July 17, 2013 / 3:17 PM / 4 years ago

Albania raises wages despite revenue shortfall

* Albanian government raises wages

* To be replaced in Sept after losing June elections

* PM sees spending cuts in new budget review

TIRANA, July 17 (Reuters) - Albania’s outgoing government raised wages on Wednesday despite a revenue shortfall and rising public debt, brushing off calls for fiscal tightening from the World Bank and central bank.

A leftist coalition led by the Socialist Party will take power in September after winning a landslide election in June on promises to cut taxes for small businesses, create jobs and modernise the agricultural sector.

On Wednesday current Prime Minister Sali Berisha said pensions will go up by 4 percent while state sector wages will rise 5.4 percent, costing the 2013 budget 2.5 billion leks ($23.36 million).

Keeping a promise made before he lost June’s elections, Berisha rammed through the move three weeks after the finance ministry reportedly said there was no money.

“The views that there will be no money for wages and pensions are views of panic, spread with very malicious intentions,” Berisha told a televised government meeting.

“At the present rate of revenue collection, there is money for every wage and pension...The fund of wages (payments) is 100 percent guaranteed.”

He admitted the incoming government of Socialist Party leader Edi Rama had to revise the budget and it “had all the possibilities to cut other spending, not wages and pensions”.

Soon after the Socialists won, Central Bank Governor Ardian Fullani said government spending before the campaign posed a risk to economic stability.

In the first five months of the year public spending rose 13.3 percent while revenue slipped 0.2 percent. Over the same period the budget showed a deficit of 38.3 billion leks ($353.84 million), 1.1 times higher than a year ago, Fullani said.

Ilir Beqja, the Socialists’ programme secretary, complained revenue from customs and taxes had fallen 200 million dollars short of the budget target, and they feared it might grow more given the poor condition of Albania’s economy.

Impoverished Albania has avoided recession, with gross domestic product growth of 1.7 percent last year and in the first quarter of 2013, yet that growth is not trickling down to most of its 2.6 million people.

$1 = 107.0300 Albanian leks Reporting by Benet Koleka, editing by Jason Neely

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