Identifier
Created
Classification
Origin
09TIRANA452
2009-07-08 06:01:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Tirana
Cable title:
ALBANIA WALKS A FINANCIAL TIGHTROPE
how-toVZCZCXRO9715 PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG DE RUEHTI #0452 1890601 ZNR UUUUU ZZH P 080601Z JUL 09 ZDK FM AMEMBASSY TIRANA TO RUEHC/SECSTATE WASHDC 8287 INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY RUEATRS/DEPT OF TREASURY WASHDC PRIORITY RUEAIIA/CIA WASHDC PRIORITY RUEHVEN/USMISSION USOSCE PRIORITY 2517 RHEFDIA/DIA WASHINGTON DC PRIORITY RUCNDT/USMISSION USUN NEW YORK PRIORITY 0834 RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY RUEKJCS/SECDEF WASHINGTON DC PRIORITY
UNCLAS TIRANA 000452
SIPDIS
SENSITIVE
DEPT FOR EUR/SCE J.ISMAIL
TREASURY FOR V.ATUKORALA
E.O. 12958:N/A
TAGS: EFIN ECON PGOV AL
SUBJECT: ALBANIA WALKS A FINANCIAL TIGHTROPE
REF: TIRANA 185
UNCLAS TIRANA 000452
SIPDIS
SENSITIVE
DEPT FOR EUR/SCE J.ISMAIL
TREASURY FOR V.ATUKORALA
E.O. 12958:N/A
TAGS: EFIN ECON PGOV AL
SUBJECT: ALBANIA WALKS A FINANCIAL TIGHTROPE
REF: TIRANA 185
1. (SBU) According to sources in the Ministry of Finance, little has
changed since reftel report on Albania's difficulties in securing a
commercial loan to finance its USD 420 million budget deficit. The
original plan was to finance about USD 100 million by selling
domestic bonds and USD 320 million through commercial loans.
Deutsche Bank and Alpha Bank (Greek) won a tender to syndicate the
commercial loans, but have not been able to find underwriters. Each
bank committed to providing USD 50 million, but at this time they
have been able to attract only an additional USD 75 - 100 million.
International banks such as Raifeissen, JP Morgan and Credit Suisse
are declining to participate despite the anticipated 12 - 13 percent
interest the loan will likely cost. At a minimum, the GOA might get
by with a loan package of 200 million USD. However, should Deutsche
and Alpha banks only manage to raise closer to 150 million or less,
the GOA will likely face a severe budget crunch come June 1, when
much-promised increased salaries and pensions come due.
2. (SBU) Under normal conditions, the GOA might consider cutting
expenses to make ends meet. However, the Prime Minister is pulling
out all the stops to get re-elected, including major spending on
huge, visible infrastructure projects, increased pensions and
government salaries, and subsidized electricity. The Durres-Kukes
highway will take the largest bite. The Bechtel consortium building
the road has notified the GOA that it will bill 300 million euro
this year to complete Albania's showcase highway connecting Kosovo
to the Port of Durres.
3. (SBU) The GOA finds itself in a very risky situation:
-- banks continue to lose deposits, which may prevent them from
buying new bonds and even force them to cash in their maturing bonds
without rolling them over;
-- some of the planned privatization receipts of over 175 million
euro may be delayed; and
-- revenues are declining at a faster rate than expenses.
In addition, the Ministry of Defense has budgeted USD 120 million to
purchase six multi-role helicopters with a decision on the tender
scheduled for early June. A postponement of the decision for any
reason would make it look like the brand new NATO member doesn't
have its act together.
4. (SBU) COMMENT: Berisha seems willing to risk it all to win the
June elections. The only way his balancing act could be riskier
would be if he wore a blindfold, although some think he already has
one on. Nevertheless, the GOA has in the past shown an uncanny
ability to avoid catastrophe, although usually just barely and at
the last minute. Privatization receipts could come in as planned,
the banks could come up with USD 200 million in loans in the next
two weeks, and bank deposits could level off. If the GOA winds up
short, the PM could turn to the IMF, postpone the helo purchase, or
export more electricity (potentially increasing blackouts),all of
which would have political downsides. A partial default on the
Bechtel payments or lek devaluation would have much more serious
consequences, both economically and politically, as the June
parliamentary elections approach.
WITHERS
SIPDIS
SENSITIVE
DEPT FOR EUR/SCE J.ISMAIL
TREASURY FOR V.ATUKORALA
E.O. 12958:N/A
TAGS: EFIN ECON PGOV AL
SUBJECT: ALBANIA WALKS A FINANCIAL TIGHTROPE
REF: TIRANA 185
1. (SBU) According to sources in the Ministry of Finance, little has
changed since reftel report on Albania's difficulties in securing a
commercial loan to finance its USD 420 million budget deficit. The
original plan was to finance about USD 100 million by selling
domestic bonds and USD 320 million through commercial loans.
Deutsche Bank and Alpha Bank (Greek) won a tender to syndicate the
commercial loans, but have not been able to find underwriters. Each
bank committed to providing USD 50 million, but at this time they
have been able to attract only an additional USD 75 - 100 million.
International banks such as Raifeissen, JP Morgan and Credit Suisse
are declining to participate despite the anticipated 12 - 13 percent
interest the loan will likely cost. At a minimum, the GOA might get
by with a loan package of 200 million USD. However, should Deutsche
and Alpha banks only manage to raise closer to 150 million or less,
the GOA will likely face a severe budget crunch come June 1, when
much-promised increased salaries and pensions come due.
2. (SBU) Under normal conditions, the GOA might consider cutting
expenses to make ends meet. However, the Prime Minister is pulling
out all the stops to get re-elected, including major spending on
huge, visible infrastructure projects, increased pensions and
government salaries, and subsidized electricity. The Durres-Kukes
highway will take the largest bite. The Bechtel consortium building
the road has notified the GOA that it will bill 300 million euro
this year to complete Albania's showcase highway connecting Kosovo
to the Port of Durres.
3. (SBU) The GOA finds itself in a very risky situation:
-- banks continue to lose deposits, which may prevent them from
buying new bonds and even force them to cash in their maturing bonds
without rolling them over;
-- some of the planned privatization receipts of over 175 million
euro may be delayed; and
-- revenues are declining at a faster rate than expenses.
In addition, the Ministry of Defense has budgeted USD 120 million to
purchase six multi-role helicopters with a decision on the tender
scheduled for early June. A postponement of the decision for any
reason would make it look like the brand new NATO member doesn't
have its act together.
4. (SBU) COMMENT: Berisha seems willing to risk it all to win the
June elections. The only way his balancing act could be riskier
would be if he wore a blindfold, although some think he already has
one on. Nevertheless, the GOA has in the past shown an uncanny
ability to avoid catastrophe, although usually just barely and at
the last minute. Privatization receipts could come in as planned,
the banks could come up with USD 200 million in loans in the next
two weeks, and bank deposits could level off. If the GOA winds up
short, the PM could turn to the IMF, postpone the helo purchase, or
export more electricity (potentially increasing blackouts),all of
which would have political downsides. A partial default on the
Bechtel payments or lek devaluation would have much more serious
consequences, both economically and politically, as the June
parliamentary elections approach.
WITHERS