costs of financing in the economy. beyond the stabilising effect of the fiscal policy, and analysing the draft budget, along with the accompanying fiscal package, from the long - term perspective of the country ’ s development, the bank of albania finds the following : 1. the draft budget 2019, envisages public investments at 5. 1 % of the gdp. from the longterm development perspective, as well as taking into account the great need for developing and improving the country ’ s infrastructure, the bank of albania considers maintaining the high level of public investments as an important element of any draft budget. 2. the fiscal package accompanying the draft budget does not envisage radical changes in the tax system. generally, the stability of the tax system is a welcomed development by both domestic and foreign investors. in particular, the bank of albania finds that the proposed reduction of the tax on dividend, from 15 % to 8 %, creates premises for albanian businesses to have lower costs of financing with capital sources. the lower costs serve potentially to boost domestic and foreign investments, and contribute to improving the structure and enhancing the stability of the balance sheet of enterprises, increasing, therefore, the share of financing with capital sources and decreasing the share of financing with borrowed funds. 3. the draft budget 2019 aims at continuing the fight against informality. the bank of albania 2 / 5 bis central bankers'speeches has supported and supports any initiative that promotes fair competition in the economy. such initiatives not only render balance sheets in the public sector healthier, but also introduce the right stimuli to enhance efficiency in the private sector and ensure a better allocation of resources in the economy. i will now focus on developments in financial markets and their interaction with the level and strategy of public debt financing. 2. financial markets, budget deficit and public debt the draft budget 2019 envisages the budget deficit level to be all 32. 9 billion, or 1. 9 % of the gdp. this level is envisaged to be financed all 25. 7 billion ( or 1. 5 % of the gdp ) by funds ensured during 2018 and all 22. 9 billion ( or 1. 3 % of the gdp ) by domestic financing. conversely, the level of foreign debt is envisaged to be lowered all 15. 7 billion ( or 0. 9 % of the gdp ). in view of the two - fold objectives that the borrowing and debt administration strategy should have – to reduce the cost of financing and minimising

gent sejko : analysis of albania's draft budget 2019 and public finances ; recommendations presentation by mr gent sejko, governor of the bank of albania, of bank of albania ’ s opinion on the draft budget 2019 to the parliamentary committee on economy and finance, tirana, 19 november 2018. * * * honourable chair, honourable members of the committee, first of all, thank you for the invitation and the opportunity to present the opinion of the bank of albania on the draft budget 2019. i would like to emphasise that the drafting and approval of this draft are among the most important moments in the economic life of the country. therefore, we have always welcomed the constructive and professional discussion on the objectives, policies, instruments and projections, which, overall combined, determine a draft budget. in compliance with the institutional mandate of the bank of albania, our opinion will focus on the correlation between the performance of the economy and the fiscal policy, as elaborated in the draft. next, i will present our judgement on the impact of the borrowing strategy and public debt management on the albanian financial market. then i will provide an overall analysis of albania ’ s public finances stability indicators. lastly, i will present some suggestions of the bank of albania for the period ahead. honourable members of the committee, detailing the governing policies in financial terms, the state budget should not be based simply and solely on the economic and financial reality of a country, but be viewed as an instrument for improving it. let me start the presentation of bank of albania ’ s assessment on the domestic economic and financial developments and the relevant policies to support them. 1. fiscal policy and draft budget 2019 as we have also emphasized in our public communications, the bank of albania judges that the albanian economy is set on a positive development trend. the growth pace accelerated in the first three quarters of the current year. in part, the pace accelerated also as a result of the favourable hydric situation. in addition, employment increased and the unemployment rate fell, whereas the financial balance sheets of households, enterprises and the banking sector continue to improve. likewise, the main indicators of the macroeconomic balances have improved : average inflation approached closer to the target in 2018, despite the negative impact from the rapid appreciation of the exchange rate ; current account deficit has trended downward, mainly as a result of growth in albanian exports ; non - performing loans ratio dropped to 12. 9 %, reflecting the improvement of balance sheets in the real sector, as well as