Ardian Fullani: Recent financial and economic developments in Albania
Speech by Mr Ardian Fullani, Governor of the Bank of Albania, while presenting the 2004 Annual
Report to the Albanian Parliament Audience, Tirana, 9 April 2005.
* * *
Honored deputies,
I am here with you presenting my first address as Governor of the Bank of Albania, to share with you
the Bank of Albania estimations on the economic developments of year 2004, to present our
viewpoints on the Albanian economy perspective for the years to come, and to present some other
important aspects of the Bank of Albania activity during this period. Bank of Albania is an institution
that plays a crucial role in the decision-making of economic and financial policies and for establishing
and maintaining the financial stability of the country. For this purpose, on behalf of the institution I
govern, I would welcome any opinion, comment or suggestion relating to the past, the present and the
future of the institutional development, of monetary policy and banking supervision.
Albanian economy during 2004
According to the Bank of Albania estimates, the development of the Albanian economy over 2004 was
in line with the objectives of the strategy on the economic development of the country. Based on the
latest estimates, it results that Albanian economy grew by 6.0 percent in real terms, keeping the
average development rate of the last five years. The economic growth rate of Albania has been
throughout this period higher than the one of other Southeastern European countries or even the one
of the countries being recently members of the European Union.
The activity conducted by the Albanian economy, as a relatively open economy, was fuelled by the
invigoration on a world-wide scale of the economic activity throughout 2004. A slow but a safe growth
of the European economy experienced over 2004 has been a positive factor for the Albanian
economy, fostering the demand for our exports and sustaining the rise of remittances inflow in foreign
currency from emigrants. The average inflation rate of the euro area has been around 2.4 percent over
this year, without exerting any influence on the rise of the imported inflation rate in Albania.
Simultaneously, the impact of shocks on the world economy during 2004 resulted to be smoother in
the Albanian economy. Oil price rise in the international market was amortised partially due to Lek
appreciation and partially due to the rising competitiveness and the emerging of a certain flexibility of
demand for this product. The impact of oil price rise on the inflation rate in the country has been
restricted. Also, its impact on the Albanian economy, though hard to be measured, is believed to have
been rather a smooth one according to the estimations on the performance of the most exposed
sectors to oil price, the transport and industry.
Exchange rates have been fluctuating over 2004. The American dollar was appreciated in the first part
of the year, as a consequence of expectations for a tightening of the United States monetary policy.
But, during the second part of the year, the attention of financial markets mainly focused on the
structural problems of the American economy, that of the budget deficit and current account deficit.
These concerns brought about a quick decrease in the American dollar value, reaching the minimum
levels against the common European currency.
In face of these developments, both monetary policy and fiscal policy of larger economies maintained
expansionist features. Notwithstanding the rise of US dollar interest rates, they remained at low
historical levels while Euro interest rates remained unchanged. The fiscal policy has impacted the
growth of domestic demand, either in the euro area or in the United States. The progressive
integration of the Albanian economy in the international markets of products and capitals makes that
this economy benefits from these incentive policies, in the form of lower interest rates for foreign
currency and in the form of higher demand for its exports.
Placed in this positive background, the Albanian economy growth continues to be generated from the
dynamic development of the private sector, while maintenance of the macroeconomic stability and
economic growth support through investments in the priority development fields: infrastructure,
education and health, have been a priority to the public sector.
During 2004, investments in the economy marked the same level as during 2003, representing nearly
25.4 percent of GDP. These investments are mainly represented by the private investments, which
count for about 80 percent of total investments. The financial sector has given an ever-stronger
support to this development, through the increase of lending activity and the range of services
provided. Thus, credit to the economy increased by an average of 34 percent during the last two
years, being at the same time accompanied by a prolongation of maturity term.
The sectoral development of the Albanian economy has been a dynamic development over the last
years. Sectors that have provided a major contribution to the annual growth rate are considered to be:
"Trade, hotels, restaurants", "Construction", "Transport" and "Other services". These sectors have
contributed about 75 percent of the economic growth over 2004. This development is accompanied by
a redistribution of the relative contribution of economy sectors to GDP, and also by a redistribution of
the production factors, the labour forces and capital support.
The large demand for the infrastructure development, for increasing and expanding the productive
capacities as well as for housing made that construction sector be characterized by high development
rates. It contributed by an average of 17 percent to the economic growth of the last three years,
although the added value in this sector represented only 10 percent of GDP in 2004. Sales of the
"Trade, hotels, restaurants" sector increased by 6.2 percent over the nine-month period of 2004, in
comparison with the same period of the previous year. This sector performed nearly 44 percent of total
sales for this period. A positive development of year 2004 was also the agricultural production, which
increased by 4.9 percent. The industry sector performance has been characterized by a mixed
performance. Sub-branches of the processing industry like foodstuff industry, manufacturing of mineral
products and metallurgy, performed higher sales during the nine-month period of 2004, while sales of
the textile industry and processing leather industry marked rather low levels. The energetic sector
experienced a positive performance during 2004. The electric energy production marked an annual
growth of 12 percent, being expressed in the rise of exports by 20 percent and the decline of energy
imports by 30 percent. Sales of the transport sector increased by 5 percent over the nine-month period
of the year.
An important aspect of the Albanian economy over the last years is the fact that the economic
growth did not generate macroeconomic imbalances. On the contrary, it is accompanied by the
ongoing consolidation of this stability, being expressed in the low and stable inflation rates, in the
reduction of budget deficit and public debt, in the improvement of the balance of payments position
and in the overall stability of monetary indicators.
Some indicators of the economy over the years
1999 2000 2001 2002 2003 2004
Real growth of GDP (in %)1 8.9 7.7 6.5 4.7 6.0 6.0
PBB (with current prices,
488611 530900 588700 630000 695100 780100
in millions of Lek2)
PBB (with current prices,
3548.4 3694.5 4102.4 4496.8 5702.2 7,581
in millions of USD)
PBB (in USD per capita)3 1052.0 1086.3 1329.0 1460.0 1833.5 2,434
Number of the employed
1081.0 1068.0 1065.0 921.0 928.0 917.0
(in thousands)
Unemployment rate (in %) 18.0 16.9 14.6 15.8 15.0 14.6
Inflation rate - in %
-1.0 4.2 3.5 2.1 3.3 2.2
(year/year)
Budget deficit (with grants,
-12.1 -8.2 -7.9 -6.6 -4.9 -4.9
as a percentage of GDP)
Public debt (as a
69.7 71.3 66.8 65.1 60.7 55.3
percentage of GDP)
External debt (as a
-32.3 29.4 25.8 23.4 20.7 17.8
percentage of GDP)4
Current account (without
government transfers, as a -8.5 -7.0 -6.1 -10.2 -8.2 -6.2
percentage of GDP)
Average exchange rate,
137.7 143.7 143.5 140.1 121.9 102.8
Lek/USD
Average exchange rate,
147.0 132.6 128.5 132.4 137.5 127.7
Lek/EUR
Source: INSTAT, Ministry of Finance, Bank of Albania and the IMF estimates.
The 2004 data suggest a gradual easing of unemployment rate. Although the demographic
changes over the last years make difficult the statistical disclosure of labour forces displacement,
according to official data the unemployment rate is estimated to have decreased from 15 percent to
14.6 percent throughout 2004.
Fiscal indicators
Based on the developments of fiscal indicators, it results that the fiscal policy followed during 2004 has
been a prudential policy, which relied upon the Medium-term Budget Program for the period
2004-2006. Expressed in terms of GDP, the budget indicators are presented at approximate levels as
those of year 2003, where one can distinguish the unchanged figure of budget deficit, of 4.9 percent.
State budget income grew by 10.4 percent over 2004, reaching 23.7 percent of GDP. Also, budget
expenses recorded an annual growth rate of 10.7 percent, reaching 28.6 percent of GDP. These
indicators remained, however, below the projected levels in the 2004 budget, imposing the necessity
for a more cautious follow-up of the budget in its two principal phases: the design and implementation.
Also, performance of capital expenses still remains a problem, which deserves more attention in the
future, given the particular importance it has for the development of infrastructure capacities of the
country.
External sector of the economy
The favourable economic situation in the country was also reflected in the field of foreign transactions.
The current deficit marked a significant decline over 2004, reaching 5.3 percent of GDP and marking a
significant decrease compared to the last two years. This development resulted to be a consequence
of trade deficit improvement, which lowered to 21 percent of GDP in 2004, from 23.4 percent of GDP it
was in 2003. Exports of goods marked a higher growth rate than imports, while the positive balance of
current transfers increased in parallel with trade deficit, thus impeding the deepening of current deficit.
The coverage of imports by exports of goods reached 27.5 percent, marking rather an improvement
relative to year 2003 when this ratio was 25 percent. During 2004, Albania's balance of payments
recorded a flow of financial assets and capitals of about 1.5 times higher than the previous year. The
rise of inflows in the financial account and the non-deepening of current deficit brought about the
increase of foreign reserves by about USD 290 million over 2004. Albania's foreign reserve is
sufficient to cover about 5.2 months of imports of goods and services.
Notwithstanding the positive developments of the recent years, the economic growth and the
macroeconomic stability of the country are two parameters, which, according to our consideration,
cannot and should be considered as issues already accomplished. The high trade deficit requires the
ability to find stable long-term coverage resources, especially to promote foreign direct investments,
which will raise the productive capacities of the Albanian economy. A major interest should be given
particularly to the sectors such as agriculture and tourism.
Fiscal policy must continue to conserve its positive contribution in the consolidation of the
macroeconomic stability, a contribution being expressed in the reduction of budget deficit, in the
increase of income and in the establishment of priorities according to the National Strategy for the
Socio-economic Development, in the performance of budget expenses. We deem that financial sector
development should be balanced in all its segments, and this requires the successful completion of the
privatisation process and the harmonization of the regulatory and supervisory legislation, in
accordance with the best practices of the developed countries.
These issues require a continuous attention and cooperative contribution. On this opportunity, I deem
appropriate to highlight that Bank of Albania shall be a prompt and open partner, assuming the
responsibilities belonging to it, and collaborating with all the actors interested in the economic and
financial development of the country.
Inflation and monetary policy developments
The primary objective of the Bank of Albania, provided in the Law "On the Bank of Albania" is
maintaining the price stability. This objective is expressed in the achieving of a low and stable inflation
rate, measured as an annual change of Consumer Price Index. For year 2004 inflation rate, according
to the Monetary Policy Document, was fixed to be within the two-to-four percent targeted range.
According to the actual developments, Bank of Albania has achieved its objective on the inflation
control within the two-to-four percent targeted range. The annual inflation rate resulted 2.2 percent by
the end of 2004, while the average annual inflation rate was 2.9 percent. Inflation rate remained about
3 percent during the first half of the year and, later on, marked a downward trend during the second
half, approximating to the lower limit of the targeted band.
The main role in creating the inflation rate during 2004 has been played by the "Rent, water, fuels,
energy" group, unlike the past years when this role was played by the "Foodstuffs and non-alcoholics"
group. The price index of the "Rent, water, fuels and energy" group marked high annual growth rates
over 2004. Despite the increase of the energy price by 31.2 percent in February of this year, this group
recorded a rise even in the price of rent and imputed rent. The annual inflation rate of the "Foodstuffs
and non-alcoholics" group has been a negative one during May-November, due to the growth of
domestic agricultural production, including the production of greenhouses.
The positive inflation performance during the last two years was facilitated by the absence of shocks,
the positive developments of productive capacities and the consolidation of macroeconomic and
macrofinancial indicators. The concern that oil price rise in the international markets would have
caused a consumer price rise even in Albania, has not become a reality. The appreciation of exchange
rate in Lek against US dollar during 2004 has eased the effect of oil price rise in the international
markets. Also, the inflation value of the two main partner countries, Italy and Greece, has been low,
compared to inflation rates in Albania. As a consequence, imported inflationary pressures did not
accompany Albania's trade activity.
The favourable macroeconomic developments during 2004 have provided an appropriate environment
for the inflation control. Two basic macroeconomic policies, monetary policy and fiscal policy, have
contributed toward the economic activity stabilization, without exerting increasing pressures on the
inflation rate. The budget expenses during 2004 have been relatively uniform throughout the year,
without jeopardizing the rise of inflationary pressures in the economy in given periods. The domestic
borrowing of Government has been 2.0 percent of GDP over 2004, compared to 2.9 percent in 2003.
Monetary policy
The monetary policy followed during 2004 maintained the easing trend of the policy being followed
during 2003. Bank of Albania has cut 5 times the core interest rate over 2004, with a total effect of
1.25 percentage points. The core interest rate reached new minimum historical levels through every
cut occurred during 2004, remaining by the end of the year 5.25 percent. The easing monetary policy
has been in compliance with the inflation developments during 2004 and the positive expectations on
this indicator in the future. These developments seem to have been perceived by the public, who is
increasingly anchoring the inflationary expectations to the inflation target announced by the Bank of
Albania. This is reflected in the increase of public interest in depositing their savings in Lek, generating
also appreciation pressures on the exchange rate in Lek. The appreciation of exchange rate in Lek,
accompanied by stable inflation values in the largest trade partners of Albania, has impacted the
decrease of inflation value imported during 2004.
The easing of monetary conditions in the economy aimed at fostering the economic activity and
creating more spaces to crediting to the economy, without infringing the long-term perspective of the
inflation target. This monetary policy resulted to be a right one. Bank of Albania has been successful in
achieving its objective on inflation, easing simultaneously the appreciation pressures on the domestic
currency. Notwithstanding the easing monetary policy, Bank of Albania has kept under control the
growth rate of monetary aggregates.
The weak inflationary pressures from the fiscal policy, the good-management of money supply, as well
as Lek appreciation, have provided appropriate conditions for a moderate rise of consumer price over
2004. In general terms, Bank of Albania believes that this favourable situation will continue to prevail
even during the current year. It will be supported by the favourable monetary conditions of the
economy and by the controlled development of domestic demand. Based on the available information
and in absence of shocks, the consumer price rise for year 2005 is expected to be within the
two-tofour percent targeted range of the Bank of Albania.
Monetary indicators performance
To achieve its primary objective, that is maintenance of price stability, Bank of Albania relies on the
monetary aggregates control as an intermediate instrument. Expectations on monetary indicators
performance are provided in detail in the annual monetary program, which serves to orient the Bank of
Albania monetary policy. Based on this strategy, the objective of increasing money supply for 2004
was fixed to be 12.4 percent. This increase is believed to have been adequate to supply the demand
of the economy for money under the conditions of an economic growth of 6 percent and of an inflation
rate within the two-to-four percent targeted range.
Money supply and the closest money aggregate (M1) have known faster growth rates during 2004
compared to year 2003. This is a consequence of a rising demand of the economy for monetary
assets, reflected even in the invigoration process of lending to the economy throughout the year. Also,
the controlled inflation level has rendered possible the maintenance of a real interest rate in positive
terms, despite the ongoing reduction of nominal interest rates. The real positive interest rate has
maintained the tendency of households to deposit their savings in the banking system, bringing about
further reductions of the relative level of currency outside banks that circulates in the economy.
The rising demand for monetary assets has been shaped mainly as the demand for monetary
balances in Lek. The demand for Lek has been particularly evident in the summer time, being partially
supplied even by means of liquidity injection through the Bank of Albania intermediations in the foreign
exchange market.
The annual growth rate of deposits in Lek was 12.9 percent, being a satisfactory growth compared to
the average historical rate. It was adequate to cover Government demand for the financing of deficit
and the economy demand for credits in Lek. Meanwhile, deposits in foreign currency grew by 17.1
percent during 2004. The main source of the high growth rate of deposits in foreign currency continues
to be the large inflows of remittances in foreign currency from emigrants.
Under these conditions, credit to the economy increased by Lek 19.4 billion during 2004, from Lek
16.5 billion being projected in the monetary program. This implies an increase of credit to the economy
by an average of Lek 1.6 billion monthly compared to year 2003. Credit to the economy constituted 8.4
percent of GDP, marking an increase of 1.6 percentage points compared to year 2003. Also,
credit/deposit ratio reached 19 percent at the end of 2004, from 15.7 percent being in 2003.
Banking system financing was done through purchasing Treasury bills and two-year bonds and
constituted the largest weight of domestic financing during the year. Commercial banks and
households increased the Treasury bills portfolios in comparison to the previous year, respectively by
Lek 6.5 and 6.2 billion. Meanwhile, revenues from the Savings Bank's privatization constituted a
significant financing source, particularly during the second half of the year.
Exchange rate
2004 was associated with appreciating pressures for the Lek, impacted by country's macroeconomic
stability, rise of confidence in domestic currency and largest influence of seasonal effects. Compared
to the previous year, the Lek was appreciated on average by 7.2 percent versus the euro and by 15.7
percent versus the dollar. The Lek appreciation is not a tendency observed only in 2004. According to
assessments made by the Bank of Albania, there exist some long-term factors whose operation has
influenced on appreciating the Lek's value:
•
Constant consolidation of the country's economic stability.
• Interest rate spread between the Lek and the foreign currencies.
•
Consolidation of public finances and budget deficit, dictating a low government demand for
monetary assets.
• Stable remittances by Albanian emigrants working abroad.
In the meantime, during 2004 the exchange rate performance was also impacted by specific factors of
the year. Specific factors relate to starting of tourism earlier than in the previous years, rise of
agricultural produce and decline of demand for agricultural merchandise imports, impacting on the
supply and demand for foreign currency in terms of the Lek appreciation. Also, the international foreign
exchange market developments are reflected in our foreign exchange market. The euro appreciation
versus the dollar over more than a year is reflected in the reduction of the dollar's value even in our
country, though no strengthening of the euro is observed. During 2004, the dollar was depreciated by
7.5 percent against the euro in the international market.
During 2004, the Bank of Albania intervened in the foreign exchange market in terms of purchasing
foreign currency, in an effort to prevent large exchange rate fluctuations reflected mainly during the
summer and end-year period.
Financial markets
Growth of deposits in Lek, in the presence of a low government demand for monetary assets, created
premises for increasing banks' liquidity and extending interbank market activity. Low inflation rates
made real interest rates rest close to historical levels, regardless of nominal interest rate cut. This has
impacted on maintaining high annual growth rates for time deposits in Lek. The main features of
money market over 2004 were the market activity intensification and interest rate cut. 2004 recorded
rise of weekly and monthly interbank transactions.
Under the impact of easing monetary policy, the interest rates in all markets continued the downward
trend of the previous year, reaching the minimum historical levels at end of 2004. Besides the easing
monetary policy of the Bank of Albania, these trends have also reflected the enhancement of
competition in the banking system, due to the Savings Bank's privatization. The banks' supply to
invest in government Treasury bills has been larger than the amount issued in the primary market,
being reflected in pressures for constant yield cut. Therefore, the Treasury bills yield gradually
dropped during 2004, reaching the lowest historical levels at end of the year. 2004 testified a
strengthening of banking system interest in investing in longer-term securities, such as two-year
bonds. The weight of two-year bonds in the securities portfolio of the banking system rose to 6.1
percent over 2004, from 2.4 percent at end of 2003; whereas that of quarterly Treasury bills dropped
from 9.2 to 2.8 percent. Albanian authorities aim at capitalizing this positive development of financial
market in terms of further increasing the maturity term and structure of domestic public debt.
Interest rates of foreign currency deposits demonstrated adverse tendency to that of Lek deposits
during 2004. This market was impacted by rise of LIBOR and EURIBOR interests in international
markets.
The Bank of Albania has successfully managed the banking system liquidity, using its framework of
monetary policy instruments. Aiming at improving its operational framework and easing the functioning
of Albania Interbank Payment System (AIPS), the Bank of Albania approved the Regulation "On
intraday credit" on March 2004. The use of this credit, which started in May, has assisted in meeting
the needs for effecting commercial banks' intraday payments.
Banking system performance
Financial position of the banking system at end of 2004 is presented as good. Main profitability
indicators have generally had a steady performance, reflecting the prudential overall banking system
growth and the activity extension of most banks through more products and larger presence in the
market.
The banking system evidenced positive net income over 2004, about Lek 5.11 billion or about 0.66
billion more than in the previous year. This figure constitutes 0.66 percent of GDP accrued for 2004.
Good position of the banking system is reflected even in the main profitability indicators, RoA and
RoE. These indicators have rested in high levels; furthermore, they have undergone a slight growth in
comparison to the previous years. This indicates that the net result growth was not only due to banking
system assets growth but also due to productivity growth of assets and capital.
During 2004 the banking system assets were raised by Lek 52.8 billion (or 14.1 percent), about Lek
18.5 billion more than the growth of assets evidenced over 2003. Year 2004 underwent a significant
rise in lending activity, with a growth rate of 38 percent (or Lek 19.3 billion) at end of 2004, compared
to 30.5 percent at end of 2003. Therefore, lending rose to 16.4 percent of total assets of the system at
end of 2004, from 13.5 percent in the same period of 2003.
Lending quality indicator (problem loans to credit balance ratio) is estimated at 4.2 percent, from 4.6
percent at end of 2003. The lowest level of this indicator highlights improvement in lending quality and
limited banking system exposure to credit risk.
Downward trend of capital adequacy ratio during 2004 was due to a better exploitation of banks'
capacities in terms of extending in riskier investments. During 2004 the supervision process, trying to
be proactive and continuous, had on its focus the risk assessment of banks' activity. Following up the
requirements of Supervision Development Plan, the document on "Operative Supervision Policy" was
drafted and approved, prescribing banks' supervision principles. In view of this policy, the supervision
cycle for banks that present less concern to supervision is lengthened from 12 months to 18 months,
whereas for problematic banks it is reduced to 6 months.
Licensing and regulatory framework
During 2004 the banking system in Albania was characterized by dynamic developments, either in
terms of increasing the number of banks operating in the market or in terms of extending the banking
network in various areas of the country. At end of 2004 the number of banks in Albania was 16, from
which 2 banks are totally with domestic capital and 14 other banks have foreign capital. On April 2004
the banking system was further consolidated with the approval on the ownership transfer of 100
percent of the Savings Banks' stock to Raiffeisen Zentralbank, as a crowning of the privatization
process of this bank. Also, the Popular Bank Jnt. Stk., the second bank with totally Albanian capital
entered into Albanian market. An application for establishing a new bank with wholly Albanian capital
was also submitted. This application has recently received the preliminary approval for licence,
pursuant to requirements of the Law "On Banking System in the Republic of Albania".
Parallel to development and extension of the banking system and the products it offers, further
improvements and amendments have taken place in the regulatory packet of banking supervision.
During 2004, the Guideline "On bank regulatory capital, the Regulation "On capital adequacy", the
Regulation "On credit risk management" were revised, and the Regulation "On money laundering
prevention" was adopted. Also, during 2004 work was done for making improvements in the existing
Law "On Banking System in the Republic of Albania", with the goal to realize its adoption by the
Albanian Parliament within 2005.
These improvements were dictated by the need to adjust to and implement the European directives in
this are, and the Basel principles for an effective supervision.
Other activities of the Bank of Albania
During 2004 the legal status of the Bank of Albania remained unchanged. Meanwhile, the revising of
the Law "On Banking System in the Republic of Albania" started with the purpose to further perfect the
legal framework of commercial banks' activity in accordance with the aspirations of our country for
membership in the European Union.
Also, during the last autumn the Bank of Albania regenerated most of its Supervisory Council (7
members) and new administrators of the institution were elected. This process did not impact on
normal flowing of the Bank's activity, indicating the consolidation of this institution.
During 2004 the inter-institutional cooperation was another feature characterizing the Bank of Albania
performance. In this aspect, we have been open and ready to design and implement the country's
development programs, to advise the Albanian executive on various economic issues and we have
participated actively in all tables of negotiations with the international factor.
In view of meeting the objectives and obligations deriving from the agreements between Albanian
authorities and international institutions, during 2004 the Bank of Albania closely cooperated with the
latter ones.
In the framework of consultations on assessing the fulfilment of obligations deriving from the
agreement between Albanian authorities and the IMF, Albania was visited by three monitoring
missions of the IMF. In general, the accomplishments of the Bank of Albania were assessed in the
framework of the Memorandum of Economic and Financial Policies signed between the Bank of
Albania, Ministry of Finance and this institution. Particularly, they evaluated the maintaining of inflation
within the Bank of Albania targeted band (2-4 percent), the maintaining of a relatively stable exchange
rate and the efforts for modernizing the banking system. At the same time, the missions expressed
their support and encouraged the mid-term plan on cash reduction in economy. Rising the lending,
developing the real sector and amending the regulatory framework of banking supervision were other
topics discussed in these meetings and in the contacts of the members of the mission with the Bank of
Albania experts.
The Bank of Albania was visited by the Mission of Technical Assistance of the IMF, which was focused
on banking supervision area, implementation of international accounting and payment standards,
application of monetary statistics standards and integration of the Bank of Albania into the European
Monetary System. The Bank of Albania required assistance in inflation targeting area. The so-far
assistance by the IMF to the Bank of Albania is regarded as a stable and fruitful one, impacting
significantly on the accomplishment of up date central banking standards.
Also, in the framework of cooperation with the World Bank and its financial support, the Bank of
Albania has initiated the Automated Electronic Clearing House Project, which will serve the further
modernization of payment system and its approximation to international standards. The work for
implementation of this project was inaugurated on November 2004, with the participation of senior
managers of the World Bank.
During 2004, the Bank of Albania, together with the banking system and the Ministry of Finance
designed a number of operations, which were intended to reduce cash in economy. In view of meeting
these commitments during 2004, a number of concrete steps were taken, among which I would
highlight the following: completion on Jan