Albania Warns of Possible Credit Downgrade

Tirana | 22 January 2010 | Gjergj Erebara

Tirana

In an internal memo obtained by Balkan Insight the ministry of finance says Albania needs urgent cuts in budget expenditures in order to improve its credit rating.

According to the document the Albanian government should revise its 2010 budget and cut its expenditure by ten per cent before March in order to avoid a very likely downgrade in its Moody’s credit rating

“We face high uncertainty in the revenue forecast, while a new credit rating that will take into account the macro-fiscal situation of the last year will be issued in March,” the report reads.

“In the current situation there is little possibility that the country's rating will stand at minus B1 with a stable outlook and the only way to avoid [the downgrade], is to demonstrate our will to manage the risks with a credible scenario,” it adds.

In December, the government forecast 5.5 per cent economic growth for 2010, but the Ministry of Finance says that such a forecast is unrealistic. The 2010 public budget forecasted 410 billion lek (2.97 billion euro) worth of expenditures and 360 billion lek (2.63 billion euro) in revenues.

Albania intends to issue 300 million euro sovereign bonds this year to repay old debts, but many analysts believe that the current economic forecast for the region does not bode well for an entry into the international bond market.