1- A loan for example
A loan considered historic was signed this month between the Ministry of Finance and the winner of the respective tender, Deutsche Bank. If we analyze the financial conditions of the loan, in fact it would be one of the most favorable ones for the Albanian government. A loan of 250 million Euros, with an interest rate of 1.3% above benchmark rate (the latter is currently 0.5%, making the total interest rate 1.8%), with a maturation timeline of 10 years and engagement tariff of 1.25%, payable only once. Above all, it is a loan provided by the World Bank, which means that in case the Albanian government can not pay its debt to the loaning bank, then it will be executed by the World Bank for the value of 200 million Euros. Of course this guarantee from the World Bank has financial costs, an interest rate not known yet and in this case the question that arises is whether this guarantee was necessary and financially efficient. However, Albania is not the only country in the region to get a loan with a guarantee from the World Bank. This has been applied for the last two years from other countries in the region.
The government declared it will use this fund to decrease the budget deficit in the two following years, which from the current level of 69% of GDP (or 7 billion Euros), according to promises in the electoral program, at the end of the mandate in 2017 will reach 60% of GDP. Nevertheless, this fund will not be enough to liquidate eurobonds with a value of 300 million Euros emmited in 2010 that will maturate in November this year, which is why the government is expected to emmit new eurobonds or get a new loan in order to cover the 550 million Euros debt in total. In conclusion, we can say this is a beneficial loan, but as the government program 2013-2017 foresees, economic growth should come through economic reconstruction with a focus on increasing the GDP, not through loans that have turned into a vicious circle.
2- A strategy at last
Last month, we reported on the impasse of budgetary income and the increase of government expenditure at 6% against every financial forecast of the country’s economic development. The same issue was taken into consideration by the Ministry of Finance, which organized this month a conference ‘’Strategy on Management of Public Finances 2014-2020’’, with the presence of Mr. Jean Eric Paquet, Director for Western Balkans in the Directory for Enlargement of the European Commission, as well as other representatives of international and Albanian institutions.
Minister Cani declared that ‘’preserving macro-economic stability of the country was always a key priority, that affects unleashing unused economic potentials of the country. The strategy aims to find mechanisms to strengthen the general fiscal framework. At the same time the strategy has set new objectives on preventing new obligations, with a better control over financial engagements. Hereinafter we will apply limitations to the uncontroled budget, as it has happened so far and putting thus under control the level of expenses in the future to avoid arrears’’. In general the strategy focuses on the efficient management of public resources and respective financial control, deficiencies that have caused so far a loss of 100 million Euros and misuse of funds because of prioritizing projects, according to Jean Eric Paquet.
However, the strategy was designed and approved since December 2014, therefore more than discussions with interested and involved parties, the conference was held to make it public, which has not made a great difference the first four months of implementation. Let’s believe that under the motto ‘’no more uncontrolled expenditures or arrears’’ the strategy will have a long term effect.
3- Who to believe?
At the end of last year, the government declared it would completely compensate the poorest layers of society for the increase in energy prices. For this purpose, a fund of 1.6 billion leke was accorded, which would cover the effect of the tariff increase for approximately 200 000 families in the country. The compensation was supposed to be prepaid, but until the fourth month of this year no compensation has been issued from the state budget. Involved institutions, local governance, Ministry of Social Welfare and Youth and Ministry of Finances, have reacted with official declarations and in this report we are interested in the latter’s attitude, that was accused of not reporting these funds to the respective items in the budget expenses.
The Ministry of Finances has clarified: ‘’The indicator Compensation for people in need, part of the fiscal indicators in the 2015 budget table has one specificity. Even though it is foreseen as a separate item (in the plan), when used it becomes part of the other budget items. Therefore, for instance: the compensation fund January – February – March, benefited by pensioners, is part of expenses for social insurances. If you contact ISSH, the directors will confirm that pensioners have received January’s compensatin in February and February’s compensation in March and this expense was reflected in expenses for social insurances, hence where they reflect expenses for pensions and other benefits. The same goes for economic aid, unemployment or budget employees, expenses for energy compensation are part of respective items’’.
The information needs to be confirmed in the balances of involved institutions according to the aid, hence we will return to this issue in the following month.
Anadolu Agency. Prill 2015. Prezantohet strategjia për menaxhimin e financave publike ne Shqiperi. http://www.aa.com.tr/al/ekonomia/493379–prezantohet-strategjia-per-menaxhimin-e-financave-publike-ne-shqiperi
Gazeta Panorama. Prill 2015. Kredia historike e qeverisë shqiptare. http://www.panorama.com.al/kredia-historike-e-qeverise-shqiptare-merren-250-milion-euro-hua-garant-del-banka-boterore/
Gazeta Shqip. Prill 2015. Deutsche Bank fiton tenderin 250 milionë euro hua qeverise. http://gazeta-shqip.com/lajme/2015/04/08/deutsche-bank-fiton-tenderin-per-250-milione-euro-hua-qeverise/
Gazeta Tema. Prill 2015. Strategjia për menaxhimin e financave publike. http://www.gazetatema.net/web/2015/04/14/strategjia-per-menaxhimin-e-financave-publikecani-stop-shpenzimeve-te-pakontrolluara-dhe-detyrimeve-te-prapambetura/
Monitor.al. Prill 2015. Kompensimi i energjisë elektrike, shpërndarja nuk pasqyrohet ne buxhet. http://www.monitor.al/kompensimi-i-energjise-elektrike-qeveria-pretendon-shperndarjen-nuk-pasqyrohet-ne-buxhet/
Reporter.al. Prill 2015. Deutsche Bank krediton Shqipërinë. http://www.reporter.al/deutsche-bank-krediton-shqiperine-250-milione-euro-per-me-pak-se-2-per-qind-interes/
The Albanian. Prill 2015. Kompensim për dritat, asnjë lek për 4 muaj. http://www.thealbanian.co.uk/kompensimi-per-dritat-asnje-lek-per-kater-muaj.html