Financial crisis can come again, but not in Albania

financial crisis covid-19

Financial crisis can come again, but not in Albania

The fear of the onset of the financial crisis as a result of the impact of unforeseen disasters is growing day by day. The main thing is that the crisis in the financial system could happen again, but with an even greater force than until today, it has returned to everyone just like the forewords of Kasandra.

Governments and Central Banks, although caught by surprise, are adopting and undertaking all kinds of monetary and fiscal actions to stop the domino effect of the still weak financial system from the last crisis of the system more than 10 years ago.

Preventing another major financial crisis, which would be not only devastating for the current financial system, but also the political, economic and social order, is the biggest challenge in the world today.
The policy decision to use taxpayer money in such disaster cases is a forced action to react to such surprise circumstances.

Now that time has brought us to where we are, it is time to clarify what the system lacks and what it should be safe for, as well as what lessons from history have served to prevent a future tragedy, as in fact the system seems more slightly resistant and overly tired.

How close and far is Albania with all this history and how much is it affected by these shock waves?

For several years now, the situation of public finances in Albania has been clearer than before, with a public debt to decrease.

The central bank occasionally seeks to spread a monetary policy aimed at boosting lending to the economy.

The budget tends to increase its budget revenue at the beginning of each year, but the performance of the administration awaits the forecast and in the end the reality of the rule of policy on expertise gains at the expense of fiscal consolidation.

With this situation, first of all, informality and evasion are the “visible enemy”, who still holds in his hands the resources that the budget must use to increase its performance. The fight against him, although difficult, seems to have exhausted the government’s capacity. Trying to hit this enemy with fiscal technology is good, but like many other initiatives it can get in the way.

Second, the growing polarization associated with the distribution of national production and the added value of economic growth has delegated some guarantees for dealing with the crisis in the hands of insecure people.

Third, in Albania there is still no financial market to have the organization, interconnection and formality that the markets of economically developed countries have. The financial market is small and gives and takes with the informal economy, being hostage to the complete non-implementation of the legal framework.

Public and monetary policy to date have coincided with the idea of maintaining rigor in reducing spending by aiming to reduce public debt with facilitation instruments to encourage investment lending and stimulate consumption.

If we analyze the facts and statistics, it seems that the promotion of economic growth and consumption have lost confidence in politics and a close return to economic growth is not possible.

If the government returns to its sole financial purpose the reduction of public debt, in addition to the troublesome achievement of this indicator, on the other hand it has affected the reduction of purchasing power and the negative impact of economic growth by completely limiting the use of those few capacities in available.

If the corruption tax is not reduced, this is a big problem for investments and the economy.
If meritocracy remains unimplemented, this is another major problem for the country’s administration and coping with difficult situations.

If conventional monetary and fiscal policy policies are not intertwined with the aim of using the wartime mechanism, such as: Quantitative Easing by carefully advancing with Direct Monetary Financing, then the market will be saturated with business-assisted package news, but the economy will remain anemic and will further lose competitiveness in relation to neighbors and development needs. Money should go to consumption and people, but not to liquidate the debts of banks and large companies.

If the current money for the payment of 10% of the employees of the formal labor market will go into their own hands, it will naturally be directly affected by the increase in purchasing power. But that’s a bit though good action to go queue. This category of consumers, the money that will benefit at the same time, as compensation recognized by law will be used in the purchase of material goods in the limited market of imported goods, as well as in receiving limited services in a low-use economy. information technology.

On the other hand, this redistribution of budget revenues, which directly affect the market with several billion ALL, will create problems in the environment filled with inequality in law enforcement.

The government should decide to adopt the right mix between direct support for families / employees, through support for firms that employ them depending on the specific circumstances.

Models presented for this purpose through Package A are beginning to function (a) with temporary tax breaks, (b) with temporary payment of business expenses, (c) with the creation of business lending opportunities through budget guarantee.

But direct government subsidies for businesses that guarantee the continuation of the economy in the future to maintain national security as well as the implementation of strategic initiatives should be the expected object of package B, which is expected to be implemented.

What should continue to be done better is related to the adaptation of these packages to the specifics of the economy and informality.

For example, in some cities or areas, it may be easier to reach out to families than small firms or the self-employed, especially where there is too much informal economy. As the restraining measures are lifted, specific support with packages A and B should perhaps be withdrawn in favor of a more general stimulus to restart the economy.

Government decisions and announcements should be transparent about costs, equality and be monitored so as not to be degraded by the current political and economic environment. The government needs to ensure that the mechanisms to control and monitor risk exposure from warranties, other possible liabilities and fiscal operations are actually working to mitigate the situation. Meanwhile, the sovereign guarantee of credit in this situation must at least overcome mistakes and defects from past experience, including the time of the global financial crisis.

Actions by banks can be effective, but also include fiscal risks and costs. Banks that will be used to combat the private credit crisis to support the economy will seek additional funding to maintain financial stability. Large capital injections or loans to banks can put pressure on the budget, which already has a high level of public debt.

Given all this, budget programs need to be redesigned. The first is to take the unfavorable budget funds towards health and the needs of the expected crisis, and the second is to recalculate the revenue to see what needs to be done to correct this year and the next.

Having said all this, the financial crisis, even if it comes, will not stop in Albania, as there is no ground to develop and spread.

Albania must use this time to learn its lessons to REVAMP the calculations of how to use its capacities and to use its resources with patriotism to get out of the last floor of per capita income.

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