Publication Date 01.07.2013
Question: In the current post-election period, what would be your advice for the actual government with regard to public finance management?
Answer: The same suggestions we have made before. It is crucial these days, and in the ones to come, to maintain fiscal balances in order to provide the necessary premises for a stable and sustainable growth in the future.
Question: As the key interest rate has been kept unchanged, reportedly, the economic situation has not been affected, let us say, by the electoral atmosphere in Albania. Is that the case? In other words, to what extent has the electoral campaign affected the country's economy, with lower consumption levels, lower crediting levels, or higher budget spending, 13 per cent as you reported.
Second, would you give us a preliminary concept of the Bank of Albania on its readiness to adjust to the new commitments of the new government for a new management style of the economy, or to the new objectives of the new government for the economy?
Answer: With regard to the first question, we have discussed it before. I would say that it is difficult to have an accurate measurement of the moment for this issue. Certainly, the Bank of Albania has its own assessments on Albania's economic activity. Such economies as Albania's, that is, emerging economies, small and open ones, have been affected by the latest global crisis, hence affecting the perception and expectations of economic agents, including the public. Presumably, during this period, these economies have been on hold; I think this is what has happened in Albania.
The campaign was long and constructive, and introduced numerous ideas and proposals, which have naturally had an impact on economic agents. However, a new perspective lies ahead of us. In this setting, it is important to continue, expeditiously, with the structural reforms and identify the main branches, whose support would enhance the competitiveness of our national economy taking the time into account. Time is a key element for decisionmaking and swift structural reforms in order to guarantee economic competitiveness. All of our countries are now competing for one target: The European Union. As we endeavour to reach this target, we should all bring added values along. The velocity is essential, but it should be followed by well-defined measures and policies that would guarantee the country's long-term macrofinancial stability. At this point, I would say that fiscal consolidation is vital, implying, above all, designing an adequate fiscal order. I think the IMF's assistance is necessary.
In addition, in the coming months, I believe we will have positive developments in this regard. On 16-17 July, the first mission of the FSAP will visit Albania. For about two years, we have been working for a second assessment programme of the Albanian financial sector, after the one conducted about 8 years ago. This "scanning" of the financial sector by IMF and WB experts is essential for a comprehensive diagnosis of the financial and macroeconomic soundness of our economy. It is thereby very important that, together with this examination, we prepare for big reforms, such as the fiscal order. This order would provide added guarantee to the markets, "put a lid" on debt, guarantee medium-term consolidations and provide added transparency to the domestic and global markets. We should think of reforms that will guide Albania in the next 20-30 years; I believe now is the time to do that.
We wish the new government all the best. The Bank of Albania is very interested, as always, in harmonised monetary and fiscal policies; it is willing to provide its expertise and assistance. I mentioned earlier that work has already started for the realisation of the FSAP programme; however, the fiscal order and other reforms would guarantee the competitiveness of the economy. Once competitiveness is guaranteed, I would say, everything stands within the projects and programmes.
Question: What is the situation in terms of the public debt? A short while ago, Ms. Meksi spoke of liquidity shortfall, and that the state has funds that perhaps would suffice for only a few days. What is the current situation?
Answer: The report that I just read reveals clearly the situation of the deficit and debt increase. This is a good question. However, I have to clarify the public opinion on the fact that this is not a matter of shortage of liquidity. The market place seems confused in relation to liquidity and both economists and analysts should provide clarity. Liquidity has been and still is ample in Albania's financial sector; therefore, the Albanian government has been able to borrow from the market.
In our press conferences throughout the crisis period, especially in the last two to three years, we have stated that maintaining fiscal balances is vital. I think that we stand now at a point when we could start to implement the reforms I mentioned earlier, conduct a normal activity of public and private finances in Albania, and, subsequently guarantee a stable banking sector that is willing and ready to lend to the economy. Our biggest challenge is our overall commitment to create the necessary stimuli to boost lending. This is a global challenge especially in the European context, discussed at length in the annual meeting of the Bank for International Settlements. The meeting concluded that the monetary policy has played its role but it may not be the "silver bullet" to solve the problem. All policies need to be harmonised and clearly-defined effective structural reforms need to be implemented in order to have a competitive economy and ensure its long-term and stable growth. Once again, all the conditions are in place to do that. I believe there is an optimistic signal that the Albanian economy has room to grow and develop and has the required potential to this end.