June 29 (SeeNews) - Albania should address reemerging arrears at the central government and mainly in public investment projects, as well as in the restructuring plan of the General Directorate of Taxes, the International Monetary Fund (IMF) said after concluding a visit to Albania.
"The country's economic program is broadly on track, with good progress in advancing structural reforms in areas such as bankruptcy legislation, and all the quantitative performance criteria under the program met," the IMF said in a statement published on its website on Tuesday.
The fund added that it has reached a staff-level agreement on the eighth review of Albania’s approved in February 2014 Extended Fund Facility (EFF) Arrangement.
The executive board of the IMF is expected to discuss the eighth review in August. Approval of the review would enable the disbursement of SDR 28.65 million (about 35.9 million euro/$ 39.9 million).
"Tax revenues were in line with the target for the first five months of 2016, despite weak oil prices and low inflation, partly reflecting early gains from the government’s efforts to improve tax compliance", the fund also said, adding that it is concerned with the weak performance of local taxes, which shows the urgency for developing a valuation-based property tax.
According to IMF, the central bank's accommodative monetary policy stance remains appropriate, and is consistent with its price stability objective. It underlined the importance of rapid implementation of the strategy for resolving non-performing loans in order to strengthen lending to the private sector.
The fund confirmed its previous projections for 3.4% GDP growth in 2016, backed by large energy-related foreign direct investment inflows and a pickup in domestic demand. It said it expects that by the end of the year inflation will reach 1.8%, led by recovery in oil and food prices.
Following IMF's visit, the country's central bank also published a statement saying that though economic activity appears upward, the Albanian economy continues to face structural weaknesses, which decelerate the pace of growth. It also mentioned the economic performance in the euro area, which is unfavourable and will be further complicated by the Brexit. "Therefore, the monetary and fiscal policies should continue to generate a prudent economic stimulus, whereas structural reforms should accelerate their pace," the bank said.
The bank commented on the low inflation, which in February broke to a 14-month low of 0.2% and in the following months remained far from the bank's target for 3% inflation. In May it recorded a slight increase reaching at 0.7%. "This performance confirms our judgement about the transitory nature of the above-mentioned shocks," the bank said. "However, our analyses confirm that the balance of inflationary pressures is still weak," it added.
Both the IMF and the Bank of Albania evaluated the country's banking sector as "highly liquid and well capitalised".
($=0.9017 euro)