IMF Executive Board Completes Fifth and Sixth Reviews of the Extended Fund Facility Arrangement for Albania
The Executive Board approved a 36-month extended arrangement under the EFF for Albania on February 28, 2014 in an amount equivalent to SDR 295.42 million (about €330.9 million at the time of approval), or 492.4 percent of the country’s quota in the Fund.
Following the Executive Board’s decision, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:
“Albania’s economic recovery is on track but downside risks persist. The authorities’ performance under the Extended Arrangement has been strong, including implementation of ambitious and difficult structural reforms. The authorities should persevere with their reform program and build on the substantial progress to date to boost the country’s growth potential while maintaining macroeconomic stability.
“The authorities’ goal of continued fiscal consolidation, with an adjustment strategy based on broadening the tax base and improving tax compliance and administration, is appropriate. To this end, they should reduce reliance on one-off measures and avoid granting any further tax exemptions or preferential tax rates. In addition, the authorities’ drive to improve tax compliance should be better aligned with international best practices and should focus on increasing voluntary compliance.
“The authorities are taking determined steps to tackle fiscal risks, including by strengthening public financial management. Going forward, it will be important to strengthen the capacity to execute public investment projects and to ensure that the impact of any new PPP projects on the fiscal accounts is being assessed transparently and in line with international norms.
“The current accommodative monetary policy stance is appropriate to counter disinflation pressures but should be pursued gradually to avoid risks to financial stability. Strengthening the central bank’s credibility and safeguarding its independence remain critical for fulfilling its mandate.
“Tackling the large stock of nonperforming loans is essential for reviving the flow of credit. Timely and forceful implementation of the planned comprehensive strategy will be key to addressing this issue. The central bank’s microprudential focus on the fastest-growing and systemically important segments of the banking system is appropriate.
“Significant reforms have been implemented in the electricity sector. Steadfast implementation of these reforms and additional measures aimed at improving corporate governance and the business environment will be necessary to promote strong and broad-based growth.”