IMF Assisting Albania to Face Challenges
By Genc Mlloja
Albanian Daily News
Published November 11, 2017
"Following numerous assessments by our tax experts, we have advised the government strongly against lowering the VAT threshold from its current level. Small enterprises account for half of all businesses but only about 2 percent of taxable transactions," has said Mr. Jens Reinke, Resident Representative of the International Monetary Fund (IMF) Resident Mission in Albania.
In an exclusive interview with Albanian Daily News, Mr. Reinke forecasted continuation of the economic recovery in Albania and an annual GDP growth reaching 4 percent in the medium term, but warned of the start of the slowing of the direct foreign investments cycle will in 2018.
"But recovery in private credit, an expansion in public investment, and a boost in confidence are expected to support continued recovery," he said.
A staff mission of the International Monetary Fund was on a 10-day visit to Albania and the IMF staffers told the Albanian government in a statement at the end the visit on October 2, 2017 as quoted by Reuters that its 1 billion-euro public investment plan posed "substantial risks".
In the meantime, the IMF Representative in Tirana, Reinke highlighted the crucial importance of the implementation of the justice reform as one of the most important steps in enhancing the business environment in Albania.
"Together with other international partners, we are carefully watching progress on justice reform," he said, adding that since 1991, the IMF has been closely involved with Albania, its government and central bank.
"Albania has received much technical assistance and training over the years, most recently particularly on tax issues and public finance management," Mr. Reinke said in the following interview:


- Albania’s economic growth in 2018 will not be 4.1%, as it was projected before, but only 3.7%. Which are some of the reasons leading IMF experts to such a prediction?
- We expect that the economic recovery will continue and that annual GDP growth will reach 4 percent in the medium term. In recent years, growth has been underpinned by large scale direct foreign investments.
Their investment cycle will start slowing in 2018. But recovery in private credit, an expansion in public investment, and a boost in confidence are expected to support continued recovery.

- The introduction of VAT on small- sized businesses has caused uproar within this category of business in Albania with them claiming that it would lead to their bankruptcy. Do you think that such a measure is a positive step in the right direction?
- Following numerous assessments by our tax experts, we have advised the government strongly against lowering the VAT threshold from its current level. Small enterprises account for half of all businesses but only about 2 percent of taxable transactions. The expansion of the VAT system will stretch the resources of the tax department too thin and could result in a significant loss of revenues overall. Small enterprises may also be overburdened with the reporting requirements.

- Which are the expectations of the IMF and you personally as Resident Representative in Albania from the implementation of the expected reform in judiciary, one of the 5 priorities set by EU for opening talks on Albania's membership in the club?
- The implementation of justice reform is one of the most important steps in enhancing the business environment in Albania. Key obstacles to better economic performance remain weakness in property rights, high perceptions of corruption, and an unaccountable judiciary.
Together with other international partners, we are carefully watching progress on justice reform.

- Do you think that Albania's transition, which as some analysts say is one of the longest among the countries of the former communist Eastern Europe, plays a negative effect on the economic performance, and given your experience is this a normal process?
- Albania has been a successful reform country, but one should keep in mind that Albania started the process of transition from a position much more challenging than most other countries in central and Eastern Europe.
In terms of institutions, physical infrastructure, and competitive industries, much reconstruction remains necessary.
However, Albania has achieved much in the last 20 years and now has a solid foundation for continued institutional reform and economic recovery.

- In conclusion, how much helpful has Albania's cooperation with IMF been, and which are some of the profits of this Balkan country, and especially of ordinary citizens, from the contribution made by it?
- Since 1991, the IMF has been closely involved with Albania, its government and central bank. Albania has received much technical assistance and training over the years, most recently particularly on tax issues and public finance management.
Also, we have maintained regular policy dialogue and Albania could borrow from the Fund. During this period, Albania has achieved raising living standards for its citizens, based on macroeconomic stability with low inflation, sound banks, and a stable currency.
Yet many challenges remain and we stand by to assist Albania in future.





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