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The World Bank has started negotiations with Albania on a credit package of more than $100 million to minimize the possible spillover effects from the European debt crisis.
|Tirana's Skenderbej Square|
Kseniya Lvovsky, World Bank country manager, said on Thursday in Tirana that while media reports had mentioned a figure of $100 million, "I can tell you that it could be even higher.
“Our main focus in 2012 will be to help Albania mitigate the impacts of the continued euro-zone crisis,” she added.
Government sources have told Balkan Insight that the World Bank has set several conditions before it disburses the loan, however, including budget cuts and a rise in the retirement age.
The same sources said the government needed the money fast and intended to use it to cover projected domestic debt in 2012.
The bank recently increased funds available for countries in South-East Europe for the next two years, mainly because private funds from European banks and remittances from emigrants working abroad are in free fall.
According Ron Hood, a World Bank expert part of the negotiating team discussing with Albanian officials, Raiffeisen Bank, the largest financial institution present in Albania, has recently withdrawn funds for investment in its local branch.
“We have come here because the world is no longer a safe place,” Hood said, referring to Raifffesen’s move. “We will look at the macroeconomic framework and will try to help improve growth and competitiveness,” Hood said.
According to Lvovsky, the bank’s financing will be used to cover government deficits but also to strengthen social safety nets in a period of financial strain for those most vulnerable, as well as improving the infrastructure of the pension systems.
“Albania has the highest debt in the region,” Lvovsky noted. “The faster the debt reduction is done the better,” she added.
Albania’s public debt increased over last five years from 53 to just below 60 per cent of GDP, mainly due to the cost of the Albania-Kosovo highway, a billion-euro public works project linking the two sister-nations.
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