gent sejko : prospects and challenges facing albania statement by mr gent sejko, governor of the bank of albania, at the conclusion of discussions on the eighth review of the arrangement with the international monetary fund, tirana, 28 june 2016. * * * in the last two weeks we have been engaged in intensive discussions with imf mission representatives, in the framework of the review of the imf arrangement. the discussions focused on : the analysis of the current situation of the albanian economy and financial system ; identification of development prospects and challenges facing albania ; and the policies to be implemented with a view to supporting the country's development. the conclusions of our discussions may be summarised in three main points : ( i ) economic activity appears upward and the development outlook remains positive. ( ii ) yet, the external environment is unfavourable and the albanian economy continues to face structural weaknesses, which decelerate the pace of growth. ( iii ) therefore, the monetary and fiscal policies should continue to generate a prudent economic stimulus, whereas structural reforms should accelerate their pace. in this context, the bank of albania deems that the arrangement with the imf and the measures envisaged as part of the eighth review provide a consistent framework for drafting and implementing a programme for the country ’ s development. let me now present in greater detail the opinion of the bank of albania. the growth pace of the albanian economy continues to show progressive improvement. the improvement reflects the expansion of domestic demand - that is increase in consumption and private investments - whereas foreign demand appears weak and fiscal policy continues the consolidating trend. the new information obtained in the first half of the year is in line with this judgement. the intensity of supply shocks, which led to the rapid decline in inflation over the first half of the year, seems to decrease. inflation recorded a slight increase in may, reaching at 0. 7 %. this performance confirms our judgement about the transitory nature of the abovementioned shocks. however, our analyses confirm that the balance of inflationary pressures is still weak. economic activity remains below potential, suggesting that the return of inflation to target will be a gradual and medium - term phenomenon. our monetary policy has assumed a stronger stimulating stance over 2016. after two consecutive cuts in april and may, the key interest rate currently stands at 1. 25 %. the strengthening of the monetary stimulus has led to lowering the interest rates across all segments of the financial market, thus stimulating the

size in normal times, can be easily exceeded in instances of unusual events that are linked with scandals on ml. firstly, i want to say that we must be very careful not to allow such difficulties to distract our focus from the heart of the issue, that of being ensured at any time that our banks are clean and that they do not represent a place where dirty money and its creators or benefitors can not enter. if we do not act like this, the negative consequences can be unimaginable. we put in danger the reputation of single financial institutions and of the entire financial system ; unwillingly, we have become instrumental of crime in reaching their goal of using the money generated from illegal activities ; we have placed the reputation of our sound clients in a very difficult position ; we have lost confidence in front of the honest market players and have darkened our positive image in front of our international partners and partners of our clients ; we are going to face in the future a higher cost on doing the bank business, represented not only from the loss of clients ( which can prove to be fatal ), but also from difficulties in expanding our activities ; we can also expect to be subjects of penal actions triggered by the regulatory framework. the damage is multifold and exceeds any quantitative advantage in the volume of business we may have had from “ outright ” acceptance of any business offer. in the end, through rigorous application of aml requirements, we have protected our institution from a potentially very large damage. this is the key element of our duty, the feature of a good banker. by being active in aml, we are simply doing our job. any negligence on this means we are not up to the requirements of our job. we need to emphasize that the key element in the process, is the strong commitment to understand and implement it. it is very important for such commitment to come from the highest management structures of the bank. if such commitment is missing, this will be immediately shown at the structures of the bank that are directly involved in the aml process, whose functioning will be negligible and full of formalism. within the institution, this commitment should be shown : in the preparation and approval of the internal procedures on aml ( including those of knowing the client ), in setting up the proper entities and appointing the responsible persons ( on monitoring the aml implementation process ) with the proper professional and hierarchical qualities, in rightly defining their rights and responsibilities, in giving them moral and material support, in providing