World Bank conditions

The World Bank presented their conditions, in which is included a bigger debt reduction. The highest WB representative for Southeastern Europe, Ms. Jane Armitage, visited Tirana a few weeks ago especially for this issue.

But no agreement was reached, even after her meeting with the Prime Minister. The government decided to not accept a debt reduction stronger than the one predicted by the macro-economic plan, which keeps the debt in 2014 over 58% of the GDP, while the bank requests it at 56%. According to the government’s predictions, the budget deficit for these three years will be 3%, while the World Bank demands to increase it to 2.5% during this year and 2% for 2013-2014.

The cost of a decision

The government increased expenses to the highest levels during 2008-2009, because of the crisis and the elections, bringing the public debt to 60% of the GDP. Facing the public finances danger, the government abandoned high expenses after 2009.

However, IMF and the World Bank demand more expense cuts. According to them, Albania has a high debt that should be reduced at any cost. And these cuts are not without cost, when the economy is facing lower consumption by the citizens. The expense cuts would be the second reason for the weakening of the economic growth.

For the next three years, the government predicts to keep the expenses stable, below 28.4%, but the World Bank is requesting to lower them even further, by affecting the investments in infrastructure in exchange of the loans with lower interest norms.

The government is facing a difficult choice now. To accept the strongest debt reduction, as the World Bank requests, or to keep the expenses for giving more breathing space to the economy and benefit in the elections. Both choices have a cost.

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