IMF Criticizes Arrears, ATRAKO, PPPs

In a public statement released at the conclusion of the Second Post-Program Monitoring Mission, the IMF issued several warnings against the current policies of the Rama government.

The IMF called for “urgent action” to curtail the persistent public sector arrears, including VAT refunds, which have been growing steadily since 2016. The increase in arrears, according to the IMF, “undermine[s] the business climate and trust in the government.”

Furthermore, the IMF reiterated its criticism of the use of public-private partnerships (PPPs), calling on the government to “limit the risks from PPP-related contingent liabilities and to ensure more consistent public investment management.” The government has consistently used PPPs, often throughout so-called “unsolicited proposals” to finance public works without having to count the investments as state debt. As a result, the actual financial obligations to the private sector remain largely off the balance sheet. The IMF continues its urge “to abolish the use of unsolicited proposals for all PPPs.”

Finally, the IMF also strongly criticized the government’s plans, currently under consideration in Parliament, to establish the Albania Investment Corporation (ATRAKO). As Exit has warned before, the current draft law turns ATRAKO into an off-budget spending tool, much in the same way PPPs are currently used. The IMF strongly criticizes this proposal:

The draft law would allow the government to direct individual investment decisions, which could make [ATRAKO] an off-budget spending tool that risks eroding fiscal discipline and circumventing public investment management processes. Instead, the framework should ensure that [ATRAKO] will operate on a commercial basis and at arm’s length of government. The law should affirm the independence of [ATRAKO] in operational decisions and in selecting individual investment projects. [ATRAKO] should also be subject to the Public Procurement Law.