“The loan approval has been announced officially by Saudi ambassador in Albania Abdullah Abdulaziz AL-ABDULKARIM. The new loan will have 2 per cent interest rate and 25 years maturity where the first five years will be grace period,” the Ministry said in a press release.

Albania had already secured 220 million USD loan from the Islamic Bank for Development. Other loans are being negotiated currently with Abu Dhabi fund with the aim of providing 100 million USD financing facility and Opec Fund for 15-25 million USD.
The 40 KM highway will connect the capital city Tirana with Elbasan and is part of the TransEuropean Transport Network number 8.

Albania’s public debt is expected to jump to 62-63 per cent of the country’s GDP from bellow 60 per cent that is currently as result of this single project.

Gjergj Erebara Tirana
24 JUN 2011

“The flat tax can be raised to 12-15 per cent, [from the current 10 per cent] as a way to cut the deficit and the stock of public debt,” IMF representative Gerwin Bell said on Thursday in a joint press conference with Albania’s Minister of Finance Ridvan Bode and the Governor of Albania’s Central Bank, Ardian Fullani.

Fullani was also concerned about the country’s debt level and called on the centre-right government of Sali Berisha to increase structural economic reform in order to reinvigorate economic growth.

“Economic growth in the country had been financed in the last 20 years by raising debt, by immigrant remittances and by foreign direct investments,” he said. “Now we cannot increase the debt further and remittances are slowing and we need structural reforms to move forward,” Fullani added.

However, in contradiction to IMF and Bank recommendations to cut spending, the government plans to further increase its public debt from 60 per cent of GDP in 2010 to 62-63 per cent of GDP in 2013.

The new loans will finance a new highway linking Tirana with the industrial city of Elbasan and a new parliamentary complex in the capital.

Despite the IMF recommendations Finance Minister Bode remained adamant in support of the government’s expenditure plan questioning the Fund’s forecast of the country’s economic growth.

“Statistical models don’t always come true in the real world,” Bode said.

The Association of Banks represent the banking industry in the country and its reaction came after employers of a bankrupted beer factory in the town of Vlora protested against the Raiffeisen Bank decision to confiscate the factory and close it down.

The factory was operated by a local businessman.

“Banks had lately experienced mounting difficulties in executing the collaterals [of the non performing loans], a process that is of vital importance,” the Association said in a press release.

“Some of the difficulties had been created due to tribunal decisions to halt the procedures of confiscation. […]” the Association said.
“In other cases the ownership deeds contain mistakes and that makes often impossible for the banks to confiscate the collaterals and to take back its money,” the press release adds.

The loans collateral executions had become vital for the banking sector in Albania currently due to increased non-performing loans. In April, non-performing loans jumped to 15.2 per cent of the total loan portfolio, a level never seen in the young banking sector of the country.

Albania has no precedents of vast scale bankruptcy. The bad loans portfolio had been on rise for the last three years. The banks had managed to avoid financial looses till now due to the poor legal framework on financial contracts that have made possible for the banks to transfer the costs of the nonperforming loans on the correct clients by increasing the interest rates.

An investigation from the National Authority for Competition this year suggested to the government to enforce new regulations on the protection of small borrowers from unfair bank practices. Despite this no regulations had yet been put into operation.

Net earnings in the sixteen banks operating in the country fell to 668 million leks (4.74 million euro) for the first quarter 2011, a 57 per cent drop compared to the first quarter 2010. Nonperforming loans reached an all time high in the end of March to 14.7 per cent of the total loan portfolio a 25 per cent growth compared to March 2010.

Banking system in Albania remained in black territory during the 2008 Global Financial Crisis and was able to transfer the raising costs of underperforming loans to the clients through increased tariffs and interests. Assets increased by 10 per cent to 1,009 million leks in the first quarter 2011 , driven by 14 per cent increase in deposits.

“This is a change in our policy and we believe that it will help in achieving our objectives in the near future,” the Governor Adrian Fullani said in a press conference announcing the decision.

Albania experienced mild inflationary pressures in the last two years as result of a combination of higher government taxation, currency depreciation, expansion of monetary base and imported price increases.

The Consumer Price Index grew to 4.5 per cent on yearly basis in February, led by increases in food prices by 4.9 per cent. The local currency Lek lost about 10 per cent of its value during 2009 and stabilized on 138 lek per Euro in 2010 but jumped to 140 in the last few weeks.

The Bank of Albania distributed 20-30 BN leks among local banks as part of its monetary stimulus during the last two years, but that stimulus had not yet been withdrawn. An increase in the interest rates will likely make more costly for the banks to rely on Central Bank financing.

The government increased taxes on petrol and tobacco several times in the last two years aiming to reduce its deficit.

“The IMF will come to Bucharest again as soon as there will be a legitimate government in Romania. Soon after, the third tranche of the loan should be disbursed,” the IMF’s mission head to Romania, Jeffrey Franks
said during a press conference.

At the end of October, an IMF delegation began to review Romania’s progress in achieving benchmarks linked to a 20-billion-euro international aid package.

During the visit, the IMF mission evaluated the country’s recent economic performance and discussed with the authorities the economic objectives for the coming year, along with the policy measures and structural reforms the Fund requires the government to fulfill.

As part of the conditions for the further disbursement of the loan, the Fund is asking for the approval of a cost-cutting budget in the first part of December, or risk postponing a 1.5 billion dollar aid tranche. The fund is also asking for as the passage of a fiscal responsibility law by the end of year.

The aid is seen as crucial to Romania’s bid to shore up its public finances in order to avert a deeper recession. The country is also dependent on the IMF loan to pay government worker salaries.

But political infighting ahead of the first round of presidential elections slated for 22 November has so far crushed attempts to form a new government, after former Prime Minister Emil Boc resigned last month.

President Traian Basescu on Friday nominated Liviu Negiota for Prime Minister, but political analysts doubt the opposition, which holds a majority in parliament, will approve his nomination. They do not expect a new government to be formed until after the second round of the presidential elections on 6 December.

Romania’s economy is predicted to shrink by 7.5 – 8 per cent this year. Source: Balkaninsight

“We have seen a strong growth of 4 to 5 per cent in the two semesters from January to June, but after that the tendency is negative, so we expect 3 per cent growth for this year,”said Daniel Berg, head of EBRD office in Tirana for Top Channel TV.

“So we are seeing a strong contraction now and this [negative] tendency will continue in the next year, when economic growth will slow to 1.6 per cent,” he added.

The biggest concern for EBRD currently is the sharp increase in public spending.

“There are some risks related to the external trade deficit, while the government deficit is also increasing and this is not an alarming situation but it is enough to be concerned,” Berg said.

“The government should oversee its spending and could cut some spending this year or early in the next year, if revenues do not increase,” he added.

Albania’s public sector has seen 23 per cent increase in expenditures and only 6 per cent increase in revenues as for end of September, thus running an expected deficit of 6.4 per cent of the GDP for this year. During the last months, government revenues slowed, thus indicating deteriorated economic environment.

According to EBRD estimates, Albania will enjoy 3 per cent growth in the gross domestic product this year, while the whole South East Europe region will suffer a 6 per cent fall of GDP.

The head of the EBRD office in Montenegro, Marek Lorinc, said that the bank is pleased to support a leading player in the sector.

“This project will raise the competitiveness of Voli Trade, bringing modern retail experience to other towns in Montenegro. We believe that this is only the first step in the cooperation between the EBRD and Voli, which will grow in the future,” Lorinc explained.

With a market share of more than 10 per cent, Voli Trade, owned by grocery retailer Voli, is Montenegro’s market leader, operating 12 stores in the capital Podgorica and in four other towns.

Voli CEO Dragan Bokan said that, after the loan agreement, Voli Trade would further strengthen its market position with competitive pricing. He announced the opening of two more stores outside Podgorica, which are to open in 2010.

The “opening of new stores is of great importance for our society and in providing a number of new jobs”, he added.

Additionally, Bokan pointed out the importance of cooperation between the company and EBRD, particularly in light of the economic crisis. Source: Balkaninight