“Electoral wage increase, and less investments in municipalities” – experts warn

On the eve of the local elections of May 14th, the government is rewarding 25,000 local government employees, i.e. half of the local administration, with salary increases. Each employee of the local government units is expected to receive at least 6,000 additional lekë per month, which is promised to increase further during 2024. Experts warn of consequences for this initiative, which according to them is taken for electoral purposes. Covering salaries will require additional financial resources, which means that municipalities will have to cut spending on other items. Most likely, this will translate into less investment from municipalities.

Esmeralda Topi 

The government has decided to allocate 5 billion ALL in additional income for the salaries of local government employees over the course of two years, as part of the reform to increase the average salary in Albania.

25,000 employees of the local administration will receive at least 6,000 lekë more per month starting this May. This is the second category with the highest number of beneficiaries of salary increase, following the 36,570 teachers in the country.

The salary increase reform benefits more than half of local administration employees, specifically 54% of the total number of employees at local government units. The increase is planned to be spread over two years at the level of 17-30%.

In the first year, the increase will be at least 6,000 ALL for each employee and the annual cost is estimated at 1.8 billion ALL. The increase in the second year (2024) is planned to be even more significant, with the annual financial effect being estimated at 3.2 billion ALL. According to the government, the bill for financing the salary increase will be covered by the increase in the level of the unconditional transfer from the central budget, as well as from the local government units’ own increased revenues.

What do experts think?

Economists and local government experts see the salary increase as an initiative taken for electoral purposes, questioning the ways funds are secured to cover such increase, especially for the local government units.

The President of the Association of Municipalities, Agron Haxhimali, says that such salary increase as a whole hides obvious electoral goals.

“THE SALARY INCREASE POLICY IN THE LAST MONTH OF THE ELECTORAL CAMPAIGN IS DEFINITELY RELATED TO VOTES. THE GOVERNMENT HAD EVERY CHANCE POSSIBLE TO ALREADY INCREASE SALARIES FOR THE ADMINISTRATION AT EVERY LEVEL AT THE END OF 2022 WHEN IT APPROVED THE 2023 BUDGET, SAID HAXHIMALI, EMPHASIZING THAT IF THE GOVERNMENT DID NOT UNDERTAKE SUCH INCREASE FOR ELECTORAL PURPOSES, IT COULD HAVE WELL WAITED FOR THE SALARY REFORM TO DO THIS AFTER MAY 14th. 

Agron Haxhimali, Association of Municipalities

“In the end, all facts and arguments suggest that such an act was only taken by the government to attract more votes,” argued Haxhimali for Faktoje.

Professor Selami Xhepa also shares the same opinion. “It is quite obvious that this is done for electoral purposes, and there is no doubt about the intention of this initiative at all, as this represents a direct material interest for the local government. There is no question about that.”, says Xhepa, adding that it remains unclear how the entire financial bill of the reform will be covered.

“IN MY OPINION, THIS IS ALL ABSURD. THE FACT THAT EVEN THOSE WHO INITIATED SUCH INITIATIVE ARE NOT CAPABLE OF JUSTIFYING THE REFORM BY FIGURES RAISES BIG QUESTIONS ABOUT SUCH INITIATIVE. WE WILL TOP UP THE 83 BILLION ALREADY SPENT ON SALARIES AND SOCIAL INSURANCE BY ADDING THESE 40 BILLION. THIS MEANS A 50% INCREASE OF THE SALARY FUND, WHICH IS A LOT OF MONEY FOR ONE YEAR AND THIS IS A POLICY THAT WILL CONTINUE. THEREFORE, IT SHOULD BE SPECIFIED WHERE THESE REALLOCATIONS WILL COME FROM, WHICH SECTOR WILL THEY BE REMOVED FROM?”

Selami Xhepa, Economics Expert

Merita Toska, on the other hand, a local policy expert at Coplan, emphasizes another issue, the financial situation of municipalities.

“THESE ARE PROMISES THAT MIGHT REALLY CAUSE MANY PROBLEMS TO THE FINANCIAL STABILITY OF THE MUNICIPALITIES, AS THIS IS NOT ASSOCIATED WITH ANY INCREASE IN PRODUCTIVITY. THE COVERAGE OF THE SALARY INCREASE WILL REQUIRE ADDITIONAL FINANCIAL RESOURCES, WHICH MEANS THAT THE MUNICIPALITIES WILL HAVE TO CUT SPENDING ON OTHER ITEMS, WHICH WILL MOST LIKELY RESULT IN LESS INVESTMENT BY THE MUNICIPALITIES, AND LACK OF INVESTMENT LEADS TO LIMITED DEVELOPMENT, ETC.”

Merita Toska, Local Policy Expert

“Counting your chickens before they are hatched”

However, while all public administration employees are waiting for the first salary increase starting this month, as promised by Prime Minister Rama, the parliamentary committees that should have approved the draft law for the salary increase, have not yet started discussions.

“The laws were expected to be discussed in the parliamentary session on Thursday, and as I told you, MPs from both sides informed me that they will make proposals. I am going to propose to the committee to postpone it, because I have not yet seen the draft. In addition, the Laws Committee, which is the committee that is expected to give its opinion, did not hold its meeting today. Therefore, dear fellow MPs, it is an issue that I think deserves an even deeper examination.”, announced at the April 25 meeting, the chairman of the Economy and Finance Commission, Eduard Shalsi.

This means that the draft will have to wait in the Assembly until after May 14. With the end of the local elections, the committees will resume discussions that will pave the way for the approval of salary increases.

130,330 employees out of 184,396 thousand in total will benefit from the salary increase reform in the public administration. In other words, the salary increase will benefit 70% of the public sector in the country.