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An International Monetary Fund (IMF) mission led by Anita Tuladhar visited Tirana from June 15–28, 2016, to conduct discussions on the eighth review of Albania’s Extended Fund Facility (EFF) Arrangement. At the conclusion of the visit, Ms. Tuladhar made the following statement:
“The IMF team reached staff level agreement with Albania’s authorities on the policies needed to complete the eighth review of the EFF. The country's economic program is broadly on track, with good progress in advancing structural reforms in areas such as bankruptcy legislation, and all the quantitative performance criteria under the program met. Nevertheless, the reemergence of arrears at the central government, mainly in public investment projects, poses a key challenge. There were also delays in approving the restructuring plan of the General Directorate of Taxes.
“The Fund team expects economic recovery to strengthen, with GDP growth projected to reach 3.4 percent in 2016, underpinned by large energy-related foreign direct investment inflows and a pickup in domestic demand as monetary policy remains accommodative. Inflation is expected to stay low, rising gradually during the second half of 2016 to reach 1.8 percent by year-end, led by a recovery in oil and food prices.
“The 2016 budget aims for a primary surplus of 0.3 percent of GDP. Tax revenues were in line with the target for the first five months of 2016, despite weak oil prices and low inflation, partly reflecting early gains from the government’s efforts to improve tax compliance. The weak performance of local taxes, however, underscores the urgency for developing a valuation-based property tax. To ensure continued fiscal consolidation, efforts to broaden the tax base and to strengthen tax administration will be important. The government should also step up its efforts to prevent the accumulation of new arrears and improve investment planning and implementation.
“Bank of Albania’s accommodative monetary policy stance remains appropriate, and is consistent with its price stability objective. Rapid implementation of the strategy for resolving non-performing loans will be important to strengthen lending to the private sector, including through improved collateral execution. The banking sector remains highly liquid and well capitalized.
“The Executive Board of the IMF is expected to discuss the eighth review in August 2016. Approval of the review would enable the disbursement of SDR 28.65 million (about € 35.94 million). Albania's 36-month EFF arrangement was approved on February 28, 2014 (see Press Release 14/81).”
