the lending to the economy, introduction of atm and other new banking products etc.. banks with private albanian capital, that have been licensed in the last three years, have been active in trying to position themselves in these changing market. they offer a full range of banking services, having the advantage of better understanding the local environment. despite the above achievements, the economy is still fragile and considerable progress is needed to establish an attractive framework favourable to investment and sustainable growth, driven by private sector development. customs procedures, tax administration, land and construction permits, sector licensing, and the judiciary system are the major obstacles to investment in albania. what can the central bank governors do to continue to encourage this new growth? are there any downsides? governance and institution building reforms remain critical for developing a rules - based business climate and attract increasing levels of investment. under this framework the bank of albania is committed to go ahead with additional structural reforms to enhance banking sector intermediation and financial services provision. in close consultation with commercial banks, governmental institutions, and the private sector, the bank of albania developed an action plan for increasing the use of the banking system in the regular conduct of business. regarding an important aspect of our central bank, the banking system stability, a lot of work has been done to encourage the development and consolidation of a sound banking and financial system for the country economic progress. measures supported by the bank include the privatization of the savings bank, the development of a deposit insurance system, improvement of the bankruptcy framework and collateral enforcement, and strengthening of bank regulation and supervision, which will also assist the government ’ s anti - money laundering efforts. the imf has provided technical assistance to the bank of albania. the imf has also funded a resident adviser to support the implementation of the institutional development program for banking supervision developed by the bank of albania in the wake of the large savings bank privatization, the financial sector is showing welcome dynamism and the boa is stepping up prudential vigilance. the recent fsap exercise will certainly help to advance reforms in the financial sector. bank of albania is also committed to increase the mutual relationships with all international partners. we are trying to be a real partner in the discussing table, arguing on the economical - financial policies, through presenting its solution alternatives, being elaborated not only on the economic logic base but also on the albanian reality. i am satisfied that, in the end, albania is on the way to get a new prgf / eff arrangement with

stability. inflation has been distinguished generally by lower rates relative to other transition economies. in the last five years, inflation has stabilized at moderate levels as measured both at the end and average period figures, though it sometimes diverges from the target due to unforeseen shocks and speculative factors that are mainly beyond the central bank ’ s control. we will continue to aim inflation rates around the 3 percent level. however, several threats may prevent the bank from reaching the target while preserving growth. to begin with, the signalling power of monetary aggregates targeted by boa may start to deteriorate. this might involve changes in the administrative prices and structural reforms in general, fiscal uncertainty issues, the impact of dollarisation on the effectiveness of monetary policy, the potential decrease in foreign remittances and its implication on exchange rate volatility, financial system development and stability etc. also, what ’ s more important, as the economy gets more and more formal we may start losing some of the flexibility seen so far, making it more and more difficult our task of keeping inflation down with little real costs. in face of this forthcoming developments, we are considering alternative regimes such as it that could both transmit central bank signals better and are more suitable to keep a better balance between economic shocks and inflation. on top of theoretical benefits of an it regime compared to the other regimes, ( summarised in a series of paper by mishkin et al. ( 1997, 2000, 2002 ) ) such as broader information base it utilises, its relatively higher flexibility with regard to supply shocks, the fact that it is easily understood by the public, there is also the successful reference to regime shifts in other european transitioning and developing economies can be made, such as the czech republic, hungary, iceland, poland and turkey. bearing the above issues in mind the boa retains that a switch to inflation targeting over the medium term will put us in a better position to strike the right balance between growth and stability. accordingly, it has initiated steps to improve its governance structure and strengthen its analytical capacities, with technical assistance from the fund. to this end an open forum took place at the end of last year where most of the issue regarding the implementation of inflation target were discussed by top experts all around the world. the main motivation for moving to the it regime is the anchoring of inflation expectations in the medium to longer term while allowing some room to respond to shocks. i ’ m conscious that going to fully fledged inflation