Posted by Gilmour Poincaree on October 31, 2008

October 29, 2008

Filed Under Economy, General News, Invest-Inform



Tirana, Oct. 29, 2008 (AENews) – IMF permanent representative in Tirana Ann-Margaret Westin commented in an interview for AENews the 17 year-long agreement with Albania. The last agreement will expire in the January of the next year.

AENews – How do you evaluate the 17 years long cooperation of the IMF with Albania?

Westin – After some 16 years of IMF programs and even more years of transition, Albania now has macroeconomic stability firmly entrenched. Growth has been stable and high, with per capita income more than doubling in the last decade, and inflation has been well contained, reflecting prudent fiscal and monetary policies. This is an achievement of the Albanian authorities, the current government as well as previous governments, and we are happy to have been partners of this successful transition.

Macroeconomic stability has also been retained under the current program, which happens to coincide with my tenure here and with the current government’s mandate. The overall public debt burden has continued to decline, from 58 percent of GDP in 2005 to a currently projected 52 percent this year; and inflation has been contained within the Bank of Albania’s 2–4 percent target range, despite external shocks in food and fuel prices.

The relationship with the Albanian authorities remains excellent and we have an open and productive dialogue. Although there can be differences of opinion, we have managed to agree on key policies and all reviews so far under the current program have been concluded on time.

AENews – Do you think that the Albanian politics has reached the necessary maturity to maintain macroeconomic stability without the need of IMF monitoring?

Westin – There are various reasons why countries might chose to have an IMF arrangement. There is the access to Fund financing. Apart from the financing, some countries have chosen to have a Fund program to maintain the close policy dialogue and to signal to the rest of the world that policies are on track. This signaling effect might be particularly important for international observers and investors when official statistics are still not up to international standards or in an election year.

If the Albanian authorities are interested, the IMF would be ready to discuss a new arrangement. This program could focus on maintaining macroeconomic stability, but could contain less conditionality on structural reforms and possibly access to IMF financing. It could take the form of a regular or precautionary Stand-By Arrangement (SBA).

Irrespective of whether Albania has a program with the Fund or not, prudent macroeconomic policies will need to be maintained to lay the foundation for continued poverty reduction and sustained high economic growth. The Albanian authorities, both this government and previous governments, have a very good track record as to maintaining macroeconomic stability. However, with the expiry of the IMF arrangement, they will need some other type of fiscal rule to anchor policies, such as an expenditure, deficit, or debt ceiling. This will be all the more important as Albania plans to access global financial markets.

Lastly just to note that Albania will continue to have access to technical assistance and undertake annual Article IV Consultations after the conclusion of the program, as is the case with all IMF member countries. The Article IV Consultation is at the heart of our surveillance activities, where we provide an assessment of economic and financial developments, and advise on risks to stability and growth and if policy adjustments are warranted.

AENews – There is one theory that says that the IMF leaves a country generally before a crisis. Is there a real risk for crisis in Albania in the next 3 years?

Westin – Definitively not. The current three-year IMF arrangement with Albania, which is supported by a combined Poverty Reduction and Growth Facility (PRGF) and Extended Fund Facility (EFF), was approved in January 2006 and is set to expire according to schedule in January 2009, under the assumption that its sixth and final review will be concluded on time. The current arrangement is the sixth program that Albania has had with the IMF. Since its inception, it was expected that this would be Albania’s last PRGF arrangement, an IMF lending facility designed for low-income countries.



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