The World Bank Group’s Board of Directors today discussed a new Country Partnership Strategy (CPS) for Albania, which provides the framework for the World Bank Group’s assistance to Albania for 2011-2014.

The World Bank Group’s Board of Directors today discussed a new Country Partnership Strategy (CPS) for Albania, which provides the framework for the World Bank Group’s assistance to Albania for 2011-2014. The new Strategy is fully aligned with Albania’s National Strategy for Development and Integration and is grounded on a broad and continuous dialogue with the Government of Albania and consultations with all development partners. The new World Bank-International Finance Corporation (IFC) joint CPS envisages financing up to $275 million from the International Bank for Reconstruction and Development (IBRD) and up to $120-150 million from the IFC over the four-year period.

“Albania is a development success story in many respects, having made remarkable strides in economic and social development over the past decade,” said Jane Armitage, World Bank Country Director and Regional Coordinator for Southeast Europe. “However, like many of its neighbors, Albania now faces a more difficult external environment following the global financial crisis. The World Bank Group has had a long and productive partnership with Albania, and we look forward to continuing our support to help Albania to maintain its strong track record of growth, sound economic management and poverty reduction.”

Armitage emphasized that, “The new Country Partnership Strategy aims to support a recovery in Albania’s growth rates through improving competitiveness, while also improving education and health services and strengthening the safety net. In addition, the Strategy will assist Albania to meet the new challenge of climate change, through improving water conservation and management and increasing disaster preparedness.”

Over the past decade, Albania has been one of the fastest-growing countries in Europe, with average annual growth rates of 6 percent, accompanied by rapid reductions in poverty. Albania is one of a very few countries in Europe to maintain positive growth rates and financial stability in 2009 during the throes of the global financial and economic crisis. Going forward, Albania, in particular, faces a number of important challenges on account of the slower recovery in Europe and the uncertainties facing the Greek economy – a major economic partner.

“Building on the previous successful cooperation of IBRD-IFC joint interventions in critical sectors, such as energy,” said George Konda, Principal Economist in the Southern Europe and Central Asia Department of the International Finance Corporation (IFC), “the IBRD and IFC have cooperated since the inception of this Strategy for a programmatic approach, with a focus on important sectors for the sustainable development of the country, including energy, roads, water supply, and waste management sectors, as well as improving the business environment.”

The new Strategy will support Albania’s development and help with key challenges, such as: consolidating its fiscal position to be able to weather the coming years; further improving the efficiency of public spending while addressing the still large infrastructure needs; improving the implementation of regulatory and institutional reforms to boost competitiveness and investment; raising education levels and skills to meet the demand from businesses; and strengthening social safety nets and key health services to ensure that the poor are protected from economic fluctuations. In addition, Albania is among the European countries most vulnerable to climate change, and needs to better manage its water resources and usage to changing climatic conditions.

The joint World Bank Group CPS program focuses on three strategic objectives:

Supporting a recovery in Albania’s growth rates through improved competitiveness, by strengthening macroeconomic and public expenditure management, improving the business climate, affordably addressing infrastructure bottlenecks, and deepening access to credit;
Broadening and sustaining social gains by improving education and health services and establishing an adequate safety net; and
Reducing vulnerability to climate change by improving water conservation and management and increasing disaster preparedness.
The new Strategy aims at a more focused lending program. It is a coordinated and complimentary IBRD-IFC engagement in the national infrastructure, including energy and roads; municipal infrastructure, mainly water supply and solid waste management; and the business environment. The new program also reflects a sub-regional focus in the Western Balkans and South-East Europe especially in energy, transport, and disaster management.

The CPS program will also continue to support governance improvements in Albania through the use of a ‘governance filter’ for all Bank-financed operations in order to promote improvements in public expenditure management, administrative, and transparency improvements across government structures.

Albania’s Development Results

During the implementation of the Country Assistance Strategy (CAS) for 2006-2010, Albania saw rapid economic growth accompanied by an impressive decline in poverty. Nearly half of Albanian’s poor were lifted out of poverty between 2002 and 2008.
In 2008, Albania has achieved middle income status and graduated from International Development Assistance (IDA) concessional lending to IBRD lending, sending a positive signal to investors and capital markets.
Albania has taken important steps to upgrade the regulatory framework for business. This is reflected in the improving ‘Doing Business’ indicators and ranking. Albania moved from 136th in 2007 to 82nd in 2010. For the first time, in 2008, Albania was among the top 10 global reformers who made doing business easier.
CAS activities aimed at poverty reduction and rural development were very successful in raising agricultural productivity through improved irrigation and technologies, as well as helping to conserve Albania’s remaining forest resources and bringing income to remote communities. Indeed during 2005 and 2008, Albania saw a more rapid reduction in rural poverty that has helped to significantly narrow the rural-urban gap.
The CAS program has been instrumental in supporting critical reforms in public expenditure management, including a new budget law, procurement law and public investment management procedures, and privatization of the electricity distribution company.

Albania became a member of the World Bank in 1991. Since then, 68 projects totaling US$1.4 billion have been supported by IDA and IBRD, and 10 projects totaling US$185 million by IFC. Currently in Albania there are 15 active projects in social sector, health, education, natural resources, water and energy, municipal infrastructure, and public sector management that are helping Albania to achieve sustainable economic and social development and pave the way for European integration.