PRESS RELEASE
Questions and answers at the press conference on 1 August 2018

Question: The normative act [of the government] of 2018 entered into force two days ago.  According to this act, the 10 million dollar fund allocated for wages will be frozen.  This decision is expected to be approved by the Parliament in September.  How will this freeze affect inflation and consumption?

Governor:  In accordance with the law, the Council of Ministers and the Ministry of Finance and Economy have the right to make changes regarding the realization of income and expenditures.  Some actions depend on the situation. The appreciation of the exchange rate has certainly had an effect on income.  Perhaps the freeze of the wage funds happened due to this factor.

The Bank of Albania has taken measures with regard to the exchange rate appreciation, to curb further appreciation according to the intervention plan in the domestic foreign exchange market, which we are continuing.  We decided to continue this program, as we are in the summer season, when seasonal effects are more evident.  We are monitoring the market and will see at how it will continue. 

Some actions regarding the budget are imposed. In order to keep budget realization under control, the government has been forced to make changes during this period of the year.  It is not the first year that changes are made in the budget.  Macroeconomic factors are impossible to be predicted.  We did not foresee that we would have such a strong exchange rate appreciation and this is the reason why we were forced to intervene.  The exchange rate appreciation had begun several years ago, but, as we have stated, the appreciation of the recent months has been faster as a result of some expectations and developments in the domestic foreign exchange market such as: the EBRD loan to an Albanian public company, the conversion of some banks' capital, the impact of the tourist season and other factors.  This drove the Bank of Albania to plan the interventions in the domestic foreign exchange market and further ease our monetary policy. At the same time, the government from its side changed the budget thus reflecting the impact of the exchange rate appreciation.  That's all we have to say for now.

Thank you!