* Deal targets Albania's debt weaknesses
* Albania to clear arrears to businesses
By Benet Koleka
TIRANA, Dec 17 The International Monetary Fund
will lend Albania 300 million euros ($411.91 million) to help
its sluggish economy recover and gradually reduce its rising
debt and deficit.
"The IMF staff and the authorities reached an agreement on
the IMF supporting their economic programme with financial
assistance which could be delivered over a period of three years
under an extended fund facility with access of about 300 million
euros," the IMF's mission chief, Nadeem Ilahi, told reporters.
The agreement needs to be approved by the IMF's Executive
Board early next year. It would be Albania's seventh programme
with the IMF since the Balkan state toppled communism in 1990.
"More specifically, the programme targets to reduce the debt
vulnerabilities that Albania has at this time while supporting
economic growth," Ilahi said.
Albania's public debt would be 936 billion leks ($9.15
billion), or 69.1 percent of the gross domestic product, this
year and would rise to 74.8 percent of GDP next year.
"The objective of reducing the debt vulnerabilities is the
idea of fiscal consolidation ... and the intensity of that
consolidation should not be so strong as to affect the economy
which is weak," Ilahi said.
The three-month-old Socialist government will scrap a flat
tax of 10 percent in the next fiscal year in January and raise
the corporate tax to 15 percent from 10 percent. Also, the
income tax for high-earners will rise to rates of 13 percent and
23 percent from 10 percent currently.
Albania's gross domestic product, which grew at around 6
percent a year for a decade since 2000, fell to 1.7 percent last
year. Finance Minister Shkelqim Cani said the economy will grow
just 1.3 percent this year and 2.1 percent next year.
The IMF programme, Ilahi said, is very flexible about
Albania's economic cycle so targets would be loosened if the
economy was not recovering or tightened if it was doing well.
The IMF loan and promised funding in the range of $100
million to $200 million from the World Bank will be used to
repay identified arrears to business for public works amounting
to 24.6 billion leks ($240.18 million) so far.
On top of fiscal measures underpinning the programme, Ilahi
said structural reforms in the business environment, including
the tax administration and the electricity and pension sectors,
needed addressing in the 2015 budget.
"The package of economic policies ... supported by the IMF
programme should make Albania an economy that is reforming, is
open to foreign investors. ... A lot of the reforms the
authorities are planning are consistent with what the European
Union has been asking for," Ilahi said.
($1 = 102.4250 Albanian leks)
(Reporting by Benet Koleka; Editing by Leslie Adler)