Investment of ALL 67.2 billion, which accounted for 14.7% of total budget expenditures and 4.82% of GDP were projected for 2014. The bulk of investments, about 57% or ALL 38.6 billion were with foreign financing.
Source: Ministry of Finance
Processing and comments: ODA
Budget review by Normative Act in September of 2014 brought about a very slight increase in total public investment, ALL 44.9 million, but at the same time introduced a change in the funding structure. Foreign financing decreased by ALL 8.6 billion and the increasing rates of domestic financing were the same, indicating thatwithdrawal ofthe programmed foreign funds was impossible leading to passing of the financing burden to domestic financing.
Source: Ministry of Finance
Processing and comments: ODA
Despite continuous efforts and the need for good planning of public finances, 2014 was characterized by a very low performance of public investment in the first half of the year, what brought about the need to revise the budget or the use of such mechanisms as Letters of Credit in order to improve indicators.
Until September (during 9 months of the year),ALL 11.5 billion domestically financed investments were realized, which accounted for 40% of the annual plan and 31% of the plan revisedby Normative Act. 09/17/2014. In the last three months of the year, ALL 22.4 billion domestic investment funds were performed, where 39% of investments of the whole year were realized in December.
Source: Ministry of Finance
Processing and comments: ODA
Due to the low level of progress in terms of investments performance and the risk of failure to meet the scheduled fiscalparameters, the Ministry of Finance was based in the use of Letters of Credit, which led to opening of a big discussion whether the investments were carried out effectively, or there was created a mechanism that simplyindulged the reported figures, but didn?t match the current situation of investments tangibility.
Letter of Credit is a financial instrument under which a bank engages on behalf of the buyer (the state in our case) that the payment will be made to the beneficiary when terms of the Letter of Credit are met. It is used when the seller has no information on the buyer and does not require neither transferring, nor freezing of the institutions funds on behalf of a customer at the bank that has entered into this relationship, as it did happen in our case. Law no. 9936, dated 26.06.2008, “On Management of Budgetary System in the Republic of Albania”, Article 54 specifies that the payment is made only by the Treasury Account and if the basic documentation certifies the service performance. Both of these elements transform the Letter of Credit into amechanism used by the Ministry of Finance to avoid waste of funds and accountability concerning the low performance of public investment.
Given the real fact that these investments were not performed until December 2014, but merely their money were frozen, the total amount of investments “performed” through Letters of Credit should be stripped from reporting of 2014 fiscal parameters.
The total value of investments through the Letter of Credit for 2014 was about 3.3 billion ALL. This figure represents 9.7% of the capital expenditures scheduled in the Revised Budget and 25% of the current investments of December. Use of Letter of Credit led to a 90% performanceof the total public investment budget compared with the Revised Budget, otherwise the level of its performance would have been at a rate of 85%,or ALL 10 billion less.
Source: Ministry of Finance
Processing and comments: ODA