Interview of Camille Nuamah, World Bank Country Manager to daily "Korrieri" on Additional Financing of Social Service Delivery Project

Q: What is the focus of the project signed a few days ago between the World Bank and the Ministry of Finances?

A: The focus of the project will be on: (i) undertaking administrative reform of the current pension system, (ii) developing the central Registry of contributors and beneficiaries, (iii) building capacity for pension policy development, and (iv) promoting public education on the system.  

Q: What is the objective of the Additional Financing of the Social Delivery Services Project?

A: The objective of the AF for the SSDP is to help mprove the efficiency and effectiveness of the pension system by: (i) improving pension system administration, (ii) institutional strengthening and capacity building for pension policy development; and (iii) improving public understanding of the pension system.

Q: When this project will start and what its duration?

A: The project is expected to be effective in July 2009. The closing date will be September 30, 2012.

Q: What are the World Bank recommendations to the Albanian Government regarding the pension scheme in Albania?

A: Future pension reforms in Albania should focus on restructuring the pay-go scheme to strengthen the link between contributions and benefits and to improve incentives for people to participate and declare correct earnings.  The Government has already taken earlier actions on the revenue side by reducing contributions, to ameliorate the adverse impact of high payroll taxes on labor market development.  However, further reductions in pension contributions may not bring the desired increase in formal employment/compliance, because such revenue measures need to be preceded/supported by expenditure reforms, such as addressing the compressed benefit structure.  As importanly, any new measures on both revenue and expenditure sides of the pensions system should carefully consider the overall fiscal outlook for 2009 and beyond.

The improvements in pension administration supported by the SSDP should help address the issue of fraudulent pensions, improve services to system participants, as well as provide the basis for future reform implementation.

Q: What is the World Bank opinion to the pension increase so far?

A: Albania needs to adopt a transparent indexation rule for pensions which is consistent with long term fiscal sustainability. Despite the legislated inflation indexation, pensions are currently increased on an ad-hoc basis, which makes the system vulnerable to political pressures, and increases uncertainty for system participants and for the fiscal outlook of the pension scheme, overall.