Press Release: IMF Completes In Principle Second Review and Approves US$6 Million Loan under PRGF for Albania
July 2, 2003
The Executive Board of the International Monetary Fund (IMF) today completed, in principle, the second review of Albania's economic performance under its Poverty Reduction and Growth Facility arrangement. The IMF Board's decision will become effective upon a further decision following the World Bank's Executive Board review of Albania's Poverty Reduction Strategy paper (PRSP), scheduled for July 10, 2003. At that time, Albania will be able to draw SDR 4 million (about US$6 million) from the IMF.
The three-year PRGF arrangement was approved on June 21, 2002 (see News Brief No. 02/52) for a total of SDR 28 million (about US$39 million). So far, Albania has drawn SDR 8 million (about US$11 million) under its current PRGF arrangement from the IMF.
The PRGF is the IMF's most concessional facility for low-income countries. It is 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. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½-year grace period on principal payments.
Following the Executive Board discussion, Anne Krueger, First Deputy Managing Director and Acting Chair, said:
"Albania's performance during the first year of the three-year PRGF-supported program on balance has been satisfactory, with low inflation, a stable effective exchange rate, and gradual fiscal consolidation. However, structural reform has been slower than envisaged; the authorities have taken steps to speed up the process and strengthen their economic strategy. The Fund has concluded the second review under the program, on the strength of the authorities' commitment to and ownership of the program, the progress being made in the fiscal area, and the strong and well-sequenced structural reform agenda.
"Fiscal policy has been hindered by weaker-than-expected revenue collection, but the deficit targets have been met. Looking forward, strong measures have been identified to broaden the tax base, improve revenue collection, and strengthen budgetary procedures. These should permit both increased expenditures on priority measures for poverty alleviation and continued fiscal consolidation. In the context of low core inflation and continued exchange rate stability, there is scope for further lowering policy interest rates.
"The steadfast implementation of structural reforms remains crucial to high private-sector led growth. Key priorities are removing administrative barriers to investment, improving governance, and fighting corruption.
"The authorities have developed a first progress report on their comprehensive National Strategy for Socio-Economic Development. This document testifies to the authorities' commitment to their poverty reduction strategy, which continues to provide a suitable framework for the current policy program and for the support of the international community," Ms. Krueger stated.