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Albania C’Bank Under Fire Over Crisis
Tirana | 09 April 2009 | By Gergj Erebara
The governor of Albania’s Central Bank, Ardian Fullani, has come under fire for the bank’s handling of the global financial crisis.
Former Minister of Finance and opposition deputy Arben Malaj asked the governor why the central bank was buying government debt directly, while the former Minister of Economy, Ermelinda Meksi, accused the bank of being slow in denouncing excessive government spending before the general elections, scheduled for 28 June.
The criticism was made on Wednesday at a parliamentary commission at which the bank presented its yearly report.
Fullani replied to MPs that his institution warned the government of centre-right Prime Minister Sali Berisha about the risks related to the global financial crisis and explained the acquisition of government bonds was a common practice for central banks.
“We sent a letter to the government last September when the crisis just begun,” Fullani said.
The letter was not made public but, according to Fullani, the government has been fully informed about the problems, although claiming during the same period that everything was fine with local economy.
The central bank warned publicly about excessive government spending in March, saying that financing debt has become more difficult as result of strong demand from the government and few offers from the banks. Fullani added that the government should cut some of the investments planed for this year.
Last Tuesday, the International Monetary Fund, IMF, cut its projection of gross domestic product, GDP, growth for Albania to between 0 to 1 per cent for this year compared to an earlier estimate that ranged between 3 to 3.5 percent of GDP.
The central bank has been very active in the treasury bills market since September. In a bank run in the last quarter of 2008, Albanians withdrew 325 million Euro from their accounts.
Several banks faced a short-term liquidity crisis which resulted in a roll over for treasury bills. The central bank used many of its tools to boost liquidity in the market, including buying treasury bills without penalties, but the liquidity problems were still not fully resolved.
The government did not comment on central bank warnings.
According to the Minister of Finance, problems in the economy are mainly caused by panic.
“If you speak about the crisis, Albanians will not send their money to the bank, and, as result, banks will not offer loans and businesses will run out of cash,” said Minister of Finance Ridvan Bode last week.
Source: Balkaninsight
