The FINANCIAL — The Executive Board of the International Monetary Fund (IMF) on August 31 completed the eighth review of Albania’s economic performance under the Extended Fund Facility (EFF).
The completion of the review enables an immediate disbursement of SDR 28.65 million (about €35.9 million), bringing total disbursements under the arrangement to SDR 238.14 million (about €298.3 million). The decision was taken without a formal meeting.
All end-April 2016 performance criteria were met with comfortable margins, and good progress has been made on the structural reform agenda. The economic recovery is strengthening, supported by large energy-related investments and a gradual recovery in domestic demand. The current account deficit is widening due to import-intensive foreign direct investment (FDI). Inflation is recovering from very low levels, although underlying inflationary pressures remain weak. Despite substantial monetary easing, credit growth remains sluggish, constrained by the still sizable overhang of nonperforming loans (NPLs) on bank balance sheets, according to IMF.
The authorities’ policy mix should continue to focus on fiscal adjustment, while supporting growth through monetary easing. A strategy based on broadening the tax base, improving tax compliance and administration, and implementing structural reforms will help lower debt levels while allowing space for more productive public spending. Fiscal structural reforms to enable a valuation-based property tax and strengthen public financial management are also crucial for entrenching the consolidation gains. The central bank’s monetary easing using conventional policy tools is appropriate given signs of a nascent demand recovery. Addressing the high stock of NPLs remains key for reviving credit and supporting growth.
The Executive Board approved a 36-month arrangement under the EFF for Albania on February 28, 2014 in an amount equivalent to SDR 295.42 million (about €370.0 million, or 212.1 percent of the country’s current quota in the Fund).