Albania

Years

Targets and attainment

Classification

1974-89

[Note: no IMF sources available before 1992]

largely closed economy, comprehensive central planning, monobank undertaking both central and commercial bank functions, plus some specialised financial institutions

multiple direct controls MDC

1990-92

international political upheavals from 1989 lead to major economic (and political) crisis despite very limited reforms in some areas 1989-90, with steep declines 1991 in industrial and agricultural production, collapse of tax revenues and massive rise in domestic credit; successive devaluations but rapid growth of parallel forex market with soaring premium; political pluralism allowed late 1990, old governing party wins 1991 elections but political tensions lead to transition government mid-1991, then new government elected 1992 embarks on wide set of reforms

unstructured discretion UD

1993-2004

official exchange rate abolished July 1992, unified rate determined in domestic interbank market, wider trade and exchange liberalisation; difficult move to two-tier banking system from mid-1992, foreign bank entry from late 1993; fiscal deficits reduced, hard budget constraints imposed on SOEs, while central bank relies on credit ceilings for non-government sector, introduces refinancing window and reserve requirements, encourages interbank market and begins to use interest rates; many statistics poor but efforts to improve; treasury bill auctions from mid-1994, teething problems; growth of pyramid schemes outside formal financial sector which attract huge deposits but collapse late 1996/early 1997, leading to riots, economic crisis, near civil war, and new government which closes pyramid companies, stabilises economy and reinforces structural reform (including rise in central bank autonomy); as of 1997 forex trades dominated by curb market, interbank market remains thin; dominant state-owned banks remain technically weak, and central bank still relies on credit ceilings in pursuing its primary target of price stability, with only occasional forex interventions; 1999 short-lived influx of refugees from Kosovo; from 2000 bank credit ceilings abolished, minimum deposit rates phased out, standing facilities to create interest rate corridor, weekly repo auctions become main instrument; 2001 interest in moving to inflation targeting, assistance requested; credit boom mid-2000s, prudential/supervisory as well as monetary reaction; 2004 final privatisation of old banks

loosely structured discretion LSD

2005-23

formal narrow inflation target announced and mostly met, but given euroisation interest rate transmission mechanism is weak, working mainly through exchange rate, while forecasting capacity is initially underdeveloped; fiscal discipline inconsistent; previously built-up buffers allow policy response to avoid recession from GFC, but recovery slow and hard, impeded by euro area crisis 2010-12; 2009 application to join EU; ongoing efforts to improve bank supervision and reduce NPLs; euroisation now higher; secondary financial markets remain limited; 2011-15 limited forex interventions but exchange rate stable vs euro, policy rate follows ECB rate with narrowing spread, while interbank rate tracks policy rate; longstanding problem of slow credit growth; 2017 efforts to reverse euroisation; 2020 Covid-19 (after earthquakes 2019): major policy responses, impact less than first expected but strong rebound; inflation targets still met except in parts of 2022-23 (global commodity price rises), and longer-term financial agents’ inflation expectations remain broadly anchored; most statistics adequate by end of period

loose inflation targeting LIT