ALBANIA PUBLIC FINANCE POLICY BASED GUARANTEE

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This public finance policy based guarantee (PFPBG) of EUR200 million in support of a commercial loan is the second in a series of two programmatic development policy financing operations. The series addresses weaknesses in public finance management that have resulted in the accumulation of general government arrears of 5.2 percent of gross domestic product (GDP) in 2013 and a surge in public debt from 54.7 percent in 2008 to 70.0 percent in 2013. The PBG is expected to: (a) reduce Albania's borrowing costs; (b) alleviate government funding pressures and risks; and (c) free up commercial bank resources for credit to the private and the energy sector, as the government implements a fiscal consolidation path that puts public debt on a downward trajectory. This operation supports strengthening public financial management (PFM) to address arrears and tax, pensions, and energy sector reforms to improve fiscal sustainability. The reforms supported by this operation have benefitted from a close coordination between the European Commission (EC), the International Monetary Fund (IMF), and the World Bank and have been supported by target technical assistance (TA).