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Let’s shake the economy from the sinful past

What has happened and continues to happen in countries around the world, in order to recover their economies after facing the pandemic is a very strong and synchronized policy response from the ministries of finance and central banks.

That includes the trillions of dollars expressed in fiscal measures, according to IMF. Meanwhile, central banks have pursued policies to inject large amounts of liquidity to support their national economies, thus impacting indirectly the economies of other countries.

Countries like Albania, which are still at the level of emerging markets, can, if they manage to be part of these impacts, could use this moment as a strong starting point to achieve the recovery of deficits that have not yet reached the end of the crisis.

As we know well, Albania, which is in the group of small countries with economies dependent on tourism, as well as services is already in biggest difficulty ever.

Such a fiscal situation is similar to the worst times of Albanian finances in decades, despite the fact that the pandemic is to blame.

Countries with high debt levels are in alarming situations, while the spread of the virus hits precisely the countries where health systems are weakest.

What do we need to understand with this situation to modify the approaches, but also the coping to recover?

First and foremost is financing the economy and consumption. If the budget can no longer finance more than the basic requirements, then potential loans from the IMF, the World Bank and other donors should go directly to increasing and empowering the sectors most affected by the pandemic, as well as the areas affected by earthquake.

The second is to start asking for money where it has never been obtained, in the informal economy. Already the budget does not have the luxury of enduring the same situation of fiscal filth, corruption and inequality in the market. The case is to start the frontal war, for the extraordinary taxes for the informals. Data and indicators exist, while the reaction of the tax administration and institutions that fight informality should be shaken.

These remaining months should shrink this situation by every means and approach available. The spirit of support to rely on the general public exists.  

The third is the revival of specific policies by the Bank of Albania. So far, the policies that have guided it have not had the necessary impact on the consequences of the pandemic. The Bank should not wait for its monetary policy to be effective as if nothing had happened. 

The lack of a different approach to putting money on the market through quantitative easing instrument, for a start, but in fact for a direct injection of money into the neediest segments is a time-bound obligation, that does not depend from us, but flows without being felt.

If the European Central Bank is moving in this direction, but also a group of countries outside it, including emerging markets, then direct monetary financing policies need to be promoted. If not, then at least we should know how far behind other countries we are and keep in mind the theories about the market and the circulation of money only on paper, because once again this situation revealed us. This situation is showing us how far the financial market is from what is said in official publications, policies and conferences.

After all, from all this, as mentioned by prominent experts in the country, the priorities and investment strategies should be changed, turning our eyes already from investments in education, in strengthening digital capacities and human capital, in health systems and social welfare systems.

These are what people and the economy need to be somewhat competitive in the regional market, but also to adapt everything to the post-pandemic situation. We need to make sure that other crises that come up are well addressed.

To make all these feasible, taxes and their modeling must already be adapted in a way that affects economic transformation, but also builds the country's economic viability for the future. These will undoubtedly be a rather difficult task for some ongoing governments. All political parties need to know how to adapt their approaches to tell us in detailed action plans, as a part of their political programs how difficult this will be for them and whether they can do it.

After the financial crisis, it is necessary to build stability in the banking sector by reforming it, as we cannot continue to live with the real lack of a financial market, but to have a small one similar to the countries that have it.

Now, we must do all this, not because of who writes or says it, but because it must be done for the functioning of our economy and to start shaking off the sinful past.