Gent Sejko: Fourth review of the arrangement with the IMF concluded
Speech by Mr Gent Sejko, Governor of the Bank of Albania, at the joint press conference
with the IMF mission, Albanian MoF and MEDTTE, Tirana, 17 March 2015.
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Dear media representatives,
During the last two weeks, an International Monetary Fund (IMF) team visited Tirana, to
conduct, together with Albanian authorities, the fourth review of the arrangement. In Bank of
Albania's perspective, the economic and financial developments have been relatively
positive. Notwithstanding the problems the Albanian economy has encountered, it has
recorded growth and a range of economic and financial balances of the country have
improved. The economic policies and the legal, regulatory and institutional reforms by the
Albanian authorities have played a significant role in this regard. These development policies
are anchored in the arrangement that Albania has with the IMF and have benefited from the
credibility and financial assistance of the International Monetary Fund and World Bank. The
Bank of Albania deems that the reforms that Albania has started should continue, to provide
sustainable and long-term growth.
I would like now to outline Bank of Albania's opinion on the country's economic and financial
situation, and to list the priorities of our work in the framework of this arrangement.
The Albanian economy posted growth in 2014, which is expected to further accelerate in
2015. Increase in consumption and private investments, owing to the improved financing
terms, confidence and private sector balance sheets, was, and is expected to continue to be,
the main driver of the economy's performance. On the other hand, the public sector has been
and remains committed in the path to fiscal consolidation, whereas the external environment
continues to face problems and pose challenges to the increase of Albanian exports. In the
short run, the increase in consumption and private investments is sufficient to generate initial
triggers for economic growth, but the long-term growth of the Albanian economy should rely
more on the improvement of its competitive profile and growth of exports. Therefore, we
deem that the acceleration of structural reforms has a unique role in supporting economic
growth.
Inflation continued to stand below our target. Internal inflationary pressures have been
upward, but the fall in prices in global markets decelerated the return of inflation to target at
home. The monetary policy stance of the Bank of Albania has become strongly
accommodative. This policy stance aims at reducing the financing costs of the private sector,
in order to sustain the return of the economy to equilibrium and of inflation to target, in the
medium-term horizon.
In our view, the indicators of economic activity and inflation are performing in the right
direction; however, the sustainable accomplishment of targets will need time and will imply
keeping low interest rates for some quarters ahead. Overall, the main indicators in banking
system activity improved. Liquidity, profitability and capitalisation indicators are at good
levels, while the ratio of non-performing loans has trended down. The Bank of Albania has
continued to work for the regulation and prudent supervision of the banking system, pursuant
to the legal obligations, as well as to sustain its steady development.
Also, we have cooperated with:
(i) other public agencies, to improve the legal framework, align regulatory practices,
and identify measures for withstanding systemic shocks;
(ii) international financial institutions, to develop loan restructuring programmes; and,
(iii) foreign regulatory institutions and parent banking groups operating in Albania, to
exchange information.
I would like to reiterate that the banking system is solid, liquid and well capitalised for
conducting its intermediary function. However, credit growth continues to appear sluggish,
due to tight bank lending policies. Maintaining and strengthening banking system soundness
is to everyone's benefit, as this is the only system that, with its funds, may sustain long-term
economic growth. Lending is expected to improve slightly during 2015. The Bank of Albania,
however, expects an increasingly active role of the banking system in lending and will also
take all the needed measures to encourage it.
At the conclusion of discussions, the Bank of Albania shares the view that economic policies
are performing overall in the right direction.
In compliance with its legal duties, and pursuant to its institutional commitments in the
framework of the arrangement, the Bank of Albania will continue to work on:
• Maintaining price stability, in accordance with its 3.0 % inflation target. The Bank of
Albania will continue to implement its monetary policy in accordance with the
targeted inflation regime and free-floating exchange rate regime. The monetary
policy will remain on the easing side, aiming at enhancing transparency of
communication and its effectiveness.
• Maintaining adequate foreign currency reserves.
• Supporting banking system stability, by exercising its duties as the regulator and
supervisor of the banking system. Special attention, in this regard, will be given to
addressing factors determining non-performing loans. For this purpose, the Bank of
Albania will cooperate with the banking industry and other national authorities to
swiftly address this issue. Moreover, the Bank of Albania will continue to work on
improving the infrastructure that assesses and addresses risks facing the overall
financial system, in the framework of recommendations left by the Financial Sector
Assessment Progam.
• Completing the project for adopting the new IFRS standards on compiling financial
statements.
Thank You!