Had this happened, the króna would probably have plunged in the meantime and not recovered before prices and wages had adjusted. But the problem was not restricted to non-residents. Residents, including Iceland’s pension funds, allocate substantial funds that must be invested on a continuous basis. With the economy paralysed and the Treasury’s ability to fund a large deficit over the next few years uncertain, domestic institutional investors also became reluctant to invest in domestic assets. Under these conditions, central government financing would have been extremely challenging, which would have undermined exchange rate stability still further. The third reason for the capital controls was the shaky balance sheets of the newly established financial institutions and the other financial firms that survived the onslaught, however briefly. Their balance sheets were fraught with uncertainty and potentially unstable. BIS Review 138/2010  1  A considerable share of their deposits could prove unstable as well. The balance sheets of households and businesses were likewise in a state of disarray. In the absence of exchange rate stability, it would be extremely difficult to restructure the finances of Iceland’s households, corporations, and banks. Prerequisites for capital account liberalisation The foregoing discussion should make it clear that the capital controls will not be lifted in full until confidence has been restored to the extent that their removal will not cause prolonged instability.
Ardian Fullani: Recent economic developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the Joint Press Conference of the International Monetary Fund (IMF) mission, the Ministry of Finance and the Bank of Albania, Tirana, 9 March 2010. *  *  *  Honourable Mr. Minister of Finance, Honourable Mr. Bell, Honourable participants, During the last two weeks we have had an intensive dialogue with the IMF Mission, which visited Tirana in the framework of periodic consultations in terms of the observance of Article IV. During these discussions there is appraised the good performance of the Albanian economy during the past year and there is also emphasized the need for pursuing prudent economic policies, designed and implemented in the context of strengthening the macroeconomic and financial stability. Also, special attention has been paid to the need for ongoing structural reform that will support our long-term economic growth. The Albanian economy has recorded a positive economic growth during the past year and has successfully tackled the direct and indirect shudders of the global economic crisis. Moreover, the Albanian economy has passed the test, by maintaining the domestic economic and financial balances, which serve as a prerequisite for a sustainable and long-term growth. Thus, inflation rate fluctuated around 2 to 3 percent during 2009; the country’s external balances have shown correction signs, while the Albanian banking system remains robust and well-capitalized. However, the economic growth rate slowed down significantly during 2009.