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Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 1999
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Albania: ESAF

The IMF approved the second annual arrangement under the Enhanced Structural Adjustment Facility (ESAF), and an augmentation of SDR 9.7 million (about $13.1 million) in the amount of resources committed under the arrangement, to support Albania’s economic and financial program. The augmentation takes into account Albania’s increased balance of payments needs arising from the impact of the Kosovo crisis. The three-year ESAF arrangement was approved on May 13, 1998, in an original amount of SDR 35.3 million (about $47.5 million), of which one-third has been disbursed. (See Press Release No. 98/18, IMF Survey, May 25, 1998, page 170.) Today’s [June 14] decision increases the total amount of the ESAF arrangement to SDR 45.0 million (about $60.6 million) and triggers release of SDR 9.6 million (about $12.9 million).

Albania: basic indicators and macroeconomic framework
199619971998119991200022001220022
(percent change)
Real GDP9.1-7.08.08.08.08.08.0
Retail prices (during period)17.442.18.77.05.03.03.0
(percent of GDP)
Domestically financed deficit10.610.86.45.54.33.32.5
Current account balance3, 4-9.1-12.1-6.1-11.9-8.6-7.2-6.1
(months of imports of goods and services)
Gross international reserves3.14.54.73.73.83.63.5

Estimates.

Projections.

For 1999, excluding imports of direct humanitarian aid related to the Kosovo crisis.

Excluding official transfers.

Data: Albanian authorities and IMF staff estimates and projections

Estimates.

Projections.

For 1999, excluding imports of direct humanitarian aid related to the Kosovo crisis.

Excluding official transfers.

Data: Albanian authorities and IMF staff estimates and projections

Medium-term strategy and 1999/2000 program

Albania’s program seeks to achieve rapid economic growth, low inflation, greater employment opportunities, and reduced poverty. It requires ambitious and comprehensive structural reforms and a concerted attack on poor governance. After the Kosovo crisis broke out, Albania’s authorities continued to focus on maintaining macroeconomic stability and the momentum of reforms. The impact of the crisis on growth and inflation is expected to be small, assuming that refugee-related expenditures are largely financed by the international community. Under the assumption that the refugees will have returned home by early 2000, foreign direct investment resumes, and fiscal consolidation and structural reforms continue as programmed, growth is expected to average 7–8 percent a year, while inflation stabilizes at industrial country levels.

The budget impact of the Kosovo crisis is estimated at $154 million (4 percent of GDP for 1999). However, the authorities aim to ensure that this does not interfere with underlying fiscal consolidation. Albania plans to stick to the original budget goal of reducing the domestically financed deficit to 5.5 percent of GDP in 1999, and about 4 percent in 2000. However, if cuts in essential development and social expenditures are to be avoided, this can realistically be achieved only if the international community finances the large budgetary cost of helping the refugees. Monetary policy for 1999 is designed to meet the inflation and balance of payments objectives and is not expected to be deflected by the Kosovo crisis.

Structural reforms

Albania is determined to keep up the momentum of structural reforms and step up the fight against corruption. Key priorities are to restructure the banking system, extend privatization to the economy’s strategic sectors, and strengthen tax collection. Albania aims to continue the significant progress already achieved in establishing a liberal and open trade system through further reduction of tariffs in the next few years.

Albania joined the IMF on October 15, 1991, and its quota is SDR 48.7 million (about $65.5 million). Its outstanding use of IMF financing currently totals SDR 42.0 million (about $56.5 million).

Press Release No. 99/21, June 14

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