Albania Successfully Concludes Three-Year IMF-Supported Program
IMF News, February 28, 2017
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- Published: February 28, 2017
Program conclusion and financing
- On February 24, Albania drew the last installment of a SDR 295.42 million ($400.4 million) credit line, successfully concluding its three-year program aimed at restoring economic growth and controlling the rapidly rising public debt.
Key achievements of the program
- economic growth accelerated to over 3 percent;
- the budget gap narrowed by 3 percent of GDP, helped mainly by growing tax revenues;
- public debt declined from its peak of 73.7 percent;
- government arrears have been mostly cleared;
- the budget now records a surplus before payments of interest on the country’s debt;
- the reform of the pension system and the electricity sector has advanced considerably, lowering the two sectors’ reliance on budget support;
- the ratio of overdue bank loans fell and parliament agreed on a bankruptcy law to resolve the bad loans; and
- overall fiscal and financial frameworks have been strengthened.
IMF assessment and message
- “The program has successfully put Albania on a recovery path with sound public finances,” said Anita Tuladhar, the head of the IMF team for Albania.
- The program strengthened the institutional framework, reduced vulnerabilities of the economy, and helped maintain economic stability despite difficult external conditions.
Policy recommendations and remaining challenges
- continue efforts to lower the public debt and borrowing needs;
- reform property tax and reduce tax exemptions;
- make public financial management more efficient and modernize the tax administration;
- resolve the overhang of overdue bank debt that impedes lending; and;
- press ahead with the recently launched, EU-supported justice reform initiative and related structural reforms to address governance concerns and an inefficient justice system.
Background context
- In 2014, Albania’s economic growth almost slowed to a halt as the economic crisis cut demand from Greece and Italy, its main trading partners.
- At the same time, public debt surged and arrears accumulated due to election time splurges, an unsustainable pension system, and an unviable electricity sector.
- The banking system, on which the government relied heavily for borrowing, had weakened due to a high ratio of overdue loans, increasing financing pressures.
- The IMF loan aimed to help address these fiscal and financial challenges and restore economic growth in Albania.
Main indicators of Albania
- GDP growth (percent): 2013 — 1.0; 2016 — 3.4
- Primary balance (percent of GDP): 2013 — -2.0; 2016 — 0.2
- Overall balance (percent of GDP): 2013 — -5.2; 2016 — -2.2
- Tax revenues (percent of GDP): 2013 — 22.0; 2016 — 24.3
- Non-performing loans (percent): 2013 — 23.5; 2016 — 20.4
IMF News — Albania Successfully Concludes Three-Year IMF-Supported Program (February 28, 2017)
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References
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