) a floor on the net international reserves (NIR) of the BoA; (ii) a ceiling on the net domestic assets (NDA) of the BoA; (iii) a ceiling on the banking system's net credit to the general government (including extra-budgetary funds); (iv) a ceiling on the contracting or guaranteeing by the public sector of new nonconcessional medium- and long-term external debt in the maturity range 1–15 years, with a subceiling on the contracting or guaranteeing of new nonconcessional external debt in the maturity range 1–5 years; and (v) a ceiling on the stock of outstanding short-term external debt, with the exception of normal import-related credits. The NIR floor will be adjusted upward and the NDA and net credit to government (NCG) ceilings downward for any excess in balance of payments or external budget financing (including budgetary grants for humanitarian relief to refugees from Kosovo) above program projections and/or any shortfall of the Kosovo-related budget cost from program projections. The NIR floor will be adjusted downward and the NDA and NCG ceilings upward to the extent that there is any shortfall in balance of payments or budget financing from program projections and/or any excess of the Kosovo-related budget cost from program projections, with the proviso that the downward adjustment to the NIR floor shall not exceed US$50 million and the upward adjustment to the NDA and NCG ceilings shall not exceed the lek equivalent of US$50 million, converted at the program monitoring exchange rate. The ceilings on NCG will also be adjusted downward for any excess in privatization receipts over the program levels (Table 1). Collection of tax revenue will be monitored on the basis of quarterly indicative floors on both total and customs revenues. During the program period, Albania will not impose or intensify exchange restrictions on current transactions or import restrictions for balance of payments reasons, and will not accumulate new external payments arrears, except for obligations for which a rescheduling is expected.