How will the pension scheme affect public spending? - IMF: Ad hoc solutions with bonuses, worrying. Remove tax exemptions in agriculture
Increasing pressure on long-term spending will necessitate undertaking even more ambitious reforms.
The International Monetary Fund staff analysis estimated a cumulative increase in public spending needs of about 7 percent of GDP in the next 10 years, reaching 10 percent by 2050.
For this reason, labor market and pension reforms are considered very necessary, including bringing as many workers into formal employment and participating in the pension system, to help alleviate the pressures this scheme has on spending.
In this context, the IMF assesses that ad hoc pension increases, such as the year-end bonus announced by the authorities in November 2024, should be treated with caution, so as not to become permanent.
Unlike this approach, the IMF believes that other interventions could be in favor of social protection and keeping spending under control.
“Support for vulnerable families is better channeled through well-targeted social assistance schemes. More ambitious revenue reform, for example, by reducing inequality in the tax treatment of some sectors of the economy, such as agriculture, could help Albania achieve its full tax revenue potential.
"Continued progress in strengthening governance and reducing informality would help raise tax collection towards the EU average," the latest IMF report states.
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