Published by Korrieri, Panorama, Gazeta Shqiptare on October 20, 2006 The IMF Program One Year Down the Road
One year ago we reached agreement with the Albanian government on the current IMF program. With an IMF mission arriving to Tirana next week to conduct the second review under the program, this might be a good time to take stock on what has been achieved so far and what still remains to be done. We expect the current program, a joint Poverty Reduction and Growth Facility—Extended Fund Facility, to be the last long-term program that Albania has with the Fund. This program is the sixth arrangement that Albania has had with the Fund since the beginning of the country’s transition toward a market economy in the early 1990s. Looking ahead, the process of integration with the European Union will provide Albania with a new external anchor to guide its economic policies. (Similarly, NATO membership, which might materialize in only a few years, will provide the external anchor for Albania’s security policies.) This 3-year program, which was formally approved by the Fund’s Executive Board in January this year, has been successful so far. The Fund program is a guardian of macroeconomic stability, which by now is well entrenched in Albania. Economic stability has, in turn, created the necessary conditions for stable growth and significant poverty reduction. Also, there have been impressive improvements in tax and customs administration through a combination of enhancing governance and strengthening of capacities. The resulting revenue over performance was allocated mid-year in a supplementary budget to further priority spending, tax reductions, and deficit reduction. Furthermore, a new merged Financial Supervisory Authority has been created that will strengthen the supervision and regulation of the non-bank financial sector. Major achievements notwithstanding, important vulnerabilities remain, including weak debt management capacities and generally weak public institutions, including the judiciary. Hence, over the next two years, the program will continue to focus on structural reforms aimed at creating strong internal anchors by strengthening institutions. In close collaboration with the Bank of Albania, the program will incorporate the necessary policy measures to keep private credit growth at a prudent level, in order to ensure the quality of the credit portfolio, and maintain hard-earned financial system and macroeconomic stability. In this context, we will continue to reinforce the independence of the central bank, which is fundamental in order for it to pursue its main mandate, namely price stability. The IMF program with Albania is a program for the entire country. For its success, it is important that all key counterparts, on both ends of the political spectrum, feel involved, and that there is an open dialogue in parliament between the ruling majority and the opposition on economic policy issues.
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István P. Székely Mission Chief
K. Ann-Margret Westin Resident Representative