Gent Sejko: Ninth and tenth 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 and the Minister of Finance, Tirana, 24 January 2017.
* * *
On the completion of the ninth and tenth review of the Arrangement with the IMF
The beginning of 2017 coincides with the conclusion of Albania's arrangement with the IMF. This
Arrangement has guided our development policies over the past three years, and has been a
roadmap for our structural reforms agenda in the long term. Against this backdrop, the last
review of the Arrangement not only provides for a comprehensive assessment on the
achievement of its objectives, but also helps in identifying challenges to the country's
development and contributes to discussions on the policies that need to be designed and
implemented for supporting the development.
Let me now outline the opinion of the Bank of Albania on this review.
The Arrangement with the IMF was signed amid an external economic and financial
environment surrounded by uncertainties, and in response to deepening internal
development challenges. Economic growth was on the downtrend, public debt and
nonperforming loans were set on the uptrend, and uncertainties in the Albanian economy and
financial markets were relatively high. With the support provided through expertise and funds, the
agreed programme with the IMF has aimed at drawing up an appropriate monetary and fiscal
policy mix, correcting fiscal imbalances, improving the balance sheets of economic agents, and
implementing an ambitious structural reforms programme, to support the long-term development
of Albania.
The Bank of Albania assesses that the Arrangement has achieved its major
objectives: correcting structural imbalances and setting the country on a steadier path to
longterm development.
Economic growth has been improving in the recent years, driven - among others - by the
combination of the monetary stimulus and fiscal consolidation, reduction of risk premiums in the
economy and improvement of the balance sheets in the real sector of the economy. From a
longer-term perspective, the structural reforms and the improved business climate should open
the way for faster, more balanced and stable growth.
In addition, excluding the effects of supply-side shocks, inflation has trended upward
recently. The improvement of economic activity, implementation of a prudent monetary policy
and a better anchoring of inflation expectations render us confident for the stable return of
inflation to our 3% target.
Lastly, Albania has made notable progress with regard to strengthening other economic
and financial equilibriums. Safety nets in the financial system have been strengthened. The
institutional framework that shapes the coordination, design and implementation of measures for
safeguarding financial stability has been improved. The legal framework that disciplines contract
enforcement has been improved. Credit risk has been lowered and non-performing loans have
been reduced, although their level remains high. After peaking in 2015, Albania's public debt
appears to be set on a downward trend. Also, our external position remains stable and current
account deficits have been financed by high levels of foreign direct investments.
Turning to the latest developments, the Bank of Albania deems that the recent economic
and financial indicators have been in line with our projections.
This performance reconfirms our scenario of expectations for the outlook. The Bank of
Albania expects economic activity to improve in the medium-term horizon. This improvement will
enable the return of the economy to equilibrium, the further improvement of indicators in the
labour market, and the return of inflation to target.
The outlook remains positive, but its guaranteeing requires prudent economic policies
and further structural reforms. Such policies and reforms should be, in essence, a
continuation of the philosophy that has guided the initiatives and steps we have undertaken in the
recent years.
To sum up, the Bank of Albania judges that:
The actual economic policy combination, based on an accommodative monetary
policy and fiscal policy stance set on public debt reduction, should be
maintained. The monetary policy should maintain the accommodative stance in the
medium-term horizon, whereas the intensity of the monetary stimulus should adapt to the
needs of the country's development.
The business climate at home should be further improved. The Bank of Albania
considers that the attraction of foreign investments as well as the support and stimulation of
domestic investments should be at the focus of decision makers.
Structural reforms should be accelerated and Albania's competitive advantages
should be enhanced further.
In conclusion, I would like to once again thank the IMF Mission for the useful and constructive
discussions.