BANK OF ALBANIA
2001 Annual Report presentation by the Governor to the Parliament of the Republic of Albania
Publication date: 07.05.2002
It is my pleasure to submit the Bank of Albania Annual Report to you today, treating some of the most important developments of Albanian economy during 2001 and making an assessment of the current year. The report provides some estimations and detailed analyses of economic-financial and monetary development during the previous year and the targets of the current year. Hence, allow me to treat briefly only some of these moments of the report in this presentation.
I. OVERALL MACROECONOMIC DEVELOPMENTS
Year 2001 was the fourth sequential year, during which the economic development program was totally respected. Though rather difficult situations existed at most of the year, due to deepened energy crisis, yet a suitable equilibrium was managed to reach in the main macroeconomic indicator. Based on the most recent estimates of relevant authorities, the growth of production at end of the year reached to 6.5 per cent.
I find it reasonable to underline once more the concern raised continuously by the Bank of Albania concerning the quality of statistical information supplied and the low level of transparency and degree of exchanging information by the state institutions. The authorities should pay proper attention to it in order to support the statistics development and increase the degree of their reporting to the public.
Turning back to the estimations on economy performance, it is noticed that the agricultural sector output is in lower paces than the forecast. From 4 per cent growth forecasted at year-start, the authorities estimate that the output is increased by 1.4 per cent. The deepening of the energy crisis was reflected in more worsened performance, especially during November-December; while construction, another important contributor to national output, did not maintain the same growth rates. Developments over the final quarter of the past year were contrary to positive cyclic developments of the previous periods. However, the Bank of Albania evaluates the general economic developments as positive, particularly the ones in the services sector, and more precisely in the area of mobile phones, where important investments took place in 2001.
Even during 2001, the private sector of economy continued to be livened up versus a shrinking state sector. Other sectors, such as that of transport and services, and the investment level, particularly in infrastructure, generally manifested obvious signs of recovery and growth of productive capacities, as well as further improvements in administration abilities. The significant improvements marked in road transport infrastructure seem to have supported and facilitated transport and services activities. On the other hand, the sectors of construction and agriculture are estimated to have contributed to GDP during the past year, but not with the same paces as before. The industrial product of state sector, mainly the mines one, kept the falling trends marked since the transition start. The electrical power production clearly recorded rather lower figures than a year ago. Whereas, the use of electrical power by the domestic users is increased by 21 per cent, the domestic product of electrical power represents only 67 per cent of the sources. Therefore, the electrical energy balance sheet was worsened, being mostly covered by imports. Regardless of high imports, i.e., 62 per cent as compared to the previous years, the domestic needs were not yet met, thus causing interruption of electrical power supply to population and business. Naturally, this situation made the country's business climate more difficult, particularly in December, when even the data, though a few ones, speak for an economic activity slow-down.
Data from foreign trade sector supply evidence, proving that domestic economy continued to grow, either due to domestic demand increase or foreign effective demand increase. Analyzing the foreign trade developments, it is noted that trade deficit has reached to about USD 1 billion and the coefficient of covering imports with exports is estimated at 23 per cent. During 2001 exports were increased by 19.4 per cent and this growth was impacted even by the rise of domestic product exports by 8 per cent. Imports were increased by 23.7 per cent, leading to deepening of trade deficit. Significant growth of imports relates to some important developments, particularly:
Enhancement of institutional reforms in the struggle against fiscal evasion. The level of paying customs duties of hard articles is increased significantly as compared to the previous years. So, paying the customs duties of coffee, cigarettes and oil (in volume) have been respectively 22,30 and 68 per cent higher than the previous year;
The deepening of energy crisis in the country, which increased oil imports and energy products significantly, compared to the previous years. Data on energy balance sheet of the country indicate that fuels import over 2001 was 48.6 per cent higher than a year ago. It's worth mentioning here that oil price cut in international markets over the past year, provided a positive effect on the country's trade balance;
The increase of private sector investment activity, which also provided impacts on import rise, evidenced in the growth of machinery and equipment imports. Striking growth was highlighted, especially in imports for telecommunication industry purposes.
On the other hand, the export rise indicates that the activity of foreign companies in Albania is further extended, and the growth of domestic product exports, though in modest levels, testifies the positive trends developed in economy during the last year. The end of 2001 has marked the budgetary target realization for this period. The budget deficit level was 4.3 billion leks under the forecasted level and its financing sources were used according to the program. Also, the income and expenditure indicators are realized within the forecasting of budget plan. However, it is noticed that their performance over the year has not been in the same rate. The concentration of income and expenses at year-end is a feature of fiscal development and as such it is expectable. In comparison to previous annual periods, the level of income and expenditure has been increased, while a tendency to keep the budget deficit equilibrium is noted.
The operative data of fiscal sector indicate that estimates reached to Lek 135.5 billion as of 2001, being 12.5 per cent higher than the level of income collected during the past year. The realization of data in 2001 was at 95.6 per cent.
The budget expenses of 2001 reached to Lek 185.7 billion, being 5.4 per cent under their forecasted level in the budget plan.
The budget deficit at end of the year reached to Lek 50.2 billion or 7.9 per cent lower than the forecasting. Domestic assets cover 56 per cent of it whereas foreign financing covers the rest of it. Privatization revenues have financed 25 per cent of the budget deficit. The maintaining of the budget equilibrium within the forecasted levels has also assisted in keeping low inflation rates.
Current account deficit is increased by 6.1 per cent of GDP, mainly due to deepening of trade deficit. The current account financing is made possible by increase of emigrants' remittances and by high capital inflows. The emigrants' remittances are estimated at about USD 615 million, while foreign direct investments of this year are about USD 220 million.
The level of net foreign reserves over 2001 has been above the limit defined for them. The growth of these reserves on annual basis is significant, about USD 145 million. In December, the gross foreign reserves were USD 737 million, covering 4.7 months of import.
Due to country's economic growth, where the main contribution was rendered by the private sector, and due to public investment growth, new jobs are created. According to official statistics, the number of employees has reached to about 1 million persons or 0.9 per cent more than a year ago. On the other hand, the unemployment rate has declined by 14.4 per cent from 16.9 per cent it was at end of 2000.
After exposing this general view of some of the main economy indicators, allow me to treat in more details the developments that directly relate with the Bank of Albania activity and responsibilities.
II. INFLATION DEVELOPMENTS AND MONETARY POLICY
Inflation at end of the year reached to 3.5 per cent, meeting the target of 2001. The Bank of Albania target is to maintain average inflation at 3 per cent in medium term. To achieve this target the Bank of Albania is based on two main pillars: money supply growth rate and economic and financial indicators' performance.
Given that inflation is mainly a monetary phenomenon, the following up of the performance of money supply growth would impact even on the meeting or non-meeting of inflation target. The growth of money supply represents the intermediate objective of the Bank of Albania and an orienting quantitative level is set forth annually on it. In 2001, the money supply was increased by 19.9 per cent, exceeding its specified limit. However, it was managed to control inflation. This happened because the actual growth of this aggregate was caused even due to the occurrence of specific events, mentioning the domestic market effects as the most striking because of physical introduction of Euro.
Inflation, especially for economies as that of Albania, which are still under the impact of structural rules, is caused even from shocks. The Bank of Albania duty is to precede such events as much as possible. Therefore the Bank of Albania is based even on a number of economic and financial indicators, which may give signals of possible inflationary pressures. This group of indicators includes exchange rate performance, economy growth, developments in external sector of economy, developments in other countries' economies, with which the country's economy is more integrated, up to factors of psychological nature, political developments, and even to results of surveys carried out by the Bank of Albania, assisting in a better understanding of economic and financial phenomena.
Problems have been created by a number of events and effects during the previous year. More highlighted and largely treated in the Annual Report are: the energy crisis in the country, political crisis' impact which may not be regarded as encountered yet, bad weather, and the developments in economies of partner countries and of our region.
The presence of these events and the effects they generated, highlighted another feature of inflation performance, expressed in smoothing and phasing out the seasonal impacts. They did not appear with the regularity and intensity manifested in the ten-year period of inflation series.
The Bank of Albania has always been interested that the inflation indicator be as real and reliable to the public as possible. Only in this sense, the Bank of Albania monetary policies would be more useful and estimated by the public. We think that inflation by the new basket, realized on the survey of households' budget by INSTAT in 2000, is a better approximation to real inflation.
The reduction of the weight of "foodstuff-beverages-tobacco" group in the household consumption should impact on more stable inflation rates.
Regardless of the pressure exerted by shock factors in economy, the Bank of Albania kept inflation under continuous control. The efforts of monetary policy during 2001 were focused on finding proper and clear ways to disclose its decisions to economy, that is to perfect the transmission mechanism so as to prevent further inflation rise.
The increase of inflationary pressures, especially in the second half of the year, made the Bank of Albania very prudential in pursuing the consumer price performance, along with other indicators. This was carried out so that the Bank's decisions ensure the smoothing of inflationary pressures in the future. So, over a relatively long period of time (1998 - first half of 2001), an easing monetary policy was carried out. What is more, the easing was aggressive, through the sequential cuts of base interest rate. In the second half of 2001, the Bank of Albania adopted a neutral monetary policy, conveying into the market the signal that the level of interests achieved was optimal and should not be exerted with pressure for further cutting.
III. MONETARY DEVELOPMENTS
Money supply growth over 2001 beyond the forecasting has not influenced on the exceeding of the Bank of Albania inflation target. However, the rapid growth of money supply has impacted on maintaining an average inflation level higher than the deposit growth, especially foreign currency deposits, which have a smaller impact on inflation since they are less liquid money supply component. Meantime, money outside banks' weight declined compared to money supply by 0.9 percentage points, passing from 30.2 per cent of M3 in December 2000 to 29.3 per cent in September 2001. This has assisted in controlling the system liquidity, without impacting on the increase of inflationary pressures in economy.
Data of December indicate that the translation of euro basket currencies has provided a considerable impact on M3 growth. Though the effects that Euro introduction might provide in Albania were taken into account, the real size exceeded the prediction. Lek 7.2 billion or 8.9 per cent increased the foreign currency deposits only in December, compared to Lek 1 billion reduction that was forecasted in monetary program of these deposits. This made possible the increase of foreign currency deposits by 38.7 per cent during 2001, against 26.1 per cent it was provided in the program.
During 2001, the Lek deposits have been the component having the lowest rate of growth among the money supply components. In annual terms, they were increased by 12.7 per cent and the weight of these deposits in M3 dropped from 50.4 per cent to 47.3 per cent.
Net foreign assets of the system were increased by 21.4 per cent, resulting to Lek 3.3 billion above the program forecast. Their growth was larger either for the Bank of Albania net foreign assets or for commercial banks.
The injecting of a large quantity of liquidity into circulation in December impacted on the rapid growth of base money, though the excess reserves of the system were held at low levels. The base money was increased by 18.1 per cent, resulting higher than the monetary program forecast, which was for a growth of 11.4 per cent. However, given that the Bank of Albania transactions have increased either its net foreign assets level or base money level, their specific impact on the growth of the Bank of Albania net domestic assets was smaller.
IV. CREDIT TO ECONOMY
Another important objective of the Bank of Albania during the past year was the extension of credit to private sector of economy through the banking system, thus assisting in narrowing the credit made through informal channels.
The banks are currently able to increase funds to the required level and to allocate funds to successful and promising businesses, by urging their customers to enter financial planning and discipline and by reducing their overall risk. Presently, no opinion that the banking system is not carrying out these functions exist and no longer can be claimed that small borrowers and new businesses are not allowed to receive funds from the banking system. Lending over 2001 was channeled almost totally through private banks.
Credit balance at end of December 2001 reached to Lek 36.6 billion, being increased by Lek 10.7 billion against 2000. This change was due to the growth of new credit, whose level reached to Lek 40.6 billion and the repayment reached to Lek 29.9 billion.
The pace of extending new credits during 2001 has been growing. The following features have associated the credit extension:
98.8 per cent is extended to private sector and 1.2 per cent to public sector, which shows a continuous shrinking of public sector credit in favor of supporting private sector by loans;
75 per cent of it is in foreign currency;
68 per cent is short-term credit, 26 per cent is medium-term credit, 6 per cent is long-term credit;
Highest values have been recorded in September and December, respectively Lek 4.8 and 8.2 billion, while Lek 3.4 billion is the average credit extended per each month.
We should emphasize that the banking system during 2001 had obvious improvements as concerns to the meeting of needs and the lending possibilities. According to some Bank of Albania estimates, the average level of credit to business has been increased over 50 per cent. Therefore, even the ratio of credit to assets of the business has been increased by about 35 per cent, financing about 12 per cent of total assets. Also, a positive development is the fact that interest rate cutting has led to reduction of business charge for paying bank loan interests.
V. MARKET DEVELOPMENT
Year 2001 continues to maintain the same features as those of a year ago, as far as the banking system liquidity level is concerned. As it is noticed over the recent years, the Albanian banking system, lacking considerable investments in credit to economy, has had liquidity excess or free reserves as its striking feature. The peculiarity of 2001 rests in the fact that the Bank of Albania increased the variety of instruments available to second-tier banks, creating more possibilities to them to invest free liquidities. Also, the acquainting, introduction, and implementation of structural regulation instruments of liquidity has made the liquidity level or the system excess reserves move in the function of the Bank of Albania monetary policy. Excess reserves of second tier banks as of 2001 have been materialized in repurchase agreements, overnight deposits and current accounts.
Due to increased efficiency of monetary policy indirect instruments of the Bank of Albania, the level of excess reserves has declined from 9.7 billion in 2000 to about Lek 3 billion during 2001. Also, we mention that the active management of free banking system funds is somewhat consolidated and the role of interbank market is made active.
Overall cumulative volume of transactions in the interbank market reached to about Lek 29.4 billion or about 6.3 times more than in 2000. This phenomenon is regarded as an indicator of an active management and of a more sensitive reaction of the banks of the system to market conditions.
As far as market interest rate is concerned, it has reflected the interest rate of repurchase agreements and the treasury bills yield movements in the primary market. Concerning the interbank overnight loans, during the whole 2001 the interest rate fluctuated in the interval of 4.25 - 6.45 per cent. Regarding interbank transactions with maturity of more than one day, the lower interest rate was 6.8 per cent, while the upper interest rate was 7.5 per cent.
The total volume of treasury bills issued in the primary marked as of 2001 reached the figure of Lek 520.8 billion, or about Lek 192.9 billion more than in 2000. It is worth mentioning that during 2001, the government obligation to the Bank of Albania, National Commercial Bank, and Savings Bank was converted into treasury bills for the total amount of Lek 40.9 billion.
Commercial banks, various financial and non-bank institutions and households have been participants in the primary market. At year-end they owned about Lek 2.5 billion treasury bills issued in the primary market.
Given the public interest in Treasury bill primary market investments and to create facility to those entering this market, in August 2001, the Bank of Albania opened the Treasury bills window at its institution. This window enabled direct participation of individuals (not through commercial banks) in Treasury bills auctions. Until end of 2001, the number of participants reached to 431, while the amount of their participation reached the level of Lek 366.6 million.
The Bank of Albania has aimed at transforming the government debt securities into a satisfying investment instrument requested by an ever-larger mass of public.
The transactions in secondary market continued to be restricted even in 2001. For the whole year, the overall volume of transactions reached the figure of 6 participants. The Savings Bank has been the main purchaser of Treasury bills of commercial banks in this market, which is explained by the liquidity position of this bank, under the conditions that it is still suspended from lending to private sector.
The development of markets and instruments during 2001 leaves space for thinking that 2002 will further improve the institutional and technical framework of money market functioning, thus assisting in consolidating the process of transmitting monetary policy decisions. Aiming at knowing the banks' needs for future liquidity better, the Bank of Albania is focused even on the forecasting of factors influencing interbank market liquidity.
VI. BANKING SYSTEM DEVELOPMENTS
The Albanian banking system continues to be the largest segment and the most developed one in the country's financial market. Even during 2001 it is presented with almost the same structure as in 2000. 13 banks continue to operate in the country.
The banking system liquidity is presented in a good position, tending to improvement, almost in all indicators. It's in its third year that the Banking system is presented with a positive financial output. The profit resulting in year-end 2001 was Lek 4.3 billion or about 0,7 per cent of GDP.
The banking system assets are increased by 17,6 per cent or in absolute value by Lek 47,6 billion. A significant impact on the growth of assets is rendered by private and joint venture banks. The increase of assets of these banks, compared to 2000, is estimated at Lek 34,5 billion and is due to the reliability of these banks, the increased number of their customers and the extension of their activity in other cities.
As a banking system, the indicator of problem loans to credit portfolio is at a satisfactory level, 6,9 per cent.
The capital adequacy report of the banking system results to 35,3 per cent from 41,9 per cent at year-end 2000 and 8,2 per cent at year-end 1999. The capitalization is high even in certain bank groups. Under such high ratios of capital adequacy (minimum rate of adequacy is 12 per cent), along with high capital levels, the banking system risk-rated assets structure has also influenced significantly. The banking system continues to evidence a high level of investments in risk-free or low-risk assets. Each change in the assets structure in favor of high-risk assets would significantly influence on the ratio by impacting simultaneously even on the profit growth, without leaving aside the impact on the development of various economy sectors through higher lending.
Many indicators regarded as measurers of liquidity are presented in satisfactory levels. A very low ratio of net credit balance to total assets (8,5 per cent), of net credit balance to average deposits (10,8 per cent), and the fact that 55 per cent of total loans are short-term loans, well reinforce the above conclusion.
So, the Albanian banking system during 2001, favored even by the economic environment, evidenced a relatively sound situation.
During 2001, 13 complete examinations and 10 partial examinations were carried out to banks. Generally, the banking system position, estimated even by on-site examinations, is presented as good, being a very important element in supporting economy developments. Deficiencies found by banking system examinations, such as non-meeting of accounting law requirements (types of currencies in which the accounting books are held), non-meeting of requirements on foreign currency positions, non-meeting of internal organizational structures, etc., are made present to respective banks and appropriate corrective measures are taken.
Also, striking features of banking system development during 2001 were:
Territorial extension of banking system network in other districts of Albania, covering the customers' needs for banking services better and with a higher quality;
Improvement and fulfillment of regulatory basis of banking system supervision and further approximation of norms and regulatory practices to international practices and standards;
Activity extension of non-bank financial institutions and licensing of Albanian Post -Office to carry out banking services;
Granting a temporary license for the opening of a new commercial bank, etc.
Finally, I should emphasize that, the improvement of indicators notwithstanding, the banking system reform did not get on with very satisfactory paces. This assessment relates directly to the postponing of the Savings Bank's privatization and to the need to replace the owner of National Commercial Bank. Both represent the largest banks of the banking system, and the problems associating their ownership will unfortunately impact on the banking system reform performance and on further livening-up of its activity. These issues require indispensably whole attention of relevant authorities. Meantime, the passing of law on deposit insurance is a positive step towards further enhancement of deposit insurance, which would assist even the increasing of confidence in the banking system.
VII. OTHER ACTIVITIES OF THE BANK OF ALBANIA
Given the low level of payment system development, the Bank of Albania during 2001 and onward is involved in a very important project, that of implementation of RTGS, i.e. the automated payment system. This system constitutes presently a standard that functions not only in the developed countries, but also implemented recently in most of Eastern Europe countries. The starting of implementation of this system would bring about positive developments to the customers and to the whole banking system and would provide a sound basis in extending and diversifying the country's financial market.
The Project of Credit Information Office is another project that is expected to assist in strengthening the relationships between the banking system and the business sector and will contribute to extending credit to economy.
The Bank of Albania is a member of the "task force" group for European integration, having the responsibility to coordinate the banking system, monetary policy, and supervision and legal aspects that are necessary for an efficient financial system. It has provided its assistance and contribution to this direction.
The Bank of Albania financial statements, audited by Deloitte&Touche, the auditor selected by the Bank's Supervisory Council, are presented attached in the Annual Report.
Net profit of the Bank of Albania for 2001 resulted to about Lek 8.8 billion, assets reached to about Lek 195.6 billion, having a growth of Lek 5.3 billion and the Bank's own capital reached to Lek 12.1 billion.
VIII. OBJECTIVES FOR 2002
In setting the current year objectives, the Bank of Albania and the Ministry of Finance, in consultation with the International Monetary Fund and other international financial institutions, has considered the analysis of the environment, in which the Albanian economy operates and the complexity of factors that are in action.
The continuation of energy crisis even over the current year, regardless of the expectation of its lower intensity due to government measures, will go on providing its impacts on economy. The cost increase of business operation will undoubtedly cause difficulties to private enterprises. Even the climate of political developments in the country does not support the arguments for making economy dynamic, at least during the first part of the year. Therefore, it seems more realistic that the economy growth during 2002 in real terms would reach to about 6 per cent.
On the other hand, inflationary pressures, urged mainly from the acting of factors on the supply side, started to appear stronger even in the first months of the year, resulting to high inflation levels. Therefore, the Bank of Albania decided to raise the base interest rate by 0.5 percentage points, leading it to 7.5 per cent. The modest interest rate rise, though inflation rate might suggest a higher rise, was aimed at keeping more facilitating conditions for the economic environment. However, the Bank of Albania has declared its attitude to review the base interest rate aggressively, raising it if necessary. These measures will be taken in the function of meeting its main target, i.e. maintaining inflation within 2-4 per cent band. The current estimates of the Bank of Albania indicate a significant growth of inflationary pressures and an extension of their operating time. Inflationary pressures will go on being present in economy even in the forthcoming months, either due to money supply developments or the operation of other economic nature factors, such as the increase of business operation costs or the forecasted rises of salaries and pensions.
Such developments were undoubtedly influenced even by the situation observed in March 2002. In this period, two essential problems were laid down to the Bank of Albania: the taking of measures to smooth inflationary pressures and to maintain the country's banking system stability. Estimating and analyzing the causes of the situation created in some districts of the country and the deposit withdrawal by part of the population, the Bank of Albania concluded that the motif of suspicion for deposit insurance was completely groundless. The Albanian banking system is being consolidated and improved for more than three years. Given that this situation took rather the character of a panic, mainly due to psychological factor, the Bank of Albania gave priority to the maintaining of the country's banking system stability, which is also a duty assigned by law to the country's monetary authority. From a long-run viewpoint, the positive effects of maintaining banking system stability constitute an indispensable condition for the country's macroeconomic stability and for maintaining low inflation rate. The existence of a sound banking system is necessary for compiling and implementing an efficient monetary policy. So, the positive effects that would be provided by the focusing of attention on the banking system stability exceeded the expected effects of inflationary pressures that liquidity increase creates to economy. Therefore, the Bank of Albania passed to the position of injecting liquidity into the market; available instruments were used to increase efficiency of using liquidity in Albanian banking market. It was committed to an educative campaign to explain the elements insuring depositors and also cooperated closely with the Ministry of Finances to ensure a harmonization of its activities with the fiscal developments, especially in terms of budget expenditures.
The deposit withdrawal has reduced banks' investment in Treasury bills and in accordance with the limits specified by law "On the Bank of Albania", the latter has ensured the covering of domestic public debt. The shifting of deficit financing from commercial banks to the Bank of Albania has increased the claims of the latter to the government by Lek 4 billion as of April 21st. But, responding to the request of the Bank of Albania for having a prudent expenditure policy, the Ministry of Finances has held a careful attitude during March and the deficit financing is increased only by Lek 0.4 billion during this month. This has limited the government demand for liquidity from the system. Meanwhile, in an attempt to better manage the situation and under the Bank of Albania pressure, during April, the domestic budget deficit financing declined by Lek 1.27 billion as of April 23rd.
Currently the Bank of Albania will continue to be positioned as liquidity injector, since it is assessed that this situation will pass soon enough. However, the liquidity injected in the market not in response to economy demand, but in consequence of the panic widespread, would need a certain time to come back to the banking system. Also, the deposit withdrawal has coincided even with the completion of maturity of deposits in Euro, placed at banks with the purpose to prevent commissions of Euro converting. This combined effect has required the entering of Lek and Euro currency into circulation. Therefore, the Bank of Albania estimates that the second quarter of the year would manifest stability of the banking system situation, but without succeeding in absorbing the liquidity totally. This phenomenon would be more present in the second half of the year. Data of April indicate a significant slow-down of the pace of deposit withdrawal from two largest banks of the country, but not a complete break. The average daily rate of withdrawal has dropped from Lek 1.3 billion per day during the first week of the month, to Lek 0.55 billiard during the second week and to Lek 0.19 billiard during the third week.
On the other hand, to smooth the impact of this situation on inflation rise, the Bank of Albania will carry out an aggressive tightening monetary policy, if necessary.
However, the decisive factor for determining monetary indicators' performance would be the public confidence in the banking system. Given the time and degree of re-establishing such confidence, the monetary indicators' performance could also be defined more clearly. Also, the so-far performance of privatization process increases the lack of clarity on budget deficit financing. Under the assumption that economic growth will be at the level of 6 per cent, which has implications on all budget indicators, especially on income, there is not excluded the possibility that budget deficit financing be performed by the Bank of Albania even in the following months. Under normal conditions, there would exist space for absorbing this financing in a later period, keeping the monetary indicators unaffected. But, under the conditions of psychological factors operation and political problematic developments, there are many probabilities that the efficiency of the Bank of Albania operations in the market would be reduced and in this way the process of returning into normality would be more slowly. Under these circumstances, the Bank of Albania is going to communicate with the Government and the Parliament in the future, regardless of the planned budget expenditure reduction.
The Bank of Albania is likely to pursue a tightened monetary policy until end of the year, inject liquidity to prevent psychological effects and combine monetary policy instruments to ensure maximum efficiency.
Thank you for your attention!