Poverty Reduction and Growth Facility.
This report was prepared by a team consisting of Messrs. Banerjee (EUR, head), Çakir (FAD), Lazar (EUR), and Mansilla (PDR). The report is based on the analysis of Fund documents as well as on discussions with current and former mission chiefs, former resident representatives, tax experts who participated in technical assistance missions to Albania, World Bank staff, and a former senior official of the Bank of Albania.
Data on national accounts and other economic activity indicators in Albania are weak. Data problems are accentuated by a large agricultural sector and sizeable informal economy. The official national accounts data include an estimate of the informal economy which is subject to debate. While the precision of the GDP growth estimates may be uncertain, the broad tendencies would seem to be plausible.
Profit transfers from the central bank to the budget fell from a peak of 4 percent of GDP in 1998 to about 1¼ percent of GDP in 2003. This mainly reflects sterilized intervention by the central bank in an environment of increasing capital inflows.
Albania: Progress with Tax and Customs Administration Reforms, IMF Fiscal Affairs Department, November 2002; and Albania: Selected Issues in Tax Design, IMF Fiscal Affairs Department, February 2004.
For example, the 2002 budget had assumed a 10–14 percent increase in revenue on account of improvements in tax administration, whereas the tax experts believed that a 5 percent gain could be reasonably expected in the absence of extraordinary circumstances.
The November 2002 FAD technical assistance report noted anecdotal evidence of other perverse impact on the behavior of tax and customs officials that did not result in any net revenue gains for the tax department as a whole. For example, a consequence of revenue targets being distributed to the level of the Customs Houses was that individual offices were likely clearing goods at the border to meet revenue targets rather than having the goods transit inland for clearance.
Public Administration Reform Project (IDA Credit No. 3328-ALB).
Box 2 in the Staff Report for the 2002 Article IV consultation and the First Review under the PRGF (IMF Country Report No. 03/63, March 7, 2003).
Christopher Jarvis, “The Rise and Fall of the Pyramid schemes in Albania,” IMF Working Paper, WP/99/98, July 1999.
At end-2001, these arrears amounted to the equivalent of 3.2 percent of GDP.
One notable exception was the PC on announcing tender for privatization of the Savings Bank by end-November 2000. This was postponed to a later date, and not converted to a prior action.
Indications are that both the authorities and Fund staff relied on the assessment of the foreign privatization advisor that the financial disputes of Albtelecom were not serious and, accordingly, agreed with the advisor’s recommendation to announce the tender for Albtelecom.
See Albania Beyond the Crisis: A Strategy for Recovery and Growth, World Bank Report No. 18658-ALB, December 7, 1998.
The Savings Bank currently holds about 72 percent of the outstanding stock of treasury bills.