The Albanian governments budget deficit blew out to 40 Billion lek (307 million euros) in the seven months to July, due to low revenues growth and rising expenditures, Finance Ministry data shows.
Despite the clear impact of the global economic crisis, the government continued to defy calls from the IMF and Central Bank to cut public spending in the first two quarters of the year.
Revenues were 12 billion lek (91.9 million euros) lower than projected at 171.5 billion lek (1.3 billion euros), while expenditures jumped to 211.3 billion lek (1.63 billion euros). Efforts to cover the deficit were largely financed directly by the Central Bank risking a spike in inflation and by euro-denominated commercial loans.
The IMF and Bank of Albania, BOA, have urged the government several times in recent months to readjust expenditures to address the drop in revenues. The government made limited attempts, but continues to defy calls to revise the budget.
In a study published this month, the BOA found that the state deficit was fuelling the countrys overall current accounts deficit; thereby exerting pressure on the currency market.
The lek depreciated by 6.5 per cent against the euro-dollar basket during the first half of the year. Further depreciation was avoided through the use of foreign currency reserves.
The BOA warns that the countrys macroeconomic stability is at risk due to the widening budget deficit, low revenues and slow economic growth.
However, the government rejects such assertions and continues to operate according to budget projections of 5 per cent growth GDP for the year.
According to the IMF, any growth in the Albanian economy this year will be minimal, at between 0-1 per cent of GDP
http://www.balkaninsight.com/en/main/news/21701/
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