Interview of Kseniya Lvovsky, World Bank Country Manager to daily Telegraf (Commentary)

July 15, 2011

Interview of Kseniya Lvovsky, World Bank Country Manager Daily Telegraf

1. What was the purpose of the visit in Albania of Mr. Piero Cipollone, the Executive Director of the World Bank?

Mr. Piero Cipollone, an Italian national, is the new Executive Director for Albania, Greece, Italy, Malta, Portugal, San Marino and Timor-Leste. He represents Albania at the Boards of Directors of the World Bank Group (IBRD, IDA, IFC, MIGA). The World Bank Group is a multilateral organization of some 190 member countries which are represented by 25 Executive Directors. Executive Directors have a dual responsibility, as representatives of the Bank's member countries that appointed or elected them, and as World Bank officials who are responsible for governance of the institution.

The aim of his first visit to Albania was to meet the country authorities, discuss the World Bank’s role in supporting Albania’s development and visit a number of World Bank supported projects. Mr. Piero Cipollone participated in the inauguration of the hazardous waste landfill of Porto Romano financed by the Dutch Government and administered by the World Bank, visited a social center for disabled children in Kombinat, which was established with World Bank support, and visited a new school in Shkozet, Durres, that is being constructed as part of the Education for Equity and Excellence Project, co-financed by the World Bank.

2. Which are some of the main World Bank investments in the country and do you have supervision reports (meaning are you supervising them I guess) on their progress?

The current portfolio consists of 11 active projects with financing of around $230 million, with the main focus on energy, transport, social sectors and environment.  The responsibility for project implementation rests with the government structures and agencies. The World Bank teams visit Albania to review project implementation on a regular basis, at least twice a year. During these visits they meet with project implementing structures, beneficiaries, and other stakeholders and financing partners. A report is prepared at the end of the visit to measure progress towards project objectives, and to assess project financial management and compliance with fiduciary, social and environmental aspects, as agreed in project legal documents. After the project is closed a completion report is prepared which analyzes the results and impact on the beneficiaries and draws lessons for future projects. The new World Bank Disclosure Policy increased public access to these reports and assessments.

3. Is there any coordination on the financial actions between the World Bank, IMF and Albania?

Yes, the IMF, the World Bank and government regularly exchange their views on economic and financial outlook. Collaboration has strengthened this year when the World Bank and the Government of Albania engaged in a program of development policy operations (DPOs) that provide budget support for policy and institutional reforms.  The first operation of US$ 25 million focusing on social sector reforms was approved by the World Bank’s Board in April.  Its preparation and approval involved an assessment of the macro-economic framework including specific government commitments and actions to contain the deficit and ensure sustainable debt reduction. The World Bank consults the IMF and takes account of its assessments in preparing such operations which was done for the social sector reform DPO and will be followed for the forthcoming operations. We are also consulting non-government stakeholders when preparing projects and analytical work.

4. Recently the media has reported some of the disagreements between the IMF and the Albanian government on issues like: state budget, taxes and economic growth. What is your comment about them?

I find that the IMF and government share a lot of concerns and approaches. This is most important. Some differences are unavoidable and normal. The advantage and added value of independent international institutions like the IMF or the World Bank is their ability to take a different, more distant perspective enriched by global experience and use it for highlighting risks and outlining a range of possible measures.  The role of governments is to customize the measures reflecting a country-specific context, both economic and political, while preserving sound macro-economic fundamentals that are critical for sustaining and accelerating growth.

5. What is your opinion on the Greek crisis? Do you think it will affect the Albanian economy?

The situation in Greece, together with the continued problems in some other eurozone countries, is of concern for Albania’s economic outlook, as well as for other countries in South-East Europe. The main possible chains of impact are through remittances and, to a lesser extent, trade. Both have already shrunk in the last two years and not only directly with Greece but also with other European countries where recovery remains weak. The financial sector channel is expected to have a limited impact given the robustness of Albania’s banking sector, including Greek subsidiary banks, while it remains important to constantly strengthen financial sector supervision and regulation

6. The Albanian government has recently requested to build a new parliament building on the amount of over Euro 100 million. Albanian economic experts have declared their objection on this investment at this time of such lack of incomes. Do you agree with them?

At the time of considerable economic uncertainties and elevated debt level, it is prudent to be very selective about priority investments.

7. Based on the import - export report, Albania has a considerable debt, which in a short term period needs to be paid back. Do you think this will deepen even more the crisis in Albania?

Despite the elevated debt level Albania does not face an immediate repayment problem given the structure of its debt.  There was a global crisis that affected Albania - as it did virtually every country in the world.  Albania weathered the impacts of the global crisis better than other countries in Europe, maintaining positive, albeit decelerated, growth rates, partly thanks to the fiscal buffers available before the crisis. With the crisis behind, the major worry of today is that weak recovery in Europe combined with difficulties in Albania’s main trading partners continues to have its toll, and the external environment remains uncertain. In this situation, it is critically important to keep the debt under control and on a declining path from the current level of just under 60 %, to ensure much needed fiscal room for maneuver, should the external environment further deteriorate.

8. How does the economic crisis and the disagreements between government and opposition on the donor confidence to invest in the country?

With respect to the economic situation, Albania lived through much more difficult times, and the World Bank has remained - and remains - a strong partner. Globally, the World Bank tripled its support to developing countries in the aftermarch of the financial crisis to help moderate the adverse economic impacts. Following the flood emergency in Northern Albania last year, we increased IBRD financing to Albania from US$275 million under the Country Partnership Strategy to US$300 million. In the next 12 months, we plan to approve four new projects with the total value of $115 million in our financing, in addition to substantial funding by other development partners.
At the same time, we are, as anyone who cares about Albania’s future, concerned about the lack of cooperation between the government and the opposition, especially when it comes to critical economic issues of national interest. The country needs to move decisively with a program of reforms that are imperative for growth, competiveness and European integration. This reform agenda cannot wait. The future of Albania is in supporting entrepreneurial talents of its citizens, strengthening its institutions, and enabling robust flows of quality private investment. It is responsibility of every political party and of every elected politician to make it happen without losing precious time.