Government violates 60% debt limit law

The crisis and the failure to realize the revenues have driven the indicators for Budget 2012 outside the legal parameters approved by the Parliament. According to the Ministry of Finances data, the revenues for 10 months of this year were 19.4 billion lower that what was predicted by law.

Facing this situation, the government is preparing a normative act to correct the figures. Top Channel has learned that the draft foresees the cutting of expenses and revenues, but not on the same measure. According to the plan, the revenues will be cut with 7 billion ALL more than the expenses and the government will pay the gap by increasing the debt.

Due to the budget deficit, the difference between the expenses and the revenues is expanded from 41 billion ALL, as predicted, to 48 billion ALL. According to the calculations, this public debt deficit of Albania will reach 61% of the GDP within this year, compromising even the 62.6% debt that is foreseen for the next year.

Unlimited debt, next year goes to 62.6%

In 2008, the Albanian government promised to reduce the public debt to 50% within five years. The promise not only was not kept, but the government has increased it with 1.7% each year. As result, the national debt goes to 62.6% during the next year, according tot eh government. The International Monetary Fund and the World Bank declared that this burden is 1.5 times bigger than what the Albanian economy can carry, and this is not the only danger.

There are great question marks even for the future. In June 2008, the Parliament passed a fiscal rule that imposed a national debt not more than 60% of the GDP. Although it wasn’t a strong rule, it has helped as a psychological barrier to stop the government from increasing the debt. But they resisted for only four years. The limit was officially violated this year and the government sent a draft to Parliament that legalizes this violation, and leaves Albania without a debt limit. The government has no legal barrier to increase the debt to their own will, besides the budget limitations. But as the last years have shown, the budget remains the most unstable law that can change three times within one year.

In an electoral year, the dangers are even bigger. The budget for the next year, although with cuts, is still in danger. The government has predicted only 800 million ALL of contingencies to preserve the macro-economic stability, three to four times less than the average of the last years.

At this point, removing the debt limit is a dangerous precedent for the public finances, which the debt spiral is putting in an unstable road by threatening the financial stability of our country. The government that will come after the next elections will face great dangers, if not an impossible mission, to keep the Albanian finances under control.

Top Channel