IMF criticizes Tirana

The Head of the IMF Mission for Albania, Nadeem Ilahi, declared for Voice of America that CEZ, the high debt and the failure to realize the privatization of Albpetrol, could bring consequences to the Albanian economy.

“Albania’s debt is among the highest in the region. This is a problem for the economic growth and brings other dangers in the future. The other problem is that almost half of Albania’s debt is short-termed and it is maturated within 12 months. Another factor is the internal debt, 70% of which is kept by the banking system, which belongs to foreign banks that have had pressures from the European financial crisis. Our advice for the authorities was to be careful with these connections. Nothing will probably happen, but the financial climate in Europe could bring a bigger danger with this high debt percentage.

Albpetrol was another issue that we discussed when we were there in October. As you know, the privatization was not realized. The government is looking to privatize some hydropower plants, but this is not a big figure. Debt must be reduced only through budget. Our advice is that urgent measures need to be taken to cut spending and increase revenues, to keep the debt in the same level during 2013, and then reduce it gradually. We have emphasized that in the past years, the fiscal pressures have been a burden for the capital spending. This is a problem for Albania, since it needs development and infrastructure. Reducing the capital in a time like this is very negative for in the long-term perspective. Our advice was to cut expenses and increase revenues, but by preserving or increasing capital spending. Programs for the poor should also be kept in consideration, because in a time of crisis you cannot cut such programs.

The problems with CEZ have been there for a long time, as consequence of the privatization. The energy sector had a large lack of investments and the fees were not adopted, making the company unable to cover spending. The fact that CEC is leaving is product of this situation that will cause other problems. This will bring needs for the energy import, and the government should think about this bill. CEC could bring other problems that might need fiscal attention”, Ilahi declared.

He added that in this situation of high debt, the government is unable to stimulate the economy. Stimulation through debt is very difficult, because moneylenders are concerned for the paying chances. Their opinion is that the government should not reduce taxes or increase spending, but on the contrary.

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