WB: Cautious with budget cuts

“What we recommend is to review the menu of options. We are concerned with what has happened in the recent years, the cutting of maintenance expenses. This is not a policy in favor of the economic growth. The maintenance expenses have been affected strongly, to the point that they are considered as the easiest to be cut. But this means that most of the investments that are made in the past, in roads or everything else, are not being maintained as it should and will not serve for as long that it was predicted”, Lvovski declared.

But how can the government rebalance its finances without cutting the investments and expenses for their maintenance?

“It is important to establish a better balance between the investments and expenses, together with other indicators. For example, wages and pensions. I know that the government is committed to increase wages, but its level could be seen by using inflation as an adequate target. Because, for the Albanians, it is more important that the economic growth increases until there is a slight wage increase in this difficult time”, Lvovski declared.

The World Bank and other financial institutions have been appealing the government of changing the budget policies for not putting in danger the stability of the country and the economic growth.

“We are not proposing a strict policy, because that would damage the economic growth even further. What we want is a careful strategy for a gradual reduction of the debt, for reviewing the entire budget program in several years. First of all, it is important for the government to reduce the need for debts, especially for internal debts, which are more expensive and with higher interests. The deficit should be preserved this year and reduce its level in the next year. There is another possibility for this program to be completed by replacing the debt, decreasing the expensive debt that was taken in the inner market, and replace it with a cheaper and longer termed debt in foreign institutions, such as the World Bank or others. But this is an additional measure that fulfills the necessary program for a gradual debt decrease”, Lvovski declared.

The Albanian government has been negotiating with the World Bank for a soft credit, but the Bank has asked some concrete measures for reducing the debt, as conditions. The parties are negotiating and there is no final agreement yet.

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