Fiscal performance of the 5-month period 2025 with increased spending without translation into sustainable development and integration

From a citizen and business perspective, with a focus on the reasons for the performance and the consequences

In the first five months of 2025, public expenditures reached 265.5 billion ALL, marking a significant increase of 12.2% compared to 2024 and around 19.5% compared to 2023. On the surface, this suggests a more active fiscal policy and an effort to expand public spending. However, the problem lies in the composition of this spending, as most of the increase is allocated to current expenditures, salaries, and social services, while capital investments—essential for sustainable development—have remained almost unchanged.

From the perspective of citizens and businesses, this means that despite wage increases, the lack of investment in infrastructure and technology negatively affects quality of life and the business environment.

But the core challenge is the nature of these expenditures.

The vast majority of the increase goes to current expenditures, such as public administration salaries and social spending, which are continuously rising (wages increased by about 15.6% in 2024 and continue in 2025).

Capital expenditures, investments in infrastructure, technology, and long-term development are almost flat in nominal terms (+2.2% in 2025 versus 2024) and have declined in real terms when it comes to domestic funding (-21.6% in investments with domestic sources).

From the viewpoint of citizens and businesses, this translates to the understanding that while wages and social aid are essential for the well-being of workers and vulnerable families, the lack of capital investment is alarming because it directly affects the quality of services and infrastructure that both rely on.

An economy without investment does not grow, and public services deteriorate over time. For example, roads, energy, digitalization, and healthcare may remain underdeveloped, limiting job creation and quality of life.

Decline in capital investments, a brake on Long-Term development

Capital expenditures fell by 4.3% in 2024 and have only slightly increased in 2025. This means that funds needed to build roads, hospitals, schools, renewable energy, or new technologies are at a very low level. This slows the development of critical infrastructure.

Domestic financing has shrunk significantly (-21.6%), and efforts to attract foreign funding are not enough to fill this gap.

The post-earthquake reconstruction fund has declined by 31.6%, indicating that the recovery phase is slowing down, while also raising questions about its conclusion and expectations for new investments.

The delay of investment decisions four months before the 2025 elections has indeed influenced the slowdown of capital investments, but this is only a small part of the problem. The larger issues are structural, including the contraction of domestic funding, lack of managerial capacity, and poor strategic planning.

Comparison with 2023 and 2024 shows that investments had already started weakening, and that the political freeze is more of a justification for deeper-rooted deficiencies.

Thus, the pre-election delay in decisions is more a contributing factor and symptom of broader structural problems than a root cause. It is often used to justify weaknesses rooted in fund management, poor administrative capacity, and lack of transparency.

For citizens and businesses, this means that the path toward improving basic infrastructure is slowing down, hindering goods transportation and access to quality services.

The lack of investments in green energy and technology places the country behind on the global agenda, making the economy more vulnerable to environmental risks and price shocks.

Rising current expenditures with risk of inefficiency and dissatisfaction

Current expenditures increased by 12.6% in 2025, mainly for wages and social services. This reflects a clear focus on social protection and wage growth, which is positive from a social standpoint.

However, the main issue is the lack of linkage between this increase and tangible outcomes.

There are no clear indicators showing whether the wage increases are accompanied by improved productivity in the administration or better services for citizens.

Social programs (e.g., economic aid or birth bonuses) do not show significant improvement in coverage or efficiency; in fact, some have seen cuts.

This creates the perception that money is being spent simply to maintain the status quo, without making any real, visible difference in people’s lives.

Fiscal deficit and rising debt, a worrying trend and a challenge for the future

In 2024, the fiscal deficit increased by 40% compared to 2023 and exceeded the annual plan significantly, marking a 97.7% increase over projections.

Even in 2025, the deficit is expected to remain high.

What does this mean?

The government is spending more than it collects from taxes and other revenues, covering the gap with borrowing.

This increases the burden of public debt and interest payments, which rose by 33.3% in 2024.

According to experts, this situation risks reducing Albania’s fiscal space for investments and social measures in the future, as a larger share of resources will go toward debt servicing.

Alignment of spending with strategic priorities and lack of focus and Long-Term planning

While Albania is in the process of EU accession negotiations and has prioritized administrative reform, rule of law, energy transition, and rural development, the 2025 five-month budget does not clearly reflect these priorities:

• Investments in key EU integration sectors (justice, green energy, digital infrastructure) are minimal and below planned levels.
• Economic aid and social support are static or declining in some cases, failing to meet expectations for inclusive social policy.
• Local governments have seen only modest budget growth (+5.6%), with no clear indicators of performance or improvement in local services.

From an integration perspective, this means that reforms aimed at facilitating business activity, improving the justice system, and protecting the environment are not receiving adequate funding, slowing down effective progress.

An economy that doesn’t invest in good infrastructure and doesn’t establish clear rules of operation will be less competitive and offer fewer opportunities for sustainable employment.

Lack of Transparency and Performance Reporting

Another deep-rooted issue is the lack of a robust system for measuring budget performance and reporting results transparently:

• Citizens and businesses do not receive clear information on what has actually been achieved with public spending.
• There are no reports linking spending to progress in EU negotiation chapters or to everyday life impact.

This lowers trust in public institutions and undermines the quality of public debate on financial policies.

Public Accountability and the need for a change in approach

It is essential that institutions report not only how much has been spent, but also on what outcomes and impacts have been achieved.

Parliament should exercise more oversight through hearings and active monitoring, while the State Audit Office should focus on performance evaluation, not just technical audits. Only then can citizen trust increase, and the budget become a tool geared toward sustainable development.

The First 5 Months of 2025 show a Governing Budget that spends more on salaries and Social Services but invests little in the fFuture

The current state of affairs highlights the need to avoid repeating past delays, where public investments were executed mostly in the final months of the year (November and December).

Such delayed practices reduce the effectiveness of spending and harm economic development, job creation, and public trust in the future state.

To avoid this, a political and institutional commitment is needed for clear planning, consistent execution, and transparency in capital spending throughout the year.

Only in this way can the budget become a real instrument for development and transformation—not merely a figure on paper that remains unused for most of the year.