Press Release: IMF Completes First Review and Approves US$5 Million Tranche under PRGF for Albania
February 26, 2003
The Executive Board of the International Monetary Fund (IMF) today completed the first review of Albania's economic performance under the Poverty Reduction and Growth Facility (PRGF)1 arrangement. This will enable Albania to draw SDR 4 million (about US$5 million) from the IMF immediately.
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$38 million). So far, Albania has drawn SDR 4 million (about US$5 million) under its current PRGF arrangement from the IMF.
Following the Executive Board discussion, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chair, said:
"Albania's performance during the first six months of the three-year PRGF supported program has been satisfactory, overall. Macroeconomic stability has been maintained, as highlighted by continued low inflation and gradual fiscal consolidation. However, progress in the area of structural reform has been relatively weak, reflecting political uncertainties and governance problems, which have also contributed to a slowdown in growth. Nonetheless, the authorities remain committed to speeding up reform and strengthening their economic strategy.
"The fiscal deficit targets were met in spite of weaker-than-expected revenue collection. Looking forward, restoring revenue performance will be key to combining increased expenditure on priority measures for poverty alleviation with continued fiscal consolidation. Accordingly, strong measures have been identified to broaden the tax base and improve administrative efficiency. Monetary policy has remained cautious, helping overcome a period of heightened—albeit still moderate—inflation.
"Restoring and sustaining high growth hinges on the steadfast implementation of wide ranging structural reforms to improve the business climate. In this context, combating corruption and improving governance are of utmost importance, and the authorities are urged to intensify their efforts in these areas. In addition, the authorities should continue with their efforts to eliminate the severe electricity shortages, with reforms formulated in close collaboration with the World Bank.
"The evaluation and preparation of economic policies has been complicated by weaknesses in data collection. The authorities are urged to improve data coverage and data quality-building on the recent publication of the National Accounts.
"The authorities' comprehensive National Strategy for Socio-Economic Development has provided a broad framework for the current policy program. Its recurrent updating should be used to help strengthen the fiscal strategy, deepen the participatory process, build up policy consensus, and develop an effective monitoring system as a basis for policy enhancements. Specific steps for the upcoming first-year progress report should include improvements in the costing and prioritization of planned spending.
"In view of the authorities' commitment to improving performance, combined with the strong program of measures aimed at strengthening institutions and revenue performance and restoring growth, the Executive Board completed the first review under the arrangement, and granted a waiver for the nonobservance of a performance criterion under the program," Mr. Sugisaki said.
1 The PRGF is the IMF's 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.