The budget deficit, or the gap between expenditures and revenues, for the covering of which the government has been forced to borrow, reached a record post-transition level in 2020. 

According to official statistics from the Ministry of Finance, this deficit was ALL 110 billion, or EUR 890 million. This is the highest level of the deficit since 1995 when the Ministry of Finance reported the data. Earlier, the record was in 2009, at about ALL 81 billion, which coincides with the period of construction of the Durrës-Kukës road. 

The increase in the deficit in 2020 came as a result of declining revenues from the crisis caused in the economy by Covid-19 and the need for increased spending on support packages for businesses and individuals, as well as reconstruction funds for the earthquake. According to preliminary fiscal statistics published by the Ministry of Finance, total budget revenues for 2020 were ALL 425 billion, with a contraction of 7.5%, or ALL 34.7 billion (EUR 280 million) less than last year. On the other hand, the total public expenditures for 2020, amounted to about ALL 536.3 billion (92.5% of the annual plan according to Normative Act no. 34 dated 16.12.2020). Compared to the same period of 2019, this item has resulted in 9% higher or about ALL 44.4 billion more. 

However, the budget deficit is ALL 21 billion less than the revised ALL 132 billion plan. The non-realization is related to the collection of budget revenues, with about ALL 20 billion less compared to the plan, forcing the finances to save equally in the direction of expenditures, in order to maintain the planned parameters of the deficit. 

In relation to Gross Domestic Product (GDP), the budget deficit has reached about 7%, from 1.9% the previous year, being far above the deficit limit in normal years, which should not be higher than 2% of GDP. But, due to the pandemic and the need for reconstruction, this fiscal rule is expected not to be implemented until 2024, when it is expected to return to normal levels, according to the macroeconomic and fiscal framework. 

Rising spending at a time when revenues are declining has also boosted public debt, which reached 80% of GDP at the end of 2020, up from 66.3% the previous year. As with the budget deficit, public debt is projected to gradually decrease to reach 73.8% of GDP in 2024.

(Source: Monitor)