EBRD’s Solidarity Package Is Available for Albania

“The Covid-19 pandemic will certainly have significant negative effects on a small open economy like Albania for this year. These are hard to quantify at the moment, although it is already clear that tourism and light manufacturing will be severely hit. Lower remittances may also impact consumption and through that the retail sector. If the pandemic can be contained relatively quickly, we can however expect a fast recovery,” said EBRD’s Head of Albania Matteo Colangeli

“We are fully behind the actions taken by the authorities to contain the spread of the Covid-19 pandemic and the decisiveness with which they are being implemented in Albania,” has said EBRD’s Head of Albania Matteo Colangeli.

In an exclusive interview with Albanian Daily News Mr. Colangeli underlined that when it comes to the economy, it is paramount to maintain businesses liquid, protect employment, and support the income of those temporarily unable to work.“It will also be important that the authorities work closely with the banking sector on temporary measures to encourage loan restructurings and support access to finance,” he said.

In a comment on an emergency 1 billion euro Solidarity Package of measures to help companies across its regions deal with the impact of the coronavirus pandemic, Mr. Colangeli said it was also available for Albania. “While this first phase of the Solidarity Package is focused primarily on the private sector, we are also looking at ways to support liquidity at the State owned enterprises we work with. In Albania, part of this effort will include expediting the disbursement of the remaining up to EUR 100 million of our loan to KESH.”

Speaking in concrete terms on EBRD’s s performance in Albania, Mr. Colangeli, who joined the EBRD Natural Resources team in London in 2005, revealed that the Bank has been steadily stepping up its activities in the country in recent years, as demonstrated by its investments totaling more than E630m over the period 2016-19. He unveiled that a USD 50m sovereign loan for local and regional road connectivity, and a credit line for residential energy efficiency with OTP Bank had been signed for 2020.

Earlier this year, EBRD approved its country strategy for the period to 2025 which sets ambitious objectives in terms of strengthening governance across the Albanian economy, supporting competitiveness and inclusion in the private sector, and boosting energy diversification and the green economy transition, he said. “On a broader level, we will continue working with our partners in Albania to support the country on its path to EU approximation.”

Asked about the lack of project to develop the railway network, Mr. Colangeli, who holds an MSc in European Studies from the London School of Economics and Political Science and a BA in Politics from the University of Sussex, believed that network is an important enabler of sustainable economic development. According to him, together with the EU, the Bank has made available financing for the rehabilitation of the Durres-Tirana line and its extension to Rinas airport. EBRD is also providing grants to fund project implementation consultants working with Albanian Railways, which is the owner of this project and is aiming to start construction as soon as possible this year. “Through this first project, our objective is also to build capacity in the railways sector in Albania that will be useful as the country plans further investments in the rehabilitation of its network,” EBRD’s Head of Albania Matteo Colangeli said in the interview which follows:

Mr. Matteo Colangeli: We are fully behind the actions taken by the authorities to contain the spread of the Covid-19 pandemic and the decisiveness with which they are being implemented. At EBRD, we also have adapted our activities in the country to fully comply with the guidelines of the Albanian Government.

When it comes to the economy, I think it is paramount to maintain businesses liquid, protect employment, and support the income of those temporarily unable to work. The idea of a sovereign guarantee to give businesses access to working capital financing from commercial banks and enable them to pay salaries is in my view a step in the right direction. Some breathing space on taxes will be necessary for many entrepreneurs but incentives should be there for those who can pay to do so.

I also think it is important to preserve the progress made over recent years in terms of payment discipline on utilities’ bills. Supporting the income of those affected would be a preferable approach in my view.  It will also be important that the authorities work closely with the banking sector on temporary measures to encourage loan restructurings and support access to finance.

– The EBRD has unveiled an emergency 1 billion euro Solidarity Package of measures to help companies across its regions deal with the impact of the coronavirus pandemic. This is an initial response to the crisis and the Bank stands ready to do more if and when needed. Sir, is there any possibility that Albania can be part of this solidarity package?

– The Solidarity Package is available for Albania, as well as all our other countries of operation. Under this, we are able to mobilize quickly financing for our private sector clients that face liquidity constraints due to the impact of the pandemic. Funding is available also to those EBRD public sector clients that we are financing on a commercial basis, such as for example Tirana Water Company.

We will mobilize this support directly and through partnerships with commercial banks, including by scaling up our risk sharing and trade finance programs. The main purpose of the Solidarity Package is to inject short term liquidity support and enable balance sheet restructurings so that our clients can maintain their long term sustainability. While this first phase of the Solidarity Package is focused primarily on the private sector, we are also looking at ways to support liquidity at the State owned enterprises we work with. In Albania, part of this effort will include expediting the disbursement of the remaining up to EUR 100 million of our loan to KESH.

– Mr. Colangeli, first evidence show that small and medium sized enterprises have been hit and some business associations have launched appeals for government’s help. How can EBRD contribute to this vital business group of Albania?

– SMEs are a key focus for us under the Solidarity Package and we are committed to play our part in ensuring they maintain access to finance through this crisis. We are aiming to deploy working capital financing facilities through commercial banks to boost liquidity available for this target group. We already have a substantial risk sharing program for agribusiness which we are looking to expand to the tourism sector with the support of the EU and the Albanian Government.

Across all sectors of the economy, we also stand ready to guarantee part of the risk on loans extended by commercial banks to their clients with a view to unlock more lending. Beyond money, we will step up our SME advisory program with a view to help individual companies to adjust their operations and financial management to the current situation. At a systemic level, we also continue to strengthen dialogue between business community and Government, including on crisis response measures, through our support to the Investment Council and the Ministry for the Protection of Entrepreneurship.

– As I have this opportunity to talk with you, Sir, how would you assess the activity of EBRD in Albania, the Bank’s strategy in the country, and how much effective has the contribution been to its progress?

– We have been steadily stepping up our activities in Albania in recent years, as demonstrated by our investments totaling more than E630m over the period 2016-19, during which we also recorded the three top years in terms of annual investment volume since the start of our operations in the country. We maintain a strong pipeline also for this year, during which we have already signed a USD 50m sovereign loan for local and regional road connectivity, and a credit line for residential energy efficiency with OTP Bank. In addition to rolling out the Solidarity Package across all sectors of the economy, we also plan to advance this year a landmark program for tourism enabling infrastructure, as well as to support the development of solar power in Albania in line with international best practice.

– It’s impressive that official estimations show that to date, the EBRD has invested nearly 1.4 billion euro in 96 projects in Albania. Mr. Colangeli how have these projects contributed to the progress of this country and which are the main fields of interest?

– We are active across all sectors. We finance public and private infrastructure projects, particularly in transport and energy. We work with local entrepreneurs and foreign investors, directly and through forming partnerships with commercial banks. Earlier this year, we approved our country strategy for the period to 2025 which sets ambitious objectives in terms of strengthening governance across the Albanian economy, supporting competitiveness and inclusion in the private sector, and boosting energy diversification and the green economy transition. On a broader level, we will continue working with our partners in Albania to support the country on its path to EU approximation.

– In the meantime, according to you, which is assessment of the progress of the Albanian economy in 2019 and which are the expectations for this year?  Which is the expected impact of the coronavirus infection on Albania’s economy as, unfortunately, this Balkan country has not recuperated itself from the impact of the earthquake of 26 November 2019?  

– The performance of the Albanian economy in 2019 remained relatively robust with GDP growth estimated at 2.8 per cent. This is the result primarily of an expanding tourism sector, domestic consumption and real estate construction activity. On the other hand, lower rainfall (and therefore hydropower generation) together with weaker international prices for oil and ferrochrome, contributed to a deceleration of economic growth relative to previous years.

The Covid-19 pandemic will certainly have significant negative effects on a small open economy like Albania for this year. These are hard to quantify at the moment, although it is already clear that tourism and light manufacturing will be severely hit. Lower remittances may also impact consumption and through that the retail sector.

If the pandemic can be contained relatively quickly, we can however expect a fast recovery. A long lasting impact of the current crisis may be a shortening of global supply chains with Italian and other European companies looking to find suppliers closer to home. This could bring opportunities for Albania. In that respect, the opening of EU accession negotiations should certainly help in building investor confidence, especially if coupled with necessary institutional reforms focusing on the business climate.

– EBRD has been critical on the PPP projects of the Albanian government. Please can you point out some of the negative aspects of these projects and how has the government justified its decision to go on with them?

– PPPs can be a useful tool for infrastructure financing, particularly for projects with their own cashflow generation, such as for example toll roads or airports. Projects suitable for PPPs should be prioritized and prepared by the public side before being tendered through solicited and competitive processes. This may not always lead to the shortest project delivery time, but increases the chances of achieving best value for money for the taxpayer and a transparent process for interested investors. EBRD has a dedicated facility in place aimed at supporting our public sector partners to structure and implement PPPs.

– As a citizen of this country I have always wondered why no projects are implemented in the railway sector in Albania. In fact it is a common concern of the people. Why has this happened and are there any chances for an endeavor to develop this vital transportation sector?

– I think a reliable railway network is an important enabler of sustainable economic development. In Albania’s case, this would also contribute to the country’s regional economic integration and to maximizing the potential of port of Durres. Together with the EU, the Bank has made available financing for the rehabilitation of the Durres-Tirana line and its extension to Rinas airport. This will be the logical starting point for the upgrade of the country’s rail network, both in terms of improving cargo logistics and reducing road traffic in the most densely populated and economically dynamic part of the country.

We are also providing grants to fund project implementation consultants working with Albanian Railways, which is the owner of this project and is aiming to start construction as soon as possible this year. Through this first project, our objective is also to build capacity in the railways sector in Albania that will be useful as the country plans further investments in the rehabilitation of its network. Some of them are already under preparation with grants provided under the Western Balkans Investment Framework. Their implementation will ultimately depend on the Albanian Government’s transport policy priorities and the related allocation of financial resources and sovereign borrowing capacity to the railways sector./ADN