16.07.2021 – 09:18
Although pandemic and earthquake emergencies were at their peak during 2020, budget expenditures have peaked this year.
During the first 6 months of 2021, the government has spent about 263 billion ALL, a value of 30 billion ALL (244 million euros) or 12% higher than the same period a year ago. The increase was driven by current expenditures by about ALL 22.6 billion or 184 million euros more than last year and investment growth by 28% or 63 million euros more than last year.
Within current expenditures, the largest increase was in expenditures for special funds (social and health insurance) by about ALL 9.4 billion or 11% more than the first 6 months of 2020. Increase in expenditures for the social insurance scheme was driven by the indexation of pensions before the election. Expenditures for staff (salaries) reached ALL 35.9 billion in the first 6 months, with an increase of ALL 3.1 billion (EUR 25 million) as a result of salary increases in the health and education sectors.
Increasing public debt by almost 12 percentage points of GDP by 2020, is increasing the pressure of budget spending on interest. In the first half of 2021, interest on debt payments reached ALL 18.3 billion with an increase of 21% compared to the first half of 2020, or 26 million euros more. The largest increase was in external debt interest rates, the payment of which increased by 56% this year, with an additional value of 19 million euros compared to a year ago.
Public debt service will increase in the coming years, as a result of the expansion of the budget deficit to about 1 billion euros. Within the item of current expenditures, a high increase was also seen in the operating and maintenance costs, which amounted to ALL 25.2 billion in January-June 2021, with an increase of EUR 34 million compared to the first 6 months of 2021 or 20%. The reason for this increase was the general elections, which prompted reconstructions and repairs in some public infrastructure facilities such as roads and water supply.
Also, expenditures for local government increased further this year, reaching ALL 24.3 billion or ALL 2 billion (16 million euros more than last year, mainly as a result of the impetus that came from the general elections.
Capital investments saw the largest increase in expenditures in percentage. In the first six months, capital expenditures were reported at ALL 35.7 billion or ALL 7.8 billion (EUR 63 million) more than last year, with an increase of 28%. This increase was influenced by the expenditures for the reconstruction, which were 10.8 million euros in 2021 from 0 that were in the first 6 months of 2020.
The government has increased by about 100 million euros the capital expenditure fund for the whole of 2021 bringing them to about 1 billion euros, the record value achieved in the last three decades.
In contrast, spending on economic assistance, compensation for the persecuted, and the reserve fund declined. Expenditures on economic assistance decreased by 3% or 3 million euros and the reserve fund was 91 million euros lower, because last year, these expenditures were increased by anti-Covid aid packages and guarantee funds.
For the reconstruction, in the first 6 months of the year, 10.8 billion ALL were spent. Reconstruction spending rates fell sharply in May to 1.7 billion eke, while peaking in March, before the election, by 3.9 billion leks. For the 6-month period, the government has spent 39% of the annual plan of ALL 28 billion.
Despite the increase in expenditures, the improvement in revenues reduced the budget deficit.
The deficit level for the 6-month period of 2021 resulted in about ALL 29.1 billion, or about ALL 9.6 billion less than the same period a year earlier. For the 6-month period, the deficit level is 58.4% of the plan for the period of about ALL 49.8 billion./B. Hoxha