Press Release: IMF Executive Board Completes the Sixth and Final Review Under the PRGF and EFF Arrangements with Albania and Approves US$3.6 Million Disbursement
January 28, 2009Press Release No.09/16
The Executive Board of the International Monetary Fund (IMF) today completed the sixth and final review of Albania's economic performance and financing assurances under the three-year Poverty Reduction and Growth Facility (PRGF) arrangement and the Extended Fund Facility (EFF) arrangement. The completion of the reviews enables the release of an amount equivalent to SDR 2.435 million (about US$3.6 million), which will disburse the total amount available under both arrangements.
The concurrent three-year arrangements under the PRGF and EFF, amounting to the equivalent of SDR 17.045 million (about US$25.4 million), were approved on February 1, 2006 (see Press Release No. 06/17).
Following the Executive Board's discussion of Albania, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:
"The Albanian authorities are to be commended for their strong performance under the Fund-supported program. Their adherence to sound economic policies and the progress made in structural reforms have allowed Albania to sustain high growth and maintain low inflation. The strengthening of revenue administration, near completion of the privatization agenda, and improvement of the business environment are particularly welcome.
"However, the global economic downturn and financial turmoil have increased vulnerabilities, as pressures are emerging from slowing remittances and exports, and tightening financing conditions. Continued steadfast implementation of sound economic policies and unwavering commitment to reform are necessary to navigate the current environment.
"Further fiscal consolidation will be key to reinforcing the economy's resilience. The tighter fiscal stance, to which the authorities have committed for 2009, will help to lower budgetary financing needs in a challenging environment. Controlling expenditure, delaying planned cuts in social security contributions, and raising wholesale electricity tariffs to cost-recovery levels will support the appropriate fiscal stance.
"Over the medium term, further fiscal reforms will create room for development spending, while maintaining macroeconomic stability. A fiscal rule would be an important tool to better anchor fiscal policy, strengthen fiscal discipline, and reduce public debt. In addition, increasing incentives for workers to participate in the pension system would help combat tax evasion.
"The existing monetary policy framework, including an independent central bank and a floating exchange rate, has served the economy well and remains appropriate. Significant buffers and inherent strengths are underpinning the stability of Albania's financial sector. Continuing diligent supervision, high-frequency monitoring, and close coordination with foreign supervisors of resident banks will be important to mitigate emerging risks. The recent enhancement of the mechanisms for liquidity provision is welcome. Early enactment of new bankruptcy and collateral laws will further strengthen crisis preparedness.
"Decisive progress on improving the performance of public utilities, particularly the electricity companies, is a key reform priority. The successful launch of the privatization process for the electricity distribution company was a step forward, and finalizing the sale of the distribution company would offer a chance to reduce electricity theft and to assure a reliable supply over the medium term," Mr. Portugal said.