News Brief: IMF Approves Final Loan of US$6 Million Under PRGF to Albania
July 13, 2001
The Executive Board of the International Monetary Fund (IMF) today completed the final review of Albania's third annual arrangement under the Poverty Reduction and Growth Facility (PRGF)1. Today's decision will enable Albania to draw the final credit tranche of SDR 4.7 million (about US$6 million) from the IMF.
The PRGF arrangement was approved on May 13, 1998 (see Press Release No. 98/18) in a total amount of SDR 45 million (about $56 million), of which Albania so far has drawn SDR 40.3 million (about US$50 million).
Following the Executive Board's discussion of the review, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chairman, said:
"The authorities are successfully implementing their program supported by their PRGF arrangement with the Fund. Sound macroeconomic management and the implementation of structural reforms have resulted in continued high growth and financial stability in Albania. GDP is growing at more than 7 percent and inflation has remained low. Fiscal policy remains on track, supported by ongoing improvements in revenue collection. A cautious monetary policy, now implemented through indirect instruments, aims to keep inflation within a 2-4 percent target range. The privatization agenda is nearing completion, following the recent announcement of the tender for privatization of the Savings Bank.
"The authorities' policies for 2001 include bold reforms in the electricity sector, in order to eliminate supply shortages that could threaten growth prospects. The efficiency and governance of revenue administration are being strengthened, building on recent improvements in customs administration. A further priority is to improve the financial and legal framework for investors, as part of the process of creating a favorable environment for private sector activity.
"The authorities are completing a comprehensive growth and poverty reduction strategy, through a broad participatory process. The strategy will be integrated with the authorities' medium-term expenditure plans and with the availability of support from international donors," Mr. Sugisaki said.
1 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was replaced by the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It was intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. At this time for Albania, pending the completion of a PRSP, a preliminary framework has been set out in an interim PRSP, and a participatory process is underway. It is understood that all policy undertakings in the interim PRSP beyond the first year are subject to reexamination and modification in line with the strategy that is to be elaborated in the PRSP. Once completed and broadly endorsed by the Executive Boards of the IMF and World Bank, the PRSP will provide the policy framework for future reviews under this PRGF arrangement. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5½ year grace period on principal payments.