News Brief No. 00/43

News Brief: IMF Completes Albania PRGF Review and Approves US$3 Million Credit Tranche

June 9, 2000

The Executive Board of the International Monetary Fund (IMF) today completed the second review of the second annual arrangement under the Poverty Reduction and Growth Facility (PRGF)¹ for Albania. As a result, Albania will be able to draw up to the equivalent of SDR 2.354 million (about US$3 million) from the IMF.

The three-year PRGF, which was approved in May 1998, totals an amount equivalent to SDR 45.04 million (about US$59.9 million), of which Albania has drawn SDR 30.93 million (about US$41 million).

In commenting on the Executive Board's discussion of the review, Stanley Fischer, First Deputy Managing Director, made the following statement:

"The Albanian authorities have been successful in maintaining macroeconomic stability, with GDP growing at about 7 percent, inflation at close to zero, and external reserves at a comfortable level. These favorable results reflect to a large extent the authorities' steadfast pursuit of sound macroeconomic policies. Despite the Kosovo crisis in early 1999, structural reforms have continued, and particularly notable progress has recently been achieved in privatization.

"The authorities' policy framework for 2000 aims at continuing rapid growth and low inflation, based on a strong program of structural reforms and cautious budgetary policies. In this context, the authorities' commitment to improve the efficiency and governance of customs and tax administration is crucial to maintaining strong revenue collections and to providing resources for spending on poverty reduction and investment. The absence of inflationary pressures creates scope for a further easing of monetary policy.

"The authorities will continue to face challenging tasks in implementing the far reaching structural reforms required to establish a fully functioning market economy and to ensure its rapid growth over the medium term. Strengthening administrative capacity throughout the public sector, good governance and public order should remain the central focus for reforms. Another priority area is completing the privatization of the banking and enterprise sectors.

"The authorities are committed to continuing to develop a comprehensive poverty reduction strategy through an open consultative process, as evidenced by their recently completed interim PRSP, which was commended by the Executive Board," Fischer said.

¹On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. At this time for Albania, pending the completion of a PRSP, a preliminary framework has been set out in an Interim PRSP, approved by the authorities in May 2000, and preparations for a participatory process are underway. It is understood that all policy undertakings in the Interim PRSP Policy Matrix beyond the third year of the current program are subject to reexamination and modification in line with the strategy that is to be elaborated in the PRSP. Once completed and broadly endorsed by the Executive Boards of the IMF and World Bank, the PRSP will provide the policy framework for future reviews under this PRGF arrangement.
PRGF loans carry an interest rate of 0.5 percent a year, and are repayable over 10 years with a 5 ½ year grace period on principal payments.