© 1992 International Monetary Fund

Library of Congress Cataloging-in-Publication Data

Albania, from isolation toward reform / Mario I. Blejer … [et al.].

• p. cm.—(Occasional paper / International Monetary Fund,

• ISSN 0251-6365; 98)

  • Includes bibliographical references (p.).

  • ISBN 1-55775-266-4

  • 1. Albania—Economic conditions. 2. Albania—Economic policy.

• I. Blejer, Mario I. II. Series: Occasional paper (International Monetary Fund); no. 98.

HC402.A63 1992

330.94965—dc20

92–24707

CIP

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Contents

• Preface

• I. Introduction

  • An Overview

  • Historical and Political Background

  • Box 1. A Profile of Albania

• II. The Pre-Reform Economic System

  • Evolution of Stalinist System

    • State Ownership

    • Central Planning

    • Financial Policies

  • Economic Organization of Enterprises

  • Box 2. Strengthening of State Control: New Constitution of 1976

• III. Economic Performance in the 1980s

  • Output, Income, and Expenditure

    • Output Growth and Composition

    • Expenditure

    • Household Income, Saving, and Consumption

    • Sectoral Developments

      • Agriculture

      • Industry

      • Construction and Housing

      • Internal Trading Activity

  • Factor Markets: Organization and Development

    • Capital Stock and Investment

      • Comparison of Capital Productivity with Other East European Countries

      • State of Capital Stock and Causes of Low Productivity

    • Labor Market

      • Structure of Population, Labor Force, and Employment

      • Organization and Unemployment

    • Wages

      • Wage Determination System

      • Wage Developments and Relativities

      • Social Security

  • Price Determination

    • Price System

    • Price Developments and Recent Reforms

  • Macroeconomic Policies

    • Budgetary Organization and Fiscal Developments

      • Role of Fiscal Policy

      • Structure of Government

      • Budgetary Process

      • Fiscal Developments Until 1990

      • Revenues

      • Expenditures

      • Deficit Financing

      • Interaction of Ministry of Finance with State Enterprises

    • Money and Credit

      • The Financial System

      • Monetary and Credit Policies

      • Monetary Developments

      • Household Financial Assets and Liabilities

    • Balance of Payments and External Issues

      • Overview of External Developments

      • Foreign Trade

      • Services and Transfers

      • Capital Account and External Debt

      • Official Reserves

  • Box 3. The Dual Budgetary System

• IV. Political and Economic Developments in 1991

• V. Toward Economic Reform

  • External Sector Reforms

  • Domestic Economy Reforms

• Bibliography

• Appendix: Albanian Statistics

• Tables

• Section

• I 1. Social Indicators

  • 2. Main Economic Indicators

• III 3. Net Material Product by Sector of Origin, 1951-90

  • 4. Net Material Product and Gross Domestic Product by Final Use, 1980-90

  • 5. Money Incomes and Expenditures of the Population in Current Prices, 1980-91

  • 6. Agricultural Production and Pattern of Ownership, 1980-90

  • 7. Comparison of Agricultural Productivity Among East European Countries, 1988

  • 8. Area Under Cultivation, Production, and Yields of Selected Agricultural Products, 1980-90

  • 9. Industrial Production, 1980-90

  • 10. Construction Activity, 1980-89

  • 11. Internal Trading Activity in Current Prices, 1980-91

  • 12. Comparison of Productivity of Capital with Other East European Countries, 1981-89

  • 13. Population, Labor Force, and Employment, 1975-90

  • 14. Average Monthly Earnings, 1975-90

  • 15. Wholesale and Retail Price Indices, 1975-90

  • 16. Fiscal Indicators, 1982-90

  • 17. General Government Tax Revenue in CPEs, 1986

  • 18. Structure of Government Expenditure, 1985

  • 19. Monetary Survey, 1980-90

  • 20. Balance of Payments in Convertible Currencies, 1968-91

  • 21. External Debt in Convertible and Nonconvertible Currencies

  • 22. Official External Reserves and Other Foreign Assets

• Appendix

  • A1. Conversion from MPS to SNA Accounts—Summary Table—in Current Prices, 1980-89

  • A2. Agricultural Production, 1980-90

  • A3. Industrial Production, 1980-90

  • A4. Output of Selected Industrial Products, 1950-June 1991

  • A5. Summary Energy Balance, 1975-90

  • A6. Domestic Production of Energy, 1975-90

  • A7. Production and Consumption of Electric Power, 1975-90

  • A8. Gross Fixed Investment, 1980-90

  • A9. Employment by Sector, 1975-90

  • A10. Selected Retail Prices in Official and Private Markets

  • A11. State Budget Operations, 1982-90

  • A12. General Government Tax Revenue

  • A13. General Government Expenditure

  • A14. State Investment

  • A15. Consumer Price Subsidies

  • A16. Subsidies to Enterprises

  • A17. Net Transfers of Enterprise Sector to State Budget

  • A18. Balance Sheet of State Bank of Albania (SBA), 1980-90

  • A19. Balance Sheet of State Agricultural Bank, 1980-90

  • A20. Balance Sheet of Savings Banks, 1980-90

  • A21. Interest Rates on Bank Credits, 1980-90

  • A22. Interest Rates on Bank Deposits, 1980-90

  • A23. Balance of Payments in Rubles, 1968-90

  • A24. Balance of Payments in Nonconvertible Currencies Other than Ruble, 1968-90

  • A25. Export and Import Indices for Value, Volume, and Prices

  • A26. Commodity Composition of Exports and Imports in Convertible Currencies, SITC Classification

  • A27. Commodity Composition of Exports and Imports in Nonconvertible Currencies, SITC Classification

  • A28. Geographical Distribution of Exports and Imports, 1975-90

  • A29. Exchange Rates

• Charts

• Section

• III 1. Net Material Product by Sector of Origin, 1951-90

  • 2. Net Material Product and Gross Domestic Product, Annual Growth Rates, 1981-90

  • 3. Sectoral Growth Rates, 1981-89

  • 4. Net Material Product by Final Use, 1980-90

  • 5. Money Incomes and Expenditures of Population, 1980-90

  • 6. Comparison of Agricultural Productivity Among East European Countries

  • 7. Unemployment Rate, 1980-90

  • 8. Average Monthly Earnings, 1980-90

  • 9. Selected Fiscal Indicators, 1982-90

  • 10. Assets and Liabilities of Households, 1980-90

  • 11. Income, Expenditure, and Savings of Population, 1989(IV)-1991(II)

  • 12. Distribution of Household Bank Deposits, 1985 and 1990

  • 13. Current Account Balance, 1968-90

  • 14. Exports and Imports, 1968-90

Preface

This paper is based on a report prepared by Mario Blejer (World Bank), Mauro Mecagni, Ratna Sahay (all Eastern European Division, European I Department), Richard Hides (Statistics Department), Barry Johnston (Policy Development and Review Department), Piroska Nagy (Central Division, European II Department), and Roy Pepper (World Bank) in connection with the application of Albania for membership in the IMF. Any opinions expressed are those of the authors and should not be construed as reflecting the views of the Albanian authorities, Executive Directors of the IMF, or other IMF staff members. The authors bear the sole responsibility for any errors.

The authors gratefully acknowledge the assistance enthusiastically extended by the many Albanian officials with whom they worked during several visits to Tirana. They are grateful to Samir Fawzi, Kenneth Friedman, Joshua Greene, Aarno Liuksila, Orlando Roncesvalles, and Mohammad Shadman-Valavi who, as part of the Albanian team, also contributed to this study. Thanks are also due to Manuel Guitian and Anoop Singh for their comments, to Anne Williams, Divina Tenorio, and Nahid Mejid for secretarial support, and to Barbara Kaminska for research assistance. The paper was edited by Elin Knotter of the External Relations Department.