Caution with PPPs and Taxes
Albanian Daily News
Published December 15, 2017
Challenges remain from the high level of public debt and financing needs, non-performing loans,and pervasive institutional weaknesses that hinder investment, IMF said in its report TIRANA - The Executive Board of the International Monetary Fund (IMF) concluded Article IVConsultation with Albania and in the report published Thursday it emphasized that Albania's economy continues to strengthen, benefitting from rising domestic demand, large energy-related foreign direct investment (FDI), and a recovery in key EU trading partners.The Washington-based institution evaluates that the new government's clear mandate following election victory in June, the favorable economic outlook, and the prospects for opening EU accession negotiations provide a window of opportunity to resume implementing the reform agenda."Albania's economy grew by 3.4 percent in 2016 and continues to strengthen, benefitting from rising domestic demand, large energy-related foreign direct investment (FDI), and a recovery in key EU trading partners," reads the report."The main policy objectives at the current juncture are to maintain macroeconomic and financial stability, and to deepen structural and institutional reforms to accelerate the pace of convergence," is written further in the report.According to the IMF, inflation is pushed up to below 2 percent. The current account deficit is predominantly funded by concessional borrowing and large FDI inflows. IMF observes that official foreign reserves are ample."Fiscal and financial vulnerabilities have been lowered over the past four years. However, challenges remain from the high level of public debt and financing needs, non-performing loans, and pervasive institutional weaknesses that hinder investment," is emphasized in the report.The report makes evident that the medium-term outlook remains favorable."GDP growth is projected to accelerate to around 4 percent, driven by continued strong domesticdemand, reforms that improve the business climate, and a strengthening EU recovery", emphasizes the IMF.Accelerated donor support as part of the EU accession process could lead to higher investment and a stronger credit recovery.On the downside, volatile domestic politics or shocks to global growth could pose risks to reformimplementation and fiscal consolidation. IMF Directors supported the need to reduce public debt to build fiscal space and ensure debt sustainability. They recommended that the authorities consider a more ambitious and front-loaded consolidation path. They also emphasized that strengthening fiscal institutions remains key for mitigating fiscal risks and enhancing efficiency. They noted that public debt management should focus on lengthening the maturity of public debtand diversifying the investor base. Directors underscored the need for higher revenues while refraining from lowering tax rates or granting any new exemptions or preferential tax policies. They supported the tax administration's efforts to improve compliance and welcomed the plan to introduce a value-based property tax.Directors agreed that it is critical to strengthen public investment management, given the plannedscaling-up of investment spending. They urged the authorities to ensure proper implementation of the framework for public-private partnerships in line with international best practices. They also emphasized the need to minimize the recurrence of arrears, including by improving the VAT refund process.




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