Although the capital and financial account inflows fell by 11.3% in annual terms, the overall balance of payments resulted positive and the Bank of Albania’s foreign-exchange reserves increased over the past year. The current level of this reserve is in accordance with our operational adequacy rates and could pay for 4.5 months of imports of goods and services. Improvement of the structural current account deficit should be one of our long-term policy objectives; it helps in maintaining the financial stability of our country and increasing the country¡¦s resilience to foreign shocks. Fiscal policy was generally consolidating in 2012. Budget deficit dropped by 1.2% in annual terms, estimated at 3.4% of GDP, or down by 0.3 percentage points from a year earlier. Current account deficit narrowed due to reduced public expenditures, which fell by 0.3% on a year earlier. Similarly, public revenues dropped by 0.2% in annual terms, reflecting the cyclical condition of the economy. On the other hand, public debt exceeded 60% as a percentage of GDP, reflecting the higherthan-projected rise in budget deficit and the increase in public guarantees. Bank of Albania’s attitude to this problem has always been transparent: maintaining public debt at sustainable  2  BIS central bankers’ speeches  and harmless levels for the Albanian economy and preserving financial market confidence regarding the Albanian public debt should remain the primary objective of the fiscal policy. Monetary indicators performed in line with real-economy ones, slowing down in 2012.
NBRM cannot require those banks to increase lending, but we undertake everything we can to prevent a reduction in their loan  2  BIS central bankers’ speeches  portfolios. Obviously, this is another area where we have a spillover of the negative developments in the Euro area into our economy. What will be the credit growth this year, and what do you expect it to be next year? The estimate for this year is about 7 percent, and for the next year it is somewhat higher. In which direction will the interest rates on loans and deposits move next year? The downward trend is likely to continue, although at a slower pace. The European Central Bank reduced the basic interest rate to 0.75 percent in order to stimulate the economic growth. The National Bank of the Republic of Macedonia maintains it at 3.75 percent. Why not reducing it down to 1 percent in our country, too, which will reduce the interest rates on loans as well? In a highly euroized economy as the Macedonian, it is necessary to motivate economic agents to demand Denars, not Euros. Therefore, interest rate parity on Denars and Euros must be kept at an appropriate level that stimulates the demand for Denars. In the last three years we have reduced that parity from 8 percent to only 3 percent. Further reduction is a process that depends on the resilience of the economy.