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The World Bank's Strategy in Albania: FY11–FY14

Available in: Albanian

Albania has been a development success story in many respects. Over the past two decades the country has made enormous strides in establishing a credible multi-party democracy and market economy and it is rapidly re-integrating into the international and European communities.
In addition, over the past decade, Albania has been one of the fastest-growing countries in Europe, enjoying average annual real growth rates of 6 percent, accompanied by rapid reductions in poverty. Poverty fell by half (to about 12.4 percent) between 2002 and 2008, while extreme poverty now affects under 2 percent of the population. In addition, the country has made solid progress towards achievement of the Millennium Development Goals (MDGs), although social indicators still lag significantly behind the EU10 and Croatia.

Albania enters the new Country Partnership Strategy (CPS) period having weathered the global financial and economic crisis reasonably well -- maintaining positive, albeit significantly reduced, growth rates in 2009 and a sound banking sector.

Executive Summary
Full Report
Full Report (in Albanian)
Annexes 1-9
Technical Annexes
 
Introduction
This World Bank Group Country Partnership Strategy for Albania covers the period FY11-FY14 and is the first CPS to be presented following Albania’s graduation from IDA in mid-2008. The last World Bank Group Country Assistance Strategy for Albania was approved on January 10, 2006 and covered the period FY06-09. Implementation of the strategy was assessed through a CAS Progress Report (CASPR) presented to the Board in May 2008, and through a comprehensive CAS Completion Report (CASCR) attached in Annex 2. The lessons identified in the CASCR, country priorities as laid out in the Government‘s National Strategy for Development and Integration, analytical work undertaken by the Bank and the activities of other external partners were critical in shaping this strategy for FY11-14.

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Country Context
With a population of about 3.2 million, Albania is situated in the Western Balkans and enjoys a favorable geographic location in South-East Europe and valuable natural resources. Not only is the country close to much larger economies (Greece, Italy) – which are important as trading partners, hosts of Albanian migrants and sources of investment – its natural resources include significant hydropower potential, large swathes of fertile agricultural land, over 360 kilometers of Mediterranean coastline with excellent tourism and transport potential, and valuable mining deposits.

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The Government Program and Sectoral Challenges
In 2007, Albania approved the National Strategy for Development and Integration for 2007-2013, which was developed via a participatory process involving stakeholders throughout the country. The NSDI aims to (i) integrate the country into the EU and NATO; (ii) develop and consolidate the democratic state, notably through electoral, judicial and property rights reform; and (iii) achieve rapid, balanced and sustainable economic, human and social development. The NSDI has established target growth rates of 6-7 percent and aims to reduce the poverty headcount to below 10 percent by 2013. The NSDI states that macroeconomic stability is to be supported by fiscal consolidation and reduction of debt. Infrastructure investments would concentrate on roads and transport, energy, and water supply and sanitation. In the social services, the Government aims to increase secondary education enrolment to 76 percent, introduce a basic package of covered health benefits, strengthen the coverage of the social assistance, and reform the public pension system. Moreover, following the 2009 Parliamentary elections, the Government reiterated the focus on water sector (including both water supply and sanitation, but also on irrigation to improve agricultural productivity) and the health sector as areas where resources would be concentrated in the next 2-4 years.

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Ongoing Program And Key Lessons
The Bank has had an active program in Albania for nearly two decades and a number of lessons have been learned over that period. The lessons have been divided into three main areas: (i) lessons from implementation of the current portfolio; (ii) broader lessons derived from a formal review of the last CAS for the period FY06-FY09 and the 2010 Client Survey; and (iii) lessons learned from engagement with other partners, both external development partners and domestic stakeholders.

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The Albania-Bank Group Country Partnership Program
The main driver of the FY11-14 CPS is the Government’s development strategy as articulated in the NSDI and the accompanying External Assistance Orientation Document (EAOD). The latter document, prepared by the Government in April 2008, provides development partners guidance on focusing assistance in support of the NSDI. Specifically, the EAOD calls for a greater use of programmatic approaches in development assistance and an added focus by development partners on water, environment, health and property sectors. It identifies a clear role for multilateral lenders and the challenges of IDA graduation.

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Managing Risks
Implementation of the CPS program identified in the previous chapter is subject to four main risks as follows:
Potential deterioration of the macroeconomic situation. The fragility of Albania‘s external environment and the country‘s current macroeconomic framework and fiscal policy stance present critical risks for the Country Partnership Strategy. A further worsening of the external environment and financing opportunities, and/or less than adequate policy responses would be addressed through an adjustment of the Bank‘s program of budget support loans either to meet urgent financing needs or to delay or reduce programmed budget support (para 109). The Bank has already intensified its dialogue on macroeconomic policy, given the absence of a disbursing IMF program. In addition, the Bank will coordinate closely with the EC on monitoring the macroeconomic situation and on the proposed policy responses. Nevertheless, given the high levels of uncertainty, some flexibility will be needed to program appropriate financing responses over the short-to-medium term.

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Multimedia
Slide-Show 
Resources
  • Summary of World Bank Strategy (Table: Results Matrix)
  • World Bank Board Chairman's Concluding Remarks
Impact of WB Work
Reference



Permanent URL for this page: http://go.worldbank.org/LSP6B26FY1