The Executive Board of the International Monetary Fund (IMF) today completed the first review of the third annual arrangement under the Poverty Reduction and Growth Facility (PRGF)1 for Albania. As a result, Albania will be able to draw up to SDR 4.7 million (about US$6 million) from the IMF.
The three-year PRGF arrangement was approved on May 13, 1998 (see Press Release No. 98/18) in a total amount of SDR 45 million (about US$58 million), of which Albania so far has drawn SDR 35.6 million (about US$46 million).
Following the Executive board's discussion of the review, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chairman, said:
“The Albanian authorities have been successful in maintaining macroeconomic stability, with GDP growing at about 7 percent, inflation at 2 percent, and external reserves rising to a comfortable level. They have also made progress in structural reform, particularly in relation to enterprise privatization.
“Consistent with the need for a progressive reduction in the budget deficit, the authorities have achieved significant improvements in tax collection in 2000. Revenues rose by about 2½ percentage points of GDP compared with 1999, reflecting the effects of strengthened administration and governance. The 2001 budget envisages further efforts in this area, as well as measures to contain and prioritize expenditures. Monetary policy continues to aim at maintaining low inflation.
“The authorities are determined to address the wide-ranging problems in the electricity sector and have reached an agreement with the World Bank on a strategy to reform the sector.
“They are continuing with their program of structural reform and, despite recent delays and complications, are making every effort to complete the privatization of the Savings Bank in 2001.
“The authorities are committed to developing a comprehensive poverty reduction strategy through an open consultative process by mid-2001,” Mr. Sugisaki said.
On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was replaced by the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It was intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. At this time for Albania, pending the completion of a PRSP, a preliminary framework has been set out in an interim PRSP, and a participatory process is underway. It is understood that all policy undertakings in the interim PRSP beyond the first year are subject to reexamination and modification in line with the strategy that is to be elaborated in the PRSP. Once completed and broadly endorsed by the Executive Boards of the IMF and World Bank, the PRSP will provide the policy framework for future reviews under this PRGF arrangement.
PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½ year grace period on principal payments.