Document of The World Bank FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT (IDA ) ONA CREDIT IN THE AMOUNT OF SDR 22.1 MILLION TO ALBANIA

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Private and Financial Sectors Development Unit Southeast Europe Country Unit Europe and Central Asia Region Document of The World Bank FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT (IDA ) ONA CREDIT IN THE AMOUNT OF SDR 22.1 MILLION TO ALBANIA FOR A PUBLIC EXPENDITURE SUPPORT CREDIT June 27, 2001 Report No: AL This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective May 1999) Currency Unit = Lek Lek I = US$ 0.69 US$ 1 = Lek 145 ALBANIA FISCAL YEAR January December ABBREVIATIONS AND ACRONYMS ESAF - Enhanced Structural Adjustment Facility GDP - Gross Domestic Product ICR - Implementation Completion Report IDA - International Development Association IMF - International Monetary Fund PRSP - Poverty Reduction Strategy Paper SAC - Structural Adjustment Credit USAID - United States Agency for International Development Vice President: Country Director: Sector Manager/Director: Task Team Leader/Program Team Leader: Johannes Linn Christiaan J. Poortman Khaled Sherif/Paul Siegelbaum Greta Minxhozi/Hormoz Aghdaey

3 FOR OFFICIAL USE ONLY ALBANIA PUBLIC EXPENDITURE SUPPORT CREDIT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 5 6. Sustainability 5 7. Bank and Borrower Performance 6 8. Lessons Learned 6 9. Partner Comments Additional Information 7 Annex 1. Key Perfonnance Indicators/Log Frame Matrix 8 Annex 2. Project Costs and Financing 10 Annex 3. Economic Costs and Benefits 11 Annex 4. Bank Inputs 12 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 13 Annex 6. Ratings of Bank and Borrower Performance 14 Annex 7. List of Supporting Documents 15 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

4

5 Project ID: P Project Name: PUBLIC EXPENDITURE SUPPORT Team Leader: Greta Minxhozi TL Unit: ECSPF ICR T pe: Core ICR Report Date: June 27, Project Data Name: PUBLIC EXPENDITURE SUPPORT Country/Department: ALBANIA Sector/subsector: BF - Public Financial Management L/C/TF Number: IDA Region: Europe and Central Asia Region KEY DATES Original Revised/Actual PCD: 04/05/1999 Effective: 05/13/ /13/1999 Appraisal: 04/07/1999 MTR: Approval: 05/06/1999 Closing: 09/30/ /30/2000 Borrower/lImplementing Agency: Other Partners: GOVERNMENT OF ALBANIA/Ministry of Finance STAFF Current At Appraisal Vice President: Johannes F. Linn Johannes Linn Country Manager. Christiaan J. Poortman Arntraud Hartmann Sector Manager: Paul Siegelbaum Pradeep Mitra Team Leader at ICR: Hormoz Aghdaey Onno Ruhl ICR Primary Author: Amtraud Hartmann 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=High]y Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome. S Sustainability: L Institutional Development Impact: SU Bank Performance: HS Borrower Performance: HS QAG (if available) Quality at Entry: Project at Risk at Any Tine: No ICR S

6 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The Public Expenditure Support Credit was designed during the very early stages of the Kosovo hostilities, in April 1999, when Albania experienced daily inflows of 10,000-20,000 refugees from Kosovo, and its public finances and institutions came under severe pressure to provide public services to these refugees. At the height of the Kosovo Crisis in May 1999, Albania provided shelter to 450,000 refugees, equivalent to about 14 percent of Albania's population. International humanitarian relief was being mobilized but at slow speed, and much of the humanitarian aid assistance arrived towards the end of the hostilities. The authorities had already agreed to a package of institutional and budgetary reform measures which were to be supported under a Structural Adjustment Credit (SAC), which had been appraised in early March The SAC was, however, put on hold for several months since it was very unlikely that a number of structural reform measures, such as privatization of banks and state-owned enterprises, could be implemented during the hostilities. Moreover, the immediate public financing requirements caused by the crisis - at least until humanitarian aid finally arrived - risked undermining public expenditure management measures, which were under implementation at the time. At risk also was the continued implementation of the transparency measures to reduce corruption in the public sector. These measures had been approved in August 1998 and were to become a pillar of the Government's institutional reform program. The objective of the Credit was to provide immediate budgetary assistance to prevent a derailment of the ongoing public expenditure and public management reform program. While much of the relief assistance was expected to be eventually financed by international humanitarian assistance, it was evident that Albania's public treasury had to pre-finance these considerable needs until this arrived. Furthermore, about half of the refugees stayed with Albanian families, which placed substantial demands on public services, especially health and, to a lesser extent education services, water, and sanitation, which could not all be reached through humanitarian intervention. The Credit was designed and put together in a very short time, to provide link between the structural reform agenda, which IDA had already supported through two ongoing credits - the Rehabilitation Credit (Cr AL) and the Recovery Program Technical Assistance Project (Cr AL) - and was to be further supported through the planned SAC. Specifically, the Public Expenditure Support Credit was designed to (i) help safeguard Albania's functioning public institutions during a period of unforseen crisis so that the adopted reform agenda could be continued; (ii) maintain macroeconomic stabilization during a period when serious shocks would depress orderly economic activities and put exceptional demand on public expenditures, while reducing possibilities for revenue collections; (iii) help monitor and enforce an orderly public expenditure pattern during a period of emergency; and (iv) establish a vehicle for parallel financing for other donors willing to provide assistance to Albania in support of the above objectives. -2 -

7 3.2 Revised Objective: The program with its original objectives was fully implemented. 3.3 Original Components: The Credit provided one-tranche budgetary assistance to support the project objectives. 3.4 Revised Components: No revisions were made. 3.5 Quality at Entry: The quality at entry of the Public Expenditure Support Credit was fully satisfactory. Due to the crisis situation resulting from the outbreak of military activities and the consequent influx of refugees into Albania, the Credit was identified, prepared, appraised, and negotiated in only 18 days. This exceptionally short preparation time was possible due to IDA's prior engagement with the Albanian authorities in an ongoing, successful dialogue on the necessary structural reform agenda. The Credit built on this work and further developed reform measures in the public finance sector, as was warranted during the crisis situation. 4. Achievement of Objective and Outputs 4.1 Outconie/achievement of objective: The objectives of the Public Expenditure Support Credit were fully achieved and Albania's macroeconomic stabilization program was preserved during the crisis and continued successfully thereafter. Government authorities continued to implement the public sector reform and transparency measures in public expenditure management, and remained fully within agreed aggregate fiscal targets. Expenditure levels agreed upon to provide basic public services were met. In addition, the Albanian authorities quickly regained the reform momentum and even prepared difficult privatization measures throughout the Kosovo crisis. Following resolution of the crisis situation, in June 1999, the SAC (7303-ALB) and the IMF's Second Annual Arrangement for the ESAF were approved. The Public Expenditure Support Program also served as a program for the provision of parallel financing of budgetary support by the European Union and USAID. 4.2 Outputs by components: Macroeconomic Stabilization. The budgetary cost of the crisis is estimated at US$75 million, about 2 percent of GDP in 1999, which was entirely financed by foreign assistance triggered by the Public Expenditure Support Credit. Macroeconomic management was excellent throughout the crisis and macroeconomic stability was successfully maintained. The Government moved quickly and decisively in dealing with the large influx of refugees. Owing to Albania's prudent policies and to generous external assistance, the economic impact of the crisis proved negligible. Despite demand pressures, inflation fell due to tight monetary policy and in-kind humanitarian aid. The current account deficit for 1999 was 3.5 percentage points below projected levels, reflecting stronger than expected exports and lower imports as a result of the early return of refugees. However, the crisis led to a postponement of investments and exacerbated problems in customs administration (including smuggling and crowding out of regular imports) which lead to tax shortfalls. -3-

8 Ensure Adequate Fiscal Resource Allocation. Expenditure allocations for the public sector were maintained at levels projected in the 1999 budget to ensure that essential public services to Albania's own population did not receive less funds due to the crisis. Prudent fiscal management was continued and aggregate expenditure levels were met. Defense spending remained below the 4.3 percent of overall fiscal expenditures which had been agreed upon as part of the policy program defined under the Credit. Ensure Transparent and Accountable Use of Budgetary Fund. The outline of the Budget Framework Memorandum was prepared and adjustments for expenditure categorizations were made. Substantial efforts and progress have since been made in improving the budget management process in Albania. IDA continued to provide important support under the SAC, the PRSP process, and as part of the Public Investment Review exercise. The Public Expenditure Support Credit specified that a budgetary account would be opened at the Savings Bank of Albania for all financial aid donated to the Government to cover the relief effort. This so-called "Kosovo Account" was opened but used only for direct emergency assistance transfers. All budgetary assistance provided continued to be channeled through the Treasury Account established at the Bank of Albania, since the authorities decided - after discussions with Bank staff - that changing existing procedures during an emergency situation could add confusion and jeopardize transparency. Coordination and Transparency of Relief Program. The Emergency Management Group - led by Government and consisting of all development and humanitarian donors - operated successfully. A representative of the Albania Country Office participated actively in the Emergency Management Group. Daily monitoring mechanisms for the distribution of aid were established. Information on the receipt and distribution of humanitarian aid was widely disseminated. The data base on humanitarian aid flows was kept current and utilized consistently. Customs screening of humanitarian aid continued to be a significant bottleneck throughout the crisis, leading to the late arrival of humanitarian aid. While the Government made strong efforts to rectify the situation, the institutional weaknesses of the customs could not be totally overcome. Improving customs services and establishing more transparent and accountable revenue collection processes at customs have since been an important element of assistance provided under the IMF ESAF program. 4.3 Net Present Value/Economic rate of return: N/A (budgetary support credit) 4.4 Financial rate ofreturn: N/A (budgetary support credit) 4.5 InstitLutional development impact: The Public Expenditure Support Credit was essential for maintaining public finance management and continued public service provision in Albania and was an important element in preventing back-sliding of institutional reforms which were underway. By providing highly visible and timely assistance during a period of crisis, reconfirniing the key elements of public expenditure management and public expenditure priorities, public expenditure management continued in an orderly fashion, even during this period of exceptional demands. The quick and effective support - 4 -

9 provided through the program was an essential ingredient in enabling the Government to adhere to agreed public expenditure levels and practices. The responsiveness of IDA to the Government's emergency needs very early during the crisis added credibility to IDA in the eyes of the Albanian population and policy makers. It also strengthened the position of the reformist elements within the Government. 5. Major Factors Affecting Implementation and Outcome 5,1 Factors ottside the control ofgovernment or implementing agency: The military hostilities ended after only a few months, much earlier than anticipated. By September 1999 virtually all refugees from Kosovo had left Albania, much quicker than expected. The brevity of the refugee crisis largely aided Albania to regain its reform momentum. It also reduced total public expenditures to lower levels than projected at the beginning of the crisis. Its short duration was a key factor in the prevention of the unraveling of the reform process and of the institutions in the face of the demands of the crisis. 5.2 Factors generally subject to government control: The Albanian authorities were exceptionally effective in providing quick assistance to arriving refugees, with the very extensive support of its population. Humanitarian assistance was well coordinated by the Government-led Emergency Management Group. Humanitarian aid agencies, which mostly arrived during the latter part of the crisis, were generally impressed by the effective early handling of the emergency situation by authorities. The Government also established a consensus that throughout the crisis every effort should be made to continue with the reform agenda in spite of the associated pressures on fiscal and human resources. 5.3 Factors generally subject to implementing agency control: The Ministry of Finance was very effective in continuing to control expenditures and to prevent the reallocation of resources away from basic social services essential for poverty alleviation. All expenditure targets were met. However, the crisis did exacerbate problems in customs administration, including smuggling and crowding out of regular imports, leading to tax shortfalls. 5.4 Costs andfinancing: N/A (budgetary support credit). 6. Sustainability 6.1 Rationale for sustainability rating: The Public Expenditure Support Credit's objective was to sustain the reform momentum in public sector management during a period of crisis. The institutional reform process has since continued and is being supported through additional programs. 6.2 Transition arrangement to regular operations: Policy reform measures agreed upon under the Credit have been continued under the SAC and the ESAF program. Further reviews and institutional support measures have been defined under the Public Expenditure and Institutional Review, undertaken during FYOO and FYO1. Additional strengthening of public expenditure management, including resource allocation decision-making and improvement of transparency measures are being pursued under the participatory process of preparing the Poverty Reduction Strategy Paper (PRSP), as well as through technical assistance -5-

10 provided under the Public Administration Reform Project (Credit 3328-ALB). 7. Bank and Borrower Performance Bank 7.1 Lending: Bank performance during the preparation of the program was highly satisfactory. Bank staff quickly identified the key policy reform components which needed attention during the crisis months. The very timely and highly visible support provided under the Credit was essential for demonstrating partnership in Albania while helping to sustain the consensus for reform within the Government. The exceptionally quick disbursement of funds assured Albanian authorities that external budgetary support would be forthcoming. 7.2 Supervision: The Credit was a one-tranche operation where all conditions were met prior to disbursement. The continued implementation of agreed measures was supervised under the SAC and they are assessed in the ICR for that operation (Credit 7303-ALB). Given the nature of the operation, no supervision mission was scheduled for the Public Expenditure Support Credit. 7.3 Overall Bank performance: Bank performance was highly satisfactory. All policy elements were appropriately designed except for some details in the administrative procedures for the "Kosovo account" (see Section 4.2). Borrower 7.4 Preparation: Highly satisfactory; collaboration and focus on essential reform measures mobilized institutional synergy during a crisis situation. 7.5 Government implementation performance: The Government provided strong coordination of humanitarian measures with special efforts to maintain transparency in the use of funds and humanitarian assistance. Consensus was maintained among the Government to not derail the reform agenda. 7.6 InmplementingAgency: Highly successful in maintaining fiscal prudence and maintaining priority expenditures for public services, especially in the social sectors. There was some backsliding in tax revenue collection due to institutional weaknesses in customs, which were further exacerbated by crisis. The authorities were exceptionally effective in maintaining a stringent monetary policy to limit inflationary pressures caused by increased demand from refugees and from a large influx of the international community during the crisis. 7.7 Overall Borrower performance: Highly satisfactory 8. Lessons Learned A budgetary support credit with disbursements against a negative list of imports was used instead of an emergency import credit with disbursements against a positive lists of imports, which was -6 -

11 more typically used in similar situations in other countries. This quick disbursing budgetary support credit was a very effective instrument during a crisis situation as it allowed the rapid transfer resources. It was possible in Albania because macroeconomic management was satisfactory and an IMF ESAF program was successfully under implementation. The approach was also possible as full agreement had previously been reached with Albanian authorities on the reform agenda, which allowed the continued implementation of a much-restricted, but very focused program throughout the crisis months. The Public Expenditure Support Credit was an effective element in coordination between development and humanitarian assistance. Although the budgetary support did not directly finance humanitarian assistance, it provided support for public services directed to the Albanian population itself Without the Credit, these public services would likely have been diverted during the crisis situation. The Credit made a contribution to poverty alleviation in Albania, because the policy program specified the continued use of funds for essential public services. The quick timing and high visibility of the Credit was essential in strengthening partnership in Albania and building credibility for IDA. The very quick response of IDA and the early availability of the funds strengthened the position of the reformers in the Albanian government. To expand and further strengthen the limited policy program supported by the Credit, additional support from subsequent operations was essential. The sustainability of the program would not have been assured through a single, one-tirne emergency intervention. 9. Partner Comments (a) Borrower/implementin7g agency: Comments from the Ministry of Finance dated June 22, 2001, are attached to the ICR. (b) Cofinanciers: N/A (c) Other partners (NGOs/private sector): N/A 10. Additional Information -7-

12 Annex 1. Key Performance Indicators/Log Frame Matrix tndicator/matrix Project in Last PSR 1/ Actual/Latest Estimate I. Maintain adequate macroeconomic and Continued monitoring under the IMF fiscal stability during crisis period. program. ESAF approved June Latest assessments indicate that the program continues to be on target. Implement measures to maintain targets Condition met prior to Board approval agreed under the ESAF program, including (May 6, 1999). maintaining the domestically financed fiscal deficit at 5.5 percent of GDP. * Budgetary expenditures for defense purposes (except services provided to relief Condition met prior to Board approval operations) will not exceed 4.3 percent (May 6, 1999). overall fiscal expenditures. 11. Ensure adequate fiscal resource allocation safeguard essential public sector functions. Intemational assistance and effective govemment policy enabled expenditure levels to be maintained, in spite of the additional fiscal demands of the refugee situation. Condition met prior to Board approval * Expenditure allocations to be maintained (May 6, 1999). at least at levels approved in the 1999 budget for: * Social services, in particular health care and education. * Maintenance of public infrastructure. * Civil service, internal security, and judicial institutions. * Local counterpart funds for public investments. -8 -

13 III. Ensure transparent and accountable use of budgetary funds. * Prepare an outline acceptable to IDA of Condition met prior to Board approval Completed the Budget Framework Memorandum to (May 6, 1999). provide a flexible and transparent mechanism for allocating budgetary resources bimonthly starting in May. * Add separate expenditure categories Condition met prior to Board approval Completed temporarily to budget classification to (May 6, 1999). provide transparent and accountable identification of budgetary resources allocated to finance emergency needs. * Establish a monitoring mechanism for the Condition met prior to Board approval Completed use of budgetary funds allocated to the (May 6, 1999). relief efforts and submit biweekly reports to the Ministry of Information which would be published for the use of the public and the donor community. * Establish a budgetary account in the Decision subsequently made to use this Completed Savings Bank of Albania for all financial account only for direct emergency aid donated to the Government to cover assistance transfers. All budgetary relief efforts ("The Kosovo Account"). assistance continued to be channeled through the Treasury Account with the Bank of Albania. * Implement guidelines and procedures Condition met prior to Board approval Completed requiring full budget and treasury (May 6, 1999). procedures for the allocation, execution, accounting, and reporting of funds in the Kosovo Account. IV. Improve coordination and transparency of relief program. * Establish one focal point - the Condition met prior to Board approval Completed Emergency Management Group-in the (May 6, 1999). Govemment for coordination of all intemational and national relief efforts. * Establish a customs screening and Condition met prior to Board approval Additional strengthening of the coordination process for the importation of (May 6, 1999). customs service is part of the the humanitarian aid. IMF program. * Improve controls and provide public Condition met prior to Board approval Completed reporting on the distribution of aid within (May 6, 1999). Albania. * Establish a database of international aid Condition met prior to Board approval Effective program for the flows and make this information available (May 6, 1999). dissemination of information on a daily basis to the public and to donor was implemented. organizations. 1/ End of project. 9

14 Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Project Cost By Component US$ million US$ million _- Public Expenditure Support Program Total Baseline Cost Total Project Costs Total Financing Required Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate IDA Govt. CoF. IDA Govt. CoF. IDA Govt. CoF. Public Expenditure Support Program

15 Annex 3. Economic Costs and Benefits N/A

16 Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists. I FMS, etc.) Implementation Development Month'Year Count Specialty Progress Objective Identification/Preparation/ Appraisal/Negotiation 4/99 (all steps 6 Sr. Guarantee Specialist, completed during a single mission) Sr. Country Economist, Public Expenditure Management Specialist, Country Director, Resident Representative, Public Administration Specialist (Consultant) Appraisal/Negotiation see above See above Supervision From updating HS HS report (7/99). No supervision mission required for this one tranche adjustment operation. The underlying program was supervised as part of the SAC (Cr ALB) ICR no mission I Consultant (b) Staff: Stage of Project Cycic Actual/Latest Estimate No. Staff wecks uss ('O() Identification/Preparation/ AppraisallNegotiation Appraisal/Negotiation Supervision ICR Total

17 Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating O Macro policies * H OSUOM O N O NA OSector Policies O H OSUOM O N * NA O Physical O H OSUOM O N * NA El Financial O H OSUOAM O N * NA I Institutional Development 0 H * SU O M 0 N 0 NA O Environmental O H OSUOM O N * NA Social al Poverty Reduction O H *SUOM O N O NA O Gender OH OSUOM ON *NA O Other (Please specify) O H O SU O M O N * NA O Private sector development 0 H O SU O M 0 N 0 NA O Public sector management 0 H O SU O M 0 N 0 NA 0 Other (Please specify) O H OSUOM O N * NA - i3 -

18 Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bankperformance Rating ai Lending OHS OS OU OHU O Supervision OHS OS OU OHU O Overall OHS OS O U O HU 6.2 Borrowerperformance Rating O Preparation OHS OS O u O HU L Government implementation performance O HS O S 0 U 0 HU L Implementation agency performance *HS OS O U O HU OI Overall OHS OS O U O HU - 14-

19 Annex 7. List of Supporting Documents ALBANIA - Public Expenditure Support Credit. Report and Recommendation of the President, Report No. P-7302-ALB ALBANIA - Structural Adjustment Credit, Report and Recommendation of the President, Report No. P-7303-ALB ALBANIA - Implementation Completion Report Rehabilitation Credit, Report No ALBANIA - Implementation Completion Report, Structural Adjustment Credit, Draft April 16, 2001 ALBANIA - Enhanced Structural Adjustment Facility Policy, Framework Paper, ( ) ALBANIA - Country Assistance Strategy Progress Report, IDA/ R ALBANIA - Interim Poverty Reduction Strategy Paper (IDA/M ) -15-

20

21 REPUBLIC OF ALBANIA Ministry of Finance Treasury and Debt Department Bul. "Deshmoret e Kombit", Tirane TeVFax: World Bank Mission Tirana, Albania Tirana, on June 22, 2001 RE: Public Expenditure Support Credit (Cr AL). I would like to thank you for the Implementation Completion Report for the above mentioned Credit. Please find attached a short report on behalf of the Ministry of Finance as Implementing Agency of the Borrower. Sincerely, jerberi Deputy Minister of Finance

22

23 Report of the Ministry of Finance (Implementing Agency) on the Public Expenditure Support Credit refering to the draft of the Implementation Completion Report. At the Height of the Cosovo Crisis in May 1999, Albania provided shelter to more than 500,000 refuges. International humanitarian relief was being mobilized but at slows speed, and much of the humanitarian aid assistance arrived towards the end of the hostilities. At that time, in April The public Expenditure Support Credit was designed. The immediate public financing requirements caused by the Cosovo crisis risked undermining public expenditure management measures, which were under implementation at the time. At risk also was the continued implementation of the transparency measures to reduce corruption in the public sector. The objective of the Credit was to provide immediate budgetary assistance to prevent a derailment of the ongoing public expenditure and public expenditure and public management program. The credit was designed and put together in very short time, to provide link between the structural reform agenda, which IDA had already supported two ongoing credits - the Rehabilitation Credit and Recovery Program Technical Assistance Project and was to be further supported through planned SAC. The main objectives where to (i) help safeguard Albania's functioning public institutions during a period of unforeseen crisis so that adopted reform agenda could be continued; (ii) maintain macroeconomic stabilization during a period when serious shock would depress orderly activities and put exceptional demand on public expenditures, while reducing possibilities for revenues collections; (iii) help monitor and enforce an orderly public expenditure pattern during a period of emergency; and (iv) establish a vehicle for parallel financing for other donors willing to provide assistance to Albania in support of the above objectives. The objectives of Public Expenditure Support Credit were fully achieved and Albania's macroeconomic stabilization program was preserved during the crisis and continued successfully thereafter. Albanian government authorities continued to implement the public sector reforms and transparency measures in public expenditure management, and remained fully within agreed fiscal targets. The Public Expenditure Support Program also served as a program for the provision of parallel financing of budgetary support by the European Union and USAID. Macroeconomic management was excellent throughout the crisis and macroeconomic stability was successfully maintained. The Albanian Government moved quickly and decisively in dealing with the large influx of refugees. Despite demand pressures, inflation fell due to tight monetary policy

24 and in-kind humanitarian aid, the current account deficit for 1999 was below projected levels. Substantial efforts and progress have since been made in improving the budget management process in Albania. The Public Expenditure Support Credit was essential for maintaining public finance management and continued public service provision in Albania and was an important element in preventing backsliding of institutional reformns, which were underway. The quick and effective support provided through the program was an essential ingredient in enabling the Government to adhere the agreed public expenditure levels and practices. The Albanian authorities were exceptionally effective in providing quick assistance to arriving refugees, with the very extensive support of its population. The Government also established a consensus that throughout the crisis every effort should be made to continue with the reform agenda in spite of the associated pressures on fiscal and human resources. The quick disbursement budgetary support credit was a very effective instrument during a crisis situation. It was possible in Albania because macroeconomic management was satisfactory and ESAF Program was successfully under implementation The Credit was identified, prepared, appraised, and negotiated in very short time. This exceptionally short preparation time was possible due to IDA's prior engagement with the Albanian authorities, successful dialogue and the necessary structural reforrm agenda. IDA continued to provide important support under the SAC, ht e PRSP process and as a part of the Public Investment Review exercise. The responsiveness of IDA to the Government's emergency needs very early during the crisis-added credibility to IDA in the eyes of the Albanian population and policy makers. It also strengthened the position of the reformist elements within the Government. The Bank performance during the preparation of the program was highly satisfactory because the bank staff quickly identified the key policy reform components, which needed attention during the crisis. The very timely and highly visible support provided by the Bank was essential for demonstrating partnership in Albania while helping to sustain the consensus for reforn within the Government. The exceptionally quick disbursement of funds by the Bank assured Albanian authorities that budgetary support would be forthcoming. Tirana on June 22, 2001