Einstein said: "madness is doing the same thing and expecting different results". This is how the head of the International Monetary Fund for Albania, Gerwin Bell, expressed himself in an interview with the TV station "Voice of America", meaning to send a message to the Albanian government to avoid the risk of being in the same situation in other European countries suffocated by public debt.
The IMF's reaction, following the presentation to Parliament of a draft of the 2012 financial law, refers to the absence of a serious measure to reduce public debt, which actually increases further. This financial is also strongly criticized by the opposition, which accuses it of underestimating the economic crisis and therefore the danger deriving from the Albanian public debt.
The much praised Albanian economic growth miracle, despite the global recession, risks entering the recession where other European countries have already entered due to a debt that has now reached 60% of GDP, up by 5% alone 6 months (from December 2010 to June of the 2011), and that according to the IMF warning it would be unsustainable for a country the size of Albania. According to the IMF advisers, the financial law for the 2012 is too optimistic: it does not take into consideration the possible risks deriving from the worsening of the international financial crisis, but with a certain lightness it states that the greater economic growth will reduce the Albanian public debt in the next years. If instead the worst condition, the one imagined by the IMF, that is to say an uncertain growth, were to occur, then the situation of the public debt, and with it the Albanian economy, would be in grave danger.
In fact, the State - as even a natural person does - borrows from other subjects (individuals, companies, banks or States) by subscribing to bonds or government bonds (such as BOTs, BTPs, etc.), money for financial expenses, to new ones investments and to cover any budget deficit. These actions make up the "public debt", which is substantially useful for the country's economic surplus and to stimulate growth, provided that it is used appropriately and productively. Otherwise the debt can get out of the government's capacity to control excessive increases in costs and interest rates, often without adequate revenues to pay it off, and thus lead to the insolvency or bankruptcy of the State, as is happening today to some European States .
What debt, then? And at what price?
The miraculous growth of Albania has fallen to 2,5% in the 2011 due to the international crisis, and the percentage of public debt on GDP has consequently increased. In terms of public debt, Albania is in the 24 world ranking. Its debt is the highest in the Western Balkans and Central Europe: more than 60%, compared to an average of around 43% on national GDPs.
The official statistics of the Ministry of Finance indicate 5 billion euros (710 billion lek) of debt for the 2010, which by the end of the 2011 should reach around 5,8 billion (800 billion lek), while the Gross Domestic Product in the 2010 has reached 8,7 billion. This means that the Albanian government spent much more than half of the national GDP. The INSTAT calculates approximately 2000 dollars of debt per head for each Albanian (INSTAT 01 / 01 / 2011, on the population of 3.194.972 inhabitants). Finding the cost is even more tortuous than understanding its existence. This depends on the composition of domestic and foreign debt, which in the Albanian case is divided by approximately 57% in domestic and 43% in foreign debt. Overall, the interest rate on the debt can range from 4% to 10%, if not even further, in the event of borrowing from private banks and for special sums.
Clearly, a higher percentage of domestic debt (57%) gives more stability and sustainability at an economic level, above all because it does not cause differences in the value of the currency. The complication is that it is structured with short-term payment instruments for 58%, to be paid approximately every year, and only 42% is long-term, to be paid every 2-3 or more years. To give more space to the pockets of the state, which otherwise finds itself having to contract debts again just to pay off the old ones, debts should be structured in the long term.
The biggest problem is foreign debt, which can create insolvency problems (see Greece). The foreign debt of the Albanian state at the end of August 2010 was around 2,5 billion, a sum that includes all the obligations that the state has towards foreign banks, development institutions and other countries. Some data indicate 800 millions of debt spread in 25 States in the world, including Italy, Germany and Austria as leader, but also other countries like Japan, China and South Korea or Kuwait. Another The rating agencies are a problem that should not be underestimated, as they are known to be averse to uncertainty over the ability to pay their debts, to the low degree of institutional maturity, and to insufficient assessments of political responsibility. It is no coincidence that the rating agency Moody's assessed the Albanian debt as garbage, with a judgment that has remained fixed for years at B + value, which is equivalent to saying "need for continuous monitoring". This is our Achilles heel.
In the Albanian case the figures by themselves are not worrying. The slowdown in economic growth (forecast by the IMF at the 3.5% growth rate for the 2012) is worrisome, to which a worse regional growth context is added (Serbia at 2%, Croatia at 0.8% of GDP, Macedonia at 3%, Montenegro at 2%, while Bosnia 2.2%, not to mention the Greek and Italian situation). Only Kosovo grew at 5.3% during the 2011.
Other internal and foreign problems such as the energy crisis, the slow growth of credit, the vast underground economy, the high unemployment rate and a regulatory labor market, political instability, the strict base of exports and the high share of short-term public debt, the fall of the entry of remittances by emigrants, enclose a picture that at the moment makes the International Monetary Fund shudder.
Furthermore, the particular risk for Albania is the excessive exposure to the threats of the Greek and Italian economy, which are also its major trading partners, and from which most of the emigrants' remittances come. "If added to the slowdown in economic activity and the difficult time for financial markets as a whole, regardless of Albanian economic results, the effects on Albania are also worrying" - concludes Gerwin Bell. Solutions need to be taken on the fly.
What is required of Albania are lasting actions to ensure fiscal sustainability, financial stability and improve the investment environment. Without forgetting to renounce the controversies that continue to threaten the necessary consensus for the reforms, and the measures necessary for the progress of the candidacy to the European Union.
Technically, the IMF advises the Albanian economy to change the type of debt from debt for consumption to debts for investments, to concentrate on increasing the country's production capacities, replacing imports with exports, and increasing revenues (with reference to the income tax currently at 10%, to be increased at 12-15%), and finally decrease public spending.
The financial law for the 2012 will have to be approved in the coming days. At that moment we will understand if Albania, having also national salvation at heart, will follow the international councils as a good pupil as it has been in the last few years and will take note of the past lessons, or will continue to perform dangerous actions and ambush on winding roads similar to those that brought Italy and Greece close to the abyss. If history and Albert Einstein teach something, this is perhaps the time for it
* PBB për 2010 është vlerësim i FMN* Për 2010, të dhënat and borxhit janë deri në tremujorin and tretë të 2010Burimi: Banka and Shqipërisë, Ministria and FinancaveKomentet dhe Analiza: ODAhttp://open.data.al/
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