IMF team warns Albania of fiscal risks from PPPs, AIC

FILE PHOTO: The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S.,September 4, 2018. REUTERS/Yuri Gripas/File Photo

TIRANA (Reuters) - An International Monetary Fund team urged Albania on Tuesday to do more to contain growing fiscal risks to the budget posed by public-private partnerships (PPPs) and the state-run Albanian Investment Corporation (AIC).

The IMF inspects the health of Albanian finances regularly but has no ongoing funding scheme with the government of Prime Minister Edi Rama, whose goal of joining the European Union is hampered by serious corruption and organised crime.

The government has launched an ambitious road-construction program by agreeing with private firms to fund building work first and then be repaid over 12 years, an arrangement that has fueled fears that costs could be inflated and hurt the budget.

“To ensure value-for-money and contain risks to the budget, shortcomings in project management need to be addressed across government entities,” the IMF team said in a statement.

They urged the Finance Ministry to turn itself into a capable gatekeeper to scrutinize the performance of PPPs and better assess whether they risk jacking up costs and breeding graft.

Under IMF pressure, Albania this year stopped the private sector from making unsolicited road-building proposals - when most of them had already been allocated - but said it would welcome them for airports and energy projects.

Albania then launched the AIC with the objective of generating income from idle state property, prompting the IMF to warn again of “new fiscal risks” that could arise from using government funds to cover losses.

“In line with earlier Fund advice, we also emphasize the importance of limiting the possible functions of the AIC to its original purpose of supporting economic development through the exploitation of idle public assets,” the IMF team said.

Reporting by Benet Koleka; Editing by Mark Heinrich