Second Environmental Performance Review of Albania

Chapter 5: Economic instruments and expenditure for environmental protection73MoEFWA budget planning ceilings for 2010-2012are defined in the 2009 DCM on Approval of Macroeconomicand Fiscal Indicators for 2010-2012, No.21 and the 2009 Instructions of the Ministry ofFinance on the Preparation of the State Budget andSpecial Funds, No. 20.Albania adopted the Classification of the Functionsof Government (COFOG) budget classification in2002. The MoEFWA budget is organized into fiveprogrammes: Planning, Management, andAdministration; Environmental Protection; Supportfor Fishery Sector; Wastewater Administration; andForest Administration Programme. Expenditure isfurther broken down by expenditure for salaries andsocial security, operational expenses andinvestments. For the period 2009-2012, salaries andsocial security cover approximately 50 per cent of theMinistry’s budget, and operational expenses (“Othercurrent expenses”) 20-25 per cent, depending on theyear of reference. Environmental investments alsoaccount for approximately 25 per cent of the budget(Table 5.7).There was an annual budget increase of 2.7 per centin 2010, 6.2 per cent in 2011, and 7.8 per cent in2012 (Table 5.7). These net increases, given thegeneral level of inflation, indicate the Government’scommitment to investing in the environment, even ifthere remains a considerable gap between actualfunding and the funding needed to cover thecountry’s environmental protection needs andpriorities. Nonetheless, the fact that these increasedallocations are planned to take place in anunfavorable macroeconomic environment isnoteworthy.In the 2009 MoEFWA budget (Table 5.8), 64 percent of allocations was directed to the ForestAdministration Programme. The EnvironmentalProtection Programme was the second largestprogramme, absorbing 17 per cent of the Ministry’sbudget, followed by the Support for Fishery SectorProgramme which was allocated 14 per cent. It couldbe expected that the recent changes in the ownershipof the country’s forests, the majority of which havebeen transferred from the ownership of the State tothat of LGUs, could have an impact on the relativeshare of forest management in the Ministry’s budget.Among other things, this structural change hastriggered a decline in the size of staff on the payrollof the Ministry (Chapter 8).Environmental investmentsInvestments in environmental infrastructure arefunded by the State budget and donor contributions.Environmental investments are planned in the midtermbudgets of MoEFWA and MoPWTT.Investment plans are executed based on fundingapproved by the National Assembly.The increase in the level of investment that can beobserved between 2009 and 2011 is primarilybecause of investments in priority areas such asrehabilitation of hotspots, solid waste facilities(landfills), rehabilitation of wastewater collection andconstruction of new wastewater treatment facilities(Table 5.9). The majority of funding for investmentscame from MoPWTT in these priority areas.Despite improvements, resources for implementationof the ECS are still limited. To increase resources forthe environment, article 87 of the 2002 Law onEnvironmental Protection and the ECS foresee theestablishment of an Environmental Fund. The ideahas been circulating ever since the first EPR in 2002;some concrete steps have been taken and there arereferences to the Environmental Fund in the new Lawon Environmental Protection. The Fund, if and whenestablished, will finance environmental investmentprojects using a cross-sectoral approach, i.e. withinthe competence of several ministries, includingactivities such as solid waste management,wastewater collection and treatment, and energyefficiency. Additionally, it is envisaged that the Fundwill cover the needs of the Environmental ProtectionProgramme.At the time of this review the Environmental Fundhad not been established as a separate budgetprogramme in MoEFWA, and the rules of itsoperation and sources of funding had not been set outin a relevant DCM. However, according to the Lawon Environmental Protection, it is expected that aninter-ministerial committee composed ofrepresentatives from line ministries involved inenvironmental programmes would run the Fund.5.5 International assistanceOver the past decade, Albania has continued toreceive international financing for achievingdomestic objectives and meeting internationalobligations, although external assistance to Albaniahas been lower in per capita terms when comparedwith neighbouring countries with similar incomelevels. ODA has steadily decreased as a share of thecountry’s GDP, attaining 3 per cent in 2009 ascompared with 8.4 per cent in 2000.Grants as a type of financing have decreasedsubstantially since 2000. The simultaneous increasein the level of loans and transit from soft loans