BoA: The increase in budget revenues is coming mainly from rising wages

The increase in budget revenues this year is largely supported by rising wages.

In its analysis of fiscal indicators for the first nine months of the year, the Bank of Albania notes that the structure of revenue growth has not shown significant changes throughout the year. Most of the growth (around 82%) has come from social security contributions and the expansion of personal income tax revenues.

According to the central bank, the high growth rates of the latter mainly reflect wage increases in both the public and private sectors.

By the end of the first nine months, revenues reached 562.5 billion lek, about 6.4% higher than the same period last year.

Expenditures, meanwhile, amounted to around 515.5 billion lek, roughly 12.2% higher than the same period a year ago. Despite a slowdown in the third quarter, the overall expenditure growth profile did not undergo major changes during the year. One-third of the increase in spending came from social security expenditures, due to the large weight of pension schemes in total budget spending. Other consistently contributing items included personnel costs, reflecting the government’s policy of raising public sector wages, local government spending, and investment expenditures.

Data show that the budget remains in a substantial surplus this year as well. By the end of the nine-month period, the budget balance was positive at around 47 billion lek, or approximately 2.4% of GDP. The third quarter also recorded a surplus of about 14 billion lek.

However, the nine-month surplus is lower compared to the same period last year.

Despite the surplus, the government has continued with the planned annual borrowing program.

In the first nine months of the year, domestic borrowing increased by 26.4 billion lek, following a strategy to reduce short-term instruments in favor of long-term ones. In terms of participants, the structure of domestic financing remained almost unchanged during the year, with banks holding the main share of around 70%.

Meanwhile, net foreign borrowing in the first nine months reached around 30 billion lek, with the main contribution coming from the issuance of a 650-million-euro Eurobond in February of this year. The government used current foreign currency liquidity surpluses to repay in October the remaining 367 million euros of the Eurobond issued in 2018. Government liquidity accumulation has also been high in local currency due to the fiscal surpluses recorded throughout the nine-month period.

“KORÇA BOOM”