## Press Release: IMF Approves Emergency Post Conflict Assistance for Albania

_IMF News, November 7, 1997_

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**Canonical URL:** [Press Release: IMF Approves Emergency Post Conflict Assistance for Albania](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9751)

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## Bibliographic details
- Published: November 7, 1997

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### Summary of Action
- The International Monetary Fund (IMF) approved a credit for Albania equivalent to SDR 8.825 million (about US$12 million) under the IMF’s emergency post conflict assistance to support the government’s economic program for 1997-98.
- Press Release No. 97/51, November 7, 1997.

### Background: 1993–1997 economic trajectory and crisis
- Exceptional progress in 1993-95:
  - Annual GDP growth averaged 9 percent.
  - Inflation fell from triple digits to 6 percent.
  - External imbalances were reduced sharply.
  - Early privatization in agriculture, retail trade, and small and medium-sized enterprises contributed to strong supply response.
  - Financial discipline at the budgetary and state enterprise level supported stabilization.
- Deterioration in 1996 and early 1997:
  - Transition stalled in 1996.
  - Election-driven policies raised the budget deficit to 10 ½ percent of GDP.
  - Annual inflation tripled.
  - Financial pyramid schemes grew to liabilities, including accrued interest at unrealistically high rates, equivalent to nearly half of GDP.
  - In March 1997, Albania descended into anarchy and near civil war.
  - Economic fallout: massive supply disruptions reduced output in construction and industry; loss of wealth in failed financial schemes depressed domestic demand.

### The 1997-98 Program: macroeconomic objectives and policy measures
- Primary macroeconomic goal: rapid disinflation and resumption of growth for 1997-98.
- Key macroeconomic objectives:
  - Limit the decline of real GDP to 8 percent in 1997 and achieve real growth of about 12 percent in 1998.
  - Contain the annual inflation rate to the range of 51-54 percent in 1997, and bring it down to 15- 20 percent in 1998.
  - Keep gross international reserves above the equivalent of 3.5 months of imports through 1998.
- Fiscal policy targets and instruments:
  - Limit the domestically financed budget deficit to about 13 percent of GDP in 1997, and to below 10 percent of GDP in 1998.
  - Measures to achieve fiscal targets:
    - Restore and then improve tax collection.
    - Raise tax rates, including a significant increase in the VAT rate.
    - Exercise expenditure restraint, including a rationalization of the civil service.
- Monetary policy:
  - The Bank of Albania will support inflation reduction by maintaining an appropriately tight monetary stance.

### Structural Reforms (planned under the program)
- Progress toward privatization or liquidation of two of the three state-owned commercial banks.
- Winding up the companies that operated pyramid schemes.
- Civil service reform.
- Resumption of enterprise privatization.
- Creation of a functioning agricultural land market.

### Addressing Social Needs
- Acknowledgement of severe impoverishment resulting from the crisis.
- Medium-term poverty alleviation based on achieving high sustainable growth driven by private sector development.
- Short-term measures:
  - Temporary support targeted toward the poorest families.
  - Accelerate disbursements of social assistance.
  - Introduce public works/community service schemes for social assistance beneficiaries who can work.
  - Priority attention in the next few months to severe shortages in pharmaceuticals, surgical goods and materials, and equipment for public health services.

### The Challenge Ahead: risks and external support needs
- Main risks to the program:
  - Limited, albeit improving, capacity of the authorities to formulate and implement macroeconomic and structural measures.
  - Difficulty of projecting key economic variables in uncertain circumstances.
- Required responses:
  - Strong commitment of the authorities to policy implementation.
  - Substantial technical assistance in a broad range of areas.
- External position and arrears:
  - Albania’s balance of payments position will remain difficult during the remainder of 1997 and 1998.
  - Over the longer term, Albania will continue to require substantial external support.
  - Arrears to Russia and non-Paris Club official bilateral creditors will need to be reconciled and rescheduled.

### Albania: Selected Economic Indicators (as presented)
- Real GDP (Percent change):
  - 1994: 9.4
  - 1995: 8.9
  - 1996: 9.1
  - 1997*: -8.0
  - 1998*: 12.0
- Retail Prices (End of period):
  - 1994: 15.8
  - 1995: 6.0
  - 1996: 17.4
  - 1997*: 51-54.0
  - 1998*: 15-20.0
- Domestically financed fiscal deficit (Percent of GDP):
  - 1994: -7.0
  - 1995: -6.3
  - 1996: -10.5
  - 1997*: -13.2
  - 1998*: -9.7
- External current account balance, excluding official transfers (deficit-) (Percent of GDP):
  - 1994: -14.3
  - 1995: -7.5
  - 1996: -9.2
  - 1997*: -8.9
  - 1998*: -14.0
- Gross official reserves (Months of imports):
  - 1994: 3.2
  - 1995: 3.5
  - 1996: 3.1
  - 1997*: 5.0
- Sources: Albanian authorities; and IMF staff estimates and projections.
- Note: * Projections.

### IMF Membership and Quota Information
- Albania joined the IMF on October 15, 1991.
- Albania’s quota is SDR 35.3 million (about US$49 million).
- Its outstanding use of IMF financing currently totals SDR 32 million (about US$45 million).

*Press Release No. 97/51, November 7, 1997 — International Monetary Fund.*

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## References

- [Albania and the IMF](http://www.imf.org/external/country/alb/index.htm)
- [Russian Federation and the IMF](http://www.imf.org/external/country/RUS/index.htm)
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- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9751_