ECONOMY

Albania borrows for Kosovo road

TIRANA – Albania is borrowing 230 million euros from Greece’s Alpha Bank and National Bank of Greece to fund a road linking its Durres port with newly independent Kosovo, a senior official said. Deputy Finance Minister Sherefedin Shehu told Reuters the syndicated loan from Alpha and NBG offered the best terms at Euribor plus 1.25 percent over 15 years with a grace period of five years. «This was a very successful financing and the first ever Albania gets in the international market,» Shehu said on Tuesday. «It is the first step that will lead us into the eurobond market.» The Finance Ministry has repeatedly announced its intention to issue eurobonds, but has yet to make a move. Most projects to build a modern infrastructure have been financed with loans from institutional lenders, such as the World Bank and the European Bank for Reconstruction and Development. But big lenders stayed away from the 600-million-euro road project, mainly due to the political overtones of a highway that will link the two neighboring Albanian-majority states. Some of them cautioned Tirana against the cost of financing the project through commercial borrowing at high rates. They noted that spending on the road beyond Albania’s means will cause the budget deficit in 2008 to jump to 7.9 percent of gross domestic product, the highest since the end of communism in 1990. An International Monetary Fund (IMF) review in mid-April said its staff had cautioned the Albanian government «that in an already inflationary environment and with elevated current account deficits, the budget should be mindful not to add stimulus.» But Shehu said the credit from the Greek banks «is within the limits of borrowing under the state budget for 2008.» «We have an IMF-agreed ceiling of 680 million euros until 2009,» he added. Shehu said he did not believe Albania would need additional commercial credit to finance the remaining 60-kilometer section of the road and a tunnel likely to cost at least 470 million euros. «I do not think we’ll need more commercial credits; we expect (revenue from) some strategic privatizations,» Shehu said, referring to the sale of an oil refiner and insurer. The government has also used part of the 120 million euros from the sale of the Albtelecom fixed-phone monopoly to finance the works so far. Cost and timetable overruns are expected. Opposition politicians have said the project lacks a clear vision and is mired in corruption.