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Ridvan Bode, DP Secretary, declared that the USD 100 million loan which the outgoing socialist government negotiated with ABN AMRO in the Netherlands and several other banks at the end of its mandate will not be necessary for the country due to it being very expensive.

The government of Prime Minister Nano after ending negotiations in June of this year submitted the draft law to the Albanian Parliament for approval. However, his government lost the July 3 parliamentary elections to the Democratic Party which now enjoys majority seats in the new parliament.

On June 20, Minister of Finances Arben Malaj signed two agreements, during an event organized for the occasion at the Tirana International Hotel. The first agreement was signed with ABN-AMRO for the EUR54,085,514 and USD11,518,877 amounts. The second was signed with several Albanian banks for loans additional loans amounting to EUR9,544,502 and USD2,032,743.

The contract prescribes loans with Libor plus 5% interest rate for the dollar amount and Euribor plus 5% for the Euro amount.

The loan is considered to be expensive judging also from the fact that interest rates from commercial banks for individuals and companies in Albania vary around the same levels and in some cases they are lower.

The first commercial loan in the history of Albania was achieved thanks to direct negotiations and not through an auction. The loan brings about a considerable foreign debt increase, which is estimated to be at USD 1.2 billion. Meanwhile, the loan is expected to bring about a strong increase in the budget balance for the disbursement of foreign debts. This year the foreign debt payments are estimated to be ALL 17.6 billion (Lek) and it should jump to 30%, reflecting the new loan.

This time the Albanian government openly decided against the council of World Bank and IMF, which is against the cooperation agreements signed with these two institutions. Right after the publication of the announcement by the government, IMF and WB came out with a joint statement considering the loan “needless and very expensive”. The WB declared the loan destination itself, rehabilitation of the Tirane-Durres railway, does not justify such a major investment with such a low return rate.

According to the feasibility study conducted by the main beneficiary, General Electric, the new railway is expected to have a 12% return rate per year. According to forecasts, this new line is supposed to have a 3.2 million passengers capacity per year, 1.2 million out of which with be coming and going from the Rinas International Airport. The loan will be secured 100% by SACE, and it will be re-secured by Ex-Im Bank of U.S. The World Bank, in a declaration made a month ago, when the government first approved the decision for the loan, said that this investment did not have any chances of recuperating itself because the its considerable value. According to the WB, even if the number of passengers were to be as high as 3.2 million per year, this number would be bringing only USD 3 million per year in revenue.