The Minister of Finance of Albania Shkelqim Cani said on Sunday that the 26 million euro loan disbursed by the International Monetary Fund will be used to pay government arrears to companies, including unpaid bills for public works and accumulated value added tax claims.
The Fund approved on Friday a 330.9 arrangement under the Extended-Fund Facility (EFF) for Albania in support of the authorities’ reform program. The approval allows for immediate disbursement of SDR 23.55 million (about €26.4 million).
Although these funds doesn’t have a precise destination, Mr. Cani told journalists in a press conference that he aims to use this sum to pay some of the arrears accumulated by the government in form of unpaid public work bills or delayed tax refunds accumulated over years.
“This is a cheap loan, the biggest ever received by Albania for budged support and it has come in a very important moment. It will help to consolidate public finances in Albania,” Cani said.
The Minister added that he is waiting for final parliamentary approval of the agreement with IMF to start distributing the money.
The government aims to pay about €300 million tax refunds and unpaid public works bills this year. The Ministry of Finance hopes that this policy will cut down bad loans in the banking sector and will spur credit growth.
Bad loans in Albania stood at 24 per cent at the end of December, the highest in the region. The government estimates that a part of these are caused by companies that run in difficulties when the government failed to pay its bills during the last several years.
The high level of bad loans had slowed down the credit market.
Cani added that the IMF support will help to restart economic growth this year and that the agreement will bring other donors like World Bank and the European Union.
According to Cani, IMF strings for further disbursements are limited to fiscal consolidation, avoiding further accumulation of arrears and cutting bad loans.