Press Release: IMF Completes Third Review Under PRGF with Albania, Approves US$5.9 Million Disbursement, and Grants Waiver
January 23, 2004
The Executive Board of the International Monetary Fund (IMF) today completed the third review of Albania's economic performance and the financing assurances review under Albania's Poverty Reduction and Growth Facility (PRGF) arrangement. In completing the review, the Board approved the disbursement of SDR 4 million (about US$5.9 million) to Albania. The Board further granted Albania's request for waiving the non-observance of a September 30, 2003 structural performance criterion, regarding measures to regularize arrears between public sector enterprises. In the meantime, these measures were implemented as a prior action for the completion of this review.
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$41.5 million). So far, Albania has drawn SDR12 million (about US$17.8 million) under its current PRGF arrangement from the IMF.
The PRGF is the IMF's most concessional facility for low-income countries. PRGF-supported programs are 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, Agustín Carstens, Deputy Managing Director and Acting Chairman, said:
"Albania's performance during the first half of the three-year PRGF-supported program has been satisfactory overall, in spite of some delays on the structural side. Growth has recovered, inflation remains low, and the exchange rate has strengthened. However, revenue shortfalls persist, and could compromise the program's poverty reduction objectives.
"Improving revenue mobilization is therefore a policy priority, requiring not only improvements in tax administration and in tax policy design, but also actions to enhance governance and the business climate in order to reduce the size of the informal economy and widen the tax net. The program includes significant tax administration measures which, taken collectively, are expected to improve the efficiency, equity, and volume of tax collections.
"Governance issues are being addressed through a series of measures, including civil service reform, improvement of the capacity to combat money laundering, and a concerted effort to remove administrative barriers to investment. Over the longer term, these reforms will be essential for higher levels of foreign and domestic investment, with positive effects on the sustainability of growth, revenue, and the balance of payments. However, success will also require the authorities to take strong action on other governance issues, such as judicial reform and improvements in the rule of law. Similarly, agreement with domestic and foreign creditors to regularize government financial obligations will be critical.
"In view of the authorities' strong commitment to the program and ownership of the policy package, the Executive Board granted a waiver for the nonobservance of a structural performance criterion—which has since been implemented—and completed the third review under the arrangement and the Financing Assurances Review," Mr. Carstens said.