Speeches & Transcripts

Media Briefing: Q&A with Kseniya Lvovsky

July 11, 2013

Ediol Halilaj, Klan TV: What is the situation in the public financing? The new elected majority says that the budgetary deficit has reached 60% – 80 %, while the government says that the economy is in a healthy situation. So, what is the opinion of the World Bank on the current situation of the public financing? My second question is on employment. What do you think about Albania’s unemployment rate compared to other countries in the region?

Kseniya Lvovsky: As I already mentioned, the economic situation remains difficult. It has been a difficult year. The growth is still slow and the Eurozone recession continues. IMF just downgraded the global economic forecast. In this situation, over several years the government had to do mid-year fiscal adjustments, because the originally planned fiscal space was significantly exhausted by the mid of the year. This current year, in some way, is no different from with the previous ones. There is likely to be a need for an adjustment this year. The current situation also argues for what I was mentioning, which is that going forward, it is important to strengthen the budget and it is useful to establish a fiscal rule and an independent fiscal council which can help manage such situations  in the future differently than going for abrupt mid-year fiscal cuts.

Our data shows that employment in Albania stagnated. It’s high, but not as high as in Macedonia or other countries around Albania. What is the level of underemployment? Underemployment is when people report that they are employed but it is not a full time employment, sufficient for family living. We will be doing more work in Albania on this in the next year. In the past years we have focused on countries with particularly worrisome unemployment figures, like Macedonia and some other Western Balkan countries.

Valbona Mezini, TVSH: I would like to ask about the economic sustainability of Albania. Yesterday the Prime Minister said that Albania has the best economy in the region. The economic growth, according by the European Commission data for the first months of the year, was 1.7%, which was 4 times higher than that of the same period last year. The unemployment rate is 12.8%, which is the best among the countries in the region. According to the European Commission data there is an improvement in the trade deficit. What does the World Bank think about the sustainability of the Albanian economy? Will the parliamentary elections affect it?

KL: We recently launched a regional economic report where similar issues were discussed. The election campaign is over, and the reality is that the Eurozone is in recession and the Western Balkans are affected, and if you look at a set of indicators, Albania is doing on par, and in some areas related to growth, better than its peers. Is it really doing great? No, because the entire Europe is not doing great. It is not doing really worse than others, because it managed not to go into negative numbers both in 2009 and 2012 when many countries went into negative numbers of growth. It’s really important to look carefully and continue those reforms which helped Albania to be relatively robust.

Dorian Karaj, Channel One TV: I would like to ask you a question on the public debt. Will it be a decisive factor for the new government in terms of realizing its promises?

KL: This is for the new government to decide. Our view that no new government can afford, for example, reducing taxes, unless they are prepared for drastic cuts in public expenditures. For any new government it will be critical to improve efficiency in performance of tax administration and predictability and stability of the tax regime. Of course, for any new government the level of public debt in Albania will be a constraint and that’s why it is more important and urgent for Albania to focus on structural reforms, those which unleash mid-term and long term growth and will generate mid-term fiscal savings.

Vizion Plus TV channel: During your three years of stay here, what do you think is the most important project funded by the World Bank in Albania? Considering the deteriorated budget situation and the public debt, is the World Bank willing to provide further support to Albania in case the government asks for it?

KL: It’s difficult to point to one project which is more important. One of our best projects, which just closed, was the Secondary and Local Roads Project. This is an excellent project because it mobilized and leveraged over half a billion dollars of financing from other development partners and the government. It also helped to build institutions to deliver this program. So working in partnership with other development partners, building country intuitions and supporting long-term programs which make a real difference for people, these are the features of a good project and we will try to replicate this positive experience in our future program.

On budget support, yes of course, we are very much willing to provide budget support to the new government. We are already hearing that the new government is keen to move ahead with a program of reforms to support growth, governance and competitiveness. It will be important that the government commits to a credible program of fiscal consolidation, which doesn’t hit growth, but credible and verifiable. Exactly what they demanded from the outgoing government when they were in opposition and now it’s their turn.

Ersuin Shehu. Scan TV: Next week there will be a visit of IMF mission. Is the World Bank part of this mission too? Do you have any idea on the agenda of this mission in concrete terms? What would be the cooperation of the new government with these institutions?

KL: Yes, I am aware and it will be a joint mission. Some colleagues from the World Bank will join. The mission will focus mostly on working with the Bank of Albania on preparing a Financial Stability Assessment update.

Dritan Spahiu, Energjia.al: The World Bank was the guarantee of the privatization of OST. Now that the OST is under state management, will the World Bank recommend a new privatization or will it be left to state management?

KL: We have worked with the government and we will continue to encourage them to reach a negotiable settlement with CEZ. The distribution sector is under state management, but the ownership is not resolved. The key is to improve the performance of the distribution sector through investments, management and other ways. After the issue of ownership is resolved and performance improves, it will be for the government to decide at which point to reprivatize it.