At the same time, the Commission also evaluated the reliable monetary policy followed, highlighting particularly the measures taken by the Bank of Albania in terms of gradually changing its monetary policy strategy towards explicit inflation targeting regime, aiming at enhancing transparency and credibility of its monetary policies. The report highlighted also the positive developments in the banking sector of the country and assessed the progress achieved regarding the establishment of the loans register, free movement of banking and financial services, freedom of establishment of foreign banks and further liberalization of capital movement. On 27 January, 2006, the Executive Board of the IMF adopted the three-annual agreement with Albania, at SDR 17.045 million. The main targets of the new program have to do with the maintaining of macroeconomic stability, as a prerequisite for economic growth, and the improvement of financial institutions. Under Reserves Advisory and Management Program (RAMP), during 2006 the World Bank’s group provided consulting and technical assistance to the Bank of Albania for foreign reserve management. During 2006 the Bank of Albania established constant contacts with the EBRD, mainly in terms of providing information and statistics for the development of the Albanian economy in general and financial sector in particular. The Transition Report 2006 assessed positively the maintaining of inflation within the Bank of Albania’s target and the consolidation of the banking system over 2006. The Bank for International Settlements (BIS) is another institution with which the Bank of Albania kept close contacts during 2006.

8  BIS Review 80/2007  During 2006 commercial banks employed the overnight deposit facility for investing their free liquidities with the Bank of Albania, on average at ALL 1.6 billion a day or ALL 0.82 billion more than in 2005. Overnight credit has been employed only in seven cases, despite the lack of liquidity over the third quarter of the year. For the fourth consecutive year, the final lending facility of the Bank of Albania, i.e., the Lombard loan was not employed at all. The required reserve instrument was used constantly even during 2006, for withdrawing the banking system liquidity. The monthly pace of ALL required reserve rise during 2006 was on average higher than in 2005, 0.92 percent versus 0.76 percent, reflecting the rise in the respective categories included in the required reserve account. 8. Foreign reserve management  During 2006 the gross foreign reserve, estimated and reported in USD, has been increased by USD 368.06 million, recording the value of USD 1,793.12 million as at end of December. Out of this growth, about USD 205 million is accumulated from Bank of Albania’s interventions in foreign currency. They were intended at meeting the quantitative target for these assets and mitigating the volatility over the peak periods of foreign currency supply. While the exchange rate effect has been positive, at USD 106 million, the rest of the growth has been contributed by receipts from foreign disbursements. 9. Banking system performance  The banking system continued its stable development during 2006.