The International Monetary Fund explained for the first time publicly
why they were not rigid with Albania, but accepted an agreement that
allowed the government to increase the debt.
“Let’s draw a strong line and say that the public debt should not increase beyond the level of this year. If you would have followed this road, you would be needing a fiscal correction of 4% of the GDP. This would damage the economic growth for the next year, and the businesses’ trust and ability to operate. By the end, taxes would have to be raised much more than now for realizing this. The idea was to find a balance between the correction that was needed, and the space that the economy would need to grow. I trust that we have found an optimal balance”, declared the head of the Mission in Albania, Nadeem Ilahi.
IMF calculates that the economic growth of Albania for this year will be 1.3%, while for the next year they expect a modest growth at only 2%. The head of the mission says that the reform package of the government might help.
“I think that the economic package of the government tents to address to the problems that the government is actually facing. We must understand that some of these problems have affeected the trust of the economic agents, such as banks, businesses. A direct consequence of this have been the obligations that the government has accumulated by slowing down the private sector. If the new government will pay some of these obligations, this will inject liquidity in the market and will allow the economy to grow, by improving the ability of businesses to take loans”, Ilahi declared.
By the end, the Head of the Mission explained that the position of the IMF for the progressive tax, one of the most debated points of the new fiscal package.
“We have not been skeptic baout the progressive tax. Many countries chose the progressive tax, others the flat tax. These are policies of governments. But when progressivity increases, the burden on the administration also increases. Our advise for the government is that if you will follow this path, you will have to make great efforts to improve the administration”, Ilahi declared.
Two days ago, the IMF and the Albanian government announced that they have reached a cooperation agreement, which returns the IMF as the guardian of the Albanian economy and finances, five years after leaving.
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