Post by albaniansoul on Nov 28, 2007 11:41:49 GMT -5
Albania 2008 budget sees record 7.9 pct deficitReuters Monday November 26 2007
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By Benet Koleka
TIRANA, Nov 26 (Reuters) - Albania on Monday passed its 2008 budget, the country's biggest ever, targeting a record deficit of 7.9 percent of gross domestic product and economic growth of around 6.0 percent.
Finance Minister Ridvan Bode told parliament public spending was seen at 369 billion leks ($4.6 billion), or 34.3 percent of GDP. Total 2008 revenue was estimated at 283.7 billion leks.
"This budget aims to increase revenues while cutting taxes, raise public spending to optimal levels and support reforms that will bring Albania closer to the European Union," Bode said.
The deficit, he said, was "exceptional" and for 2008 only, going to finance large infrastructure projects such as a highway linking the Albanian coast with Serbia's Albanian-majority breakaway Kosovo province.
Bode said that maintaining the current six percent growth rate would depend on the electricity supply. The country suffers power cuts of up to 15 hours daily.
Growth would also depend on global oil prices, and a deepening trade deficit with European Union countries as a result of a deal that stipulates the gradual phasing out of tariffs.
The deficit was likely to be criticised by the International Monetary Fund (IMF), which has told Albania not to over-extend itself and warned that too big a debt burden on these projects "could add to overheating pressures and fiscal risks".
In comments released earlier in November, the IMF said: "A deficit of some five percent ... would allow for temporary acceleration of spending on critical transport infrastructure while maintaining economic stability."
But Bode said the government had in fact made concessions to the Fund's wishes.
It would take only 580 million euros worth of commercial credits for the road projects, instead of the 680 million allowed it by its deal with the IMF, and spend most of it next year, instead of the entirety as it planned.
"The bulk of credits we have signed will be disbursed in 2008," Bode said, listing two highways, the costliest part of the Kosovo road, and power, water and port projects.
The budget does not include probable revenue from the sale of state-owned insurer INSIG, Albania's oil company and state-held minority shares in two banks, the minister said.
The budget also showed Albania will cut corporate tax to 10 percent from 20 percent as of January, and bring in a flat personal income tax of 10 percent, in line with the regional average in neighbouring Balkan countries.
The government hopes that a lower and simpler tax rate will motivate businesses and citizens to declare their real income, improving collection and fighting the corruption generated by rampant tax evasion.
(Writing by Ellie Tzortzi; Editing by Stephen Nisbet)
(Adds details)
By Benet Koleka
TIRANA, Nov 26 (Reuters) - Albania on Monday passed its 2008 budget, the country's biggest ever, targeting a record deficit of 7.9 percent of gross domestic product and economic growth of around 6.0 percent.
Finance Minister Ridvan Bode told parliament public spending was seen at 369 billion leks ($4.6 billion), or 34.3 percent of GDP. Total 2008 revenue was estimated at 283.7 billion leks.
"This budget aims to increase revenues while cutting taxes, raise public spending to optimal levels and support reforms that will bring Albania closer to the European Union," Bode said.
The deficit, he said, was "exceptional" and for 2008 only, going to finance large infrastructure projects such as a highway linking the Albanian coast with Serbia's Albanian-majority breakaway Kosovo province.
Bode said that maintaining the current six percent growth rate would depend on the electricity supply. The country suffers power cuts of up to 15 hours daily.
Growth would also depend on global oil prices, and a deepening trade deficit with European Union countries as a result of a deal that stipulates the gradual phasing out of tariffs.
The deficit was likely to be criticised by the International Monetary Fund (IMF), which has told Albania not to over-extend itself and warned that too big a debt burden on these projects "could add to overheating pressures and fiscal risks".
In comments released earlier in November, the IMF said: "A deficit of some five percent ... would allow for temporary acceleration of spending on critical transport infrastructure while maintaining economic stability."
But Bode said the government had in fact made concessions to the Fund's wishes.
It would take only 580 million euros worth of commercial credits for the road projects, instead of the 680 million allowed it by its deal with the IMF, and spend most of it next year, instead of the entirety as it planned.
"The bulk of credits we have signed will be disbursed in 2008," Bode said, listing two highways, the costliest part of the Kosovo road, and power, water and port projects.
The budget does not include probable revenue from the sale of state-owned insurer INSIG, Albania's oil company and state-held minority shares in two banks, the minister said.
The budget also showed Albania will cut corporate tax to 10 percent from 20 percent as of January, and bring in a flat personal income tax of 10 percent, in line with the regional average in neighbouring Balkan countries.
The government hopes that a lower and simpler tax rate will motivate businesses and citizens to declare their real income, improving collection and fighting the corruption generated by rampant tax evasion.
(Writing by Ellie Tzortzi; Editing by Stephen Nisbet)