World Bank Warns Albania of Need For Reform

The report entitled "Albania’s Public Finance Review," underlines that Tirana’s fiscal deficit is largely structurally driven, and says reforms in tax, administration, pensions and energy could significantly enhance its fiscal sustainability.

 “The program of reforms undertaken by the government is very important for the correction of macro-fiscal misbalances,” World Bank Albania country director Tahseed Sayed said at the presentation of the report in the capital, Tirana, on Monday.

“We believe the realization of these difficult but urgently needed reforms in public finances, financial sector, energy, pensions and public services will bring concrete results in the years to come,” she added.

The report recalled that the global financial crisis in 2008 slammed the brakes on the internal demand-driven growth that Albania had experienced over the previous decade.

Although Albania avoided going into recession, the World Bank notes that the crisis still hit the economy "hard," especially between 2009 and 2012, when GDP growth averaged less than 3 per cent.

A loose fiscal policy implemented by the previous centre-right government, coupled with the depreciation of the lek and the accumulation of $670 million in arrears, brought public debt well above the ceiling of 60 per cent of GDP.

“With Albania’s medium-term growth rate at around 2.0-3.0 percent and the average real interest rate on current public debt of 3.0 percent or higher, the public debt-to-GDP ratio is set to grow rapidly unless the authorities introduce a serious program of fiscal consolidation,” the report said.

According to the World Bank, if the government does not undertake immediate structural reforms, Albania’s public debt-to-GDP ratio...