Sound corporate governance at the firm level is the first bulwark against financial system instability, and begins with capable and experienced directors and management, a coherent strategy and business plan, and clear lines of responsibility and accountability. The execution of overall objectives must be supported by rigorous internal controls and effective risk management. The importance of a strong institutional credit culture cannot be stressed enough. Strong private balance sheets contribute to a strong national balance sheet. Recent experience underscores the importance of prudent management of liquidity risk. Clearly, reducing public sector short-term borrowing is often an essential (and generally well-acknowledged) part of the solution. To encourage improved private sector liquidity, authorities need to review the broader policy mix and identify and remove incentives that favor excessive short-term capital flows, as well as identify and remove barriers to longer-term and/or equity capital flows. The second line of defense is effective market discipline, an increasingly important ally of policymakers in a global marketplace. Of course, market discipline must be supported by substantial disclosure, sound accounting standards, and an efficient and credible legal framework. On the last point, while some foreign investors have too frequently made allowances for “special” local practices during periods of economic boom, only strong and proven attitudes towards law, taxation, disclosure and the like provide the kinds of protections most long-term investors want and should insist upon.

The Bank of Albania, in the light of priority to comply with budget deficit and fiscal consolidation objectives, suggests that the implementation of the budget 2017 should regard the following: - In the event the budget revenues are less than the planned level and the difference is higher than the contingencies foreseen in the budget, then the Government should take additional measures to comply with the budget deficit levels. This implies the reduction of budget expenditures commensurate to the level of unrealised income. - In the event the budget revenues are above the planned level, and the difference stems from faster than projected economic growth, such revenues should be saved, by proportionally reducing the budget deficit. - In the event the budget revenues are above the planned level and the difference stems from the improved fiscal management, such revenues may be spent, affecting neither the budget deficit nor the fiscal consolidation intensity. 4.2 Structure of financing and public debt The way the budget deficit and public debt are financed is as important as their level. The financing structure of the Albanian debt was and remains stable. The domestic debt is shifting towards longer-term maturities, and its sensitivity against short-term volatilities on interest rates is downward. In parallel, the external debt is mostly in concessionary terms and has long-term maturity. Nevertheless, the Albanian public debt showed an increasing trend of financing from external resources. In the last decade, the share of external debt to total debt increased by 16 percentage points.