Albanian cabinet approves spending cuts to meet fiscal targets

By bne IntelliNews July 11, 2013

The Albanian government has approved a set of measures, which aim to ensure the country's stable fiscal position, local TV Top Channel reported. The restrictive package includes freezing of public procurement and investments, which after July 15 could be implemented only through a special decision of the cabinet. In addition, the government reduced the expenditure on administrative services by 20%. 

According to the latest official report of the finance ministry, the general budget deficit expanded by 114% y/y to ALL 38.3bn (EUR 272mn) in the first five months of 2013. Total budget revenues edged down by 0.2% y/y to ALL 132.9bn, which was exclusively due to tax revenues that dropped by 2.7% y/y. Within this, receipts from VAT, which represent about a third of total budget revenues, declined by 5.4% y/y in the period, signalling for a continued stagnation of the domestic consumption.

At the same time, budget spending increased by 13.3% y/y in Jan-May supported by a 7.1% y/y rise in current expenditure and a 41.4% y/y increase in capital expenditure. The latter accounted for 47% of the full-year plan, which was higher that the 33.6% share a year earlier. Higher spending on public investments could be partly explained with pre-election expenditures as Albania held parliamentary vote on June 23.

We note that the Albanian government has introduced mid-year budget revisions in the past few years.

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