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imageTIRANA: The International Monetary Fund acknowledged Albania's reform efforts on Tuesday and urged it to tighten its budget to meet an ambitious primary surplus goal of 0.3 percent of gross domestic product in 2016.

Poor revenue collection forced the Adriatic country, one of the poorest in Europe, to cut its budget spending in September. Keen not to lose the IMF's money and reluctant to raise taxes, the two-year-old Socialist government has reported some success in the last two months in tackling tax evasion.

After inconclusive talks in July on Albania's 330.9 million euro ($354 million) aid programme, the IMF team said the government had met all its quantitative targets and that its reform of the energy sector, plagued by theft and a burden on the budget, was already "yielding fiscal savings".

"Fiscal consolidation is expected to continue in 2016 with the budget aiming for a primary surplus of 0.3 percent of GDP (gross domestic product)," the IMF's team leader Anita Tuladhar told reporters. The 2015 deficit target is 4 percent of GDP.

Tuladhar said the budget was "designed to allow sufficient room for growth-supporting capital investment while enabling public debt to decline over time" and urged the government to keep working to improve tax collection.

Flanking Tuladhar in the conference broadcast live, Finance Minister Shkelqim Cani ruled out tax hikes.

Economy Minister Arben Ahmetaj said public investment in 2016 would be a "record $800 million".

The IMF saw Albania's economy growing 2.5-2.75 percent in 2015 and between 3 and 3.5 percent in 2016, recovering from 1.1 percent growth in 2013 but half the growth rate in the years leading up to the 2008 global crisis.

Tuladhar saw growth coming from foreign direct investment and rising domestic demand, funded by a gradual pickup in bank lending. Spooked by bad loans accounting for 20 percent of total loans, banks have tightened their criteria.

"Inflation is expected to stay low, around 2 percent, in part reflecting globally low price pressures and output still below potential," she added.

Copyright Reuters, 2015

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