PRESS RELEASE
Extracts from the joint interview of Mr. Ardian Fullani, Governor of Bank of Albania, and Mr. Arben Malaj, Minister of Finance, given to the Financial Times newspaper, ''Foreign money is the key to advancement'', Washington, on April 12, 2005

The steady flow of cash from abroad helps to alleviate poverty by easing the plight of jobless and elderly relatives. Remittances have also driven a boom in housing construction. But only a small percentage is invested in production and services, says Ardian Fullani, the central bank governor. Dependence on imports paid for by remittance money makes the current account uncomfortably high, he adds. Thanks to a rise in tourism and increased exports of textiles, footwear and vegetables the deficit fell last year but still stood at 7 per cent of gross domestic product.

In contrast with the decades of enforced self-reliance under communism, Albania imports most of its food, including fresh produce from Greece and Macedonia, which sells at lower prices than locally grown fruit and vegetable. " To have an impact on the trade balance, we have finance available to local producers and processors," Mr. Fullani says. "There is plenty of room for growth in the agricultural sector."

The level of financial intermediation is rising, partly as a result of a government drive to reduce the use cash. The finance ministry set an example by arranging for public sector workers to be paid through the banking system. Bank credit to the private sector is growing fast but is still the lowest in the region at just 8.5 per cent of GDP in 2004.

Small businesses, including those in the farm sector, rely on loans arranged under international donor programmes and micro-credit financing but commercial banks are starting to evaluate the sector. Arben Malaj, the finance minister, acknowledges remmitances can support economic growth for several more years but increased inflows of foreign direct investment are needed if the country is to start closing the income gap with the rest of the Ballkans. This year's budget includes a fiscal package aimed at bringing the country closer to other countries in the Ballkans on tax rates and business practices. As competition intensifies among Balkan countries to reduce tax rates as an incentive for investment the government has cut the corporate tax rate from 25 per cent to 23 per cent and will reduce it to 20 percent next year.

"We are determined to improve the tax administration to smooth the path for good quality investors." Mr. Malaj says.

Following the sale of Albanian Savings Bank, the country's biggest bank, to Austria's Raiffeisen group the government this year plans to sell its 40 per cent equity stakes in two small banks. - Italian -Albanian Bank and United Albanian Bank.