Managing fiscal risks in Albania: Challenges, comparative insights, and policy recommendations

Abstract

Fiscal risk management is a key aspect of good public financial management, especially in developing countries such as Albania. This paper presents the principal sources of fiscal risks in Albania, with particular reference to state-owned enterprises (SOEs), public-private partnerships (PPPs), and contingent liabilities arising from natural disasters. Drawing on recent fiscal reports, IMF assessments, and national budgetary documents, the paper discusses the transparency, evaluation, and mitigation of fiscal risks in the Albanian context. Although considerable progress has been made in fiscal reporting and risk disclosure, crucial gaps remain in monitoring and mitigating quasi-fiscal liabilities and climate-related risks. Comparative perspectives with regional peers are included to highlight regional trends and best practices. The findings show that while Albania has made progress, major challenges remain, particularly in integrating climate and disaster risks into fiscal frameworks and in improving the governance of SOEs and PPPs. Our examination suggests that a comprehensive and transparent fiscal risk management framework is needed to support Albania's fiscal sustainability and resilience to potential shocks. The paper concludes with practical recommendations directed to policymakers and fiscal authorities for the construction of a more robust and forward-looking fiscal risk framework.

This article is among the first to examine Albania's fiscal risks systematically by combining scenario analysis, cross-country benchmarking, and stress testing. By placing Albania's experience in regional and international contexts, the study contributes new empirical evidence on fiscal risk management in emerging economies.