IMF Executive Board Completes Second and Third Reviews under Extended Fund Facility Arrangement for Albania and Approves €58.8 Million Disbursement

This paper discusses Albania’s Second and Third Reviews Under the Extended Arrangement and Request for Waiver for the Nonobservance of Performance Criterion, Waiver of Applicability of PCs, and Rephasing of Future Disbursements. The program is on track. All end-June, end-September, and available end-December quantitative PCs were met. However, the continuous PC on the accumulation of external arrears was not observed because of technical delay with one interest payment. The IMF staff supports the authorities’ request for the completion of the second and third reviews under the Extended Arrangement, waiver of applicability of PCs, and rephasing of future disbursements.

Abstract

This paper discusses Albania’s Second and Third Reviews Under the Extended Arrangement and Request for Waiver for the Nonobservance of Performance Criterion, Waiver of Applicability of PCs, and Rephasing of Future Disbursements. The program is on track. All end-June, end-September, and available end-December quantitative PCs were met. However, the continuous PC on the accumulation of external arrears was not observed because of technical delay with one interest payment. The IMF staff supports the authorities’ request for the completion of the second and third reviews under the Extended Arrangement, waiver of applicability of PCs, and rephasing of future disbursements.

The Executive Board of the International Monetary Fund (IMF) today completed the second and third reviews of Albania’s economic performance under a program supported by the Extended-Fund Facility (EFF). The completion of the review enables the authorities to draw an additional amount equivalent to SDR 47.1 million (about €58.8 million), bringing the total disbursements to SDR 94.2 million (about €117.7 million).

Following the Executive Board’s discussion on Albania, Mr. Min Zhu, Deputy Managing Director and Acting Chair, stated:

“Albania’s economic recovery appears to be on track even as downside risks persist. The authorities deserve credit for a broadly successful policy implementation during the first year of the arrangement under the Extended Fund Facility. Perseverance in implementing the structural reform agenda will be crucial in order to reduce macroeconomic imbalances and raise living standards.

“The authorities’ commitment to strengthen debt sustainability, as reflected in their 2015 budget, is welcome. It will be important to address the fiscal risks stemming from property compensation claims and the large stock of unbudgeted investment projects.

“The authorities’ initial steps to reform the power sector are encouraging. Sustained implementation of these reforms over the medium term will be needed, as they are vital for fiscal sustainability. The authorities’ decision to compensate the most vulnerable social groups for electricity tariff adjustments is welcome.

“The authorities’ policy of gradual monetary easing is appropriate in countering disinflation pressures while avoiding risks to financial stability. Ensuring the central bank’s independence and strengthening its oversight will be important for safeguarding its credibility.

“The large stock of nonperforming loans should be addressed comprehensively and forcefully in order to revive bank credit to the private sector. Continued vigilance is needed to ensure that each bank meets capital and liquidity requirements and manages risks appropriately,” Mr. Zhu said.

The Executive Board approved a 36-month arrangement under the EFF for Albania on February 28, 2014 (see Press Release No. 14/81) in an amount equivalent to SDR 295.42 million (about €369 million, 492.4 percent of the country’s quota in the Fund).