On February 24, 2017, the Executive Board of the International Monetary Fund (IMF) completed the two final reviews (ninth and tenth) of Albania’s economic program supported by an arrangement under the Extended Fund Facility (EFF). The completion of the reviews allows the authorities to draw the equivalent of an additional SDR 57.28 million (about €73.2 million), bringing total disbursements to the equivalent of SDR 295.42 million (about €377.3 million at current exchange rates, or 212.1 percent of the country’s current quota in the Fund).
The Executive Board approved a 36-month extended arrangement under the EFF for Albania on February 28, 2014 (see Press Release No. 14/81). The arrangement aimed to restore economic growth and control the rapidly rising public debt that had threatened economic stability, by strengthening public finances, maintaining financial stability, and implementing structural reforms focused on improving the energy sector and the business climate.
Following the Executive Board’s decision, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, issued the following statement:
“Strong policy implementation under the Fund-supported Extended Arrangement has helped Albania achieve the objectives of correcting large macroeconomic imbalances and boosting economic growth, while maintaining stability in the face of external challenges. The authorities implemented key structural reforms, demonstrating strong ownership of the program. Continued steadfast commitment to the economic reform agenda is crucial to safeguard these economic gains, reduce vulnerabilities, and enhance growth.
“The authorities’ main priorities in the post-program period are appropriate. They should continue to pursue fiscal consolidation in 2017 and beyond in order to lower public debt to around 60 percent of GDP by end-2019. The consolidation strategy should focus on broadening the tax base and improving tax compliance and administration. The strategy is ambitious and will require unwavering political commitment.
“The authorities undertook a sizable fiscal adjustment and made substantial progress in strengthening fiscal institutions. Further reforms in tax administration and public financial management would help reduce fiscal risks and create fiscal space for more high-quality spending. In addition, improving public investment management, and tackling arrears of unbudgeted investment projects should further enhance the credibility of the government’s medium-term budgetary framework.
“The Bank of Albania’s (BoA) accommodative monetary policy stance is appropriate in light of subdued inflationary pressures and expectations. The authorities should pursue gradual deeuroization, with due consideration of disintermediation risks.
“The banking system remains liquid and well-capitalized and recent efforts to strengthen the BoA’s supervisory capacity and to address non-performing loans (NPLs) are encouraging. Further action is needed to tackle high NPLs by ensuring implementation of the new bankruptcy legislation. Priority should also be given to augmenting the supervision of nonbank financial institutions and ensuring that high transparency and governance standards are maintained in developing capital market institutions.”