Press Release No. 14/224

Press Release: Statement at the Conclusion of an IMF Mission to Albania

May 13, 2014

A staff team from the International Monetary Fund (IMF) led by Nadeem Ilahi visited Tirana during April 30 – May 13, 2014 to conduct discussions on the first review of the arrangement under the Extended Fund Facility (EFF). At the end of the visit Mr. Ilahi made the following statement:

“Albania's economic program is on track. The IMF team reached staff- level agreement with the authorities on the policies needed to complete the first review of the EFF, after all the end-March performance criteria and structural benchmarks were met.

“After slowing in 2013, economic growth is projected to increase to 2 percent this year, boosted by continued growth in exports and a modest recovery in domestic demand. Output remains below potential, however, and inflation is expected to remain low.

“Fiscal performance was in line with program targets in the first quarter of 2014, and arrears clearance has begun to move forward. The authorities remain committed to further fiscal consolidation in 2015 in order to begin to reduce public debt as envisaged under their economic program.

“Inflation expectations appear well-anchored and monetary policy should continue to be supportive of economic recovery, consistent with the Bank of Albania’s mandate of maintaining price stability. However, the transmission to credit growth remains hampered by banks’ risk aversion.

“The authorities have made good progress in preparing the pension reform strategy. The reform proposal recently developed in cooperation with the World Bank should help ensure that the system becomes sustainable over the long-term.

“The electricity sector poses a large fiscal risk. Reforms are urgently needed to improve collections, curb high distribution losses and reduce theft in order to end the current reliance on fiscal support to finance the sector. In addition, there is a need to tackle other emerging fiscal risks, including those related to property compensation and restitution.

“The IMF staff mission supports the authorities’ policy and structural reform efforts, including those to enhance the business environment, and views them as providing a credible basis for restoring economic growth and maintaining macroeconomic and financial stability.”

The Executive Board of the IMF is expected to discuss the first review of Albania's EFF in late June. Approval of the review would entail the disbursement of SDR 23.55 million (about EUR 26.5 million). Albania's 36-month EFF arrangement was approved on February 28, 2014 (see Press Release 14/81).