Press Release No. 15/507

Press Release: IMF Reaches Staff-Level Agreement for Completion of Fifth and Sixth Reviews of Albania’s EFF

November 10, 2015

An International Monetary Fund (IMF) mission led by Anita Tuladhar visited Tirana from October 28 to November 10, 2015 to conduct discussions on the fifth and sixth reviews of Albania’s Extended Fund Facility (EFF) arrangement. On the conclusion of the visit, Ms. Tuladhar made the following statement:

“The IMF team reached staff level agreement with the authorities on the policies needed to complete the fifth and sixth review of the EFF. Albania's economic program is on track. All quantitative targets under the program were met. Implementation of structural reforms, such as in the energy sector, remains strong, and is already yielding fiscal savings and setting the foundation for stronger growth over the medium term.

“Economic recovery is expected to continue, with GDP growth reaching 2.5 – 2.75 percent in 2015 and between 3 – 3.5 percent in 2016. Growth will be driven by continued foreign direct investment and rising domestic demand, supported by a gradual pickup in bank lending. Inflation is expected to stay low, around 2 percent, in part reflecting globally low price pressures and output still below potential.

“Fiscal consolidation is expected to continue in 2016 with the budget aiming for a primary surplus of 0.3 percent of GDP, designed to allow sufficient room for growth-supporting capital investment while enabling public debt to gradually decline over time. The country needs to continue improving tax compliance and broadening the tax base to sustain fiscal consolidation, and ensure medium-term debt sustainability, while allowing fiscal space for productive spending.

“Bank of Albania’s monetary policy should continue to be supportive of economic recovery, consistent with its mandate of maintaining price stability. Lending to the private sector is gradually recovering but credit growth remains low, affected by high non-performing loans (NPLs) and weaknesses in contract enforcement. The government and Bank of Albania have adopted a comprehensive strategy for resolving the NPL issue, focusing on legal and administrative changes. The banking sector remains highly liquid and well capitalized and has weathered the Greek crisis well.

“The Executive Board of the IMF is expected to discuss the fifth and sixth reviews in early 2016. Approval of the reviews would enable the disbursement of SDR 57.8 million (about €73.8 million). Albania's 36-month EFF arrangement was approved on February 28, 2014 (see Press Release 14/81).”