The 2027 budget further increases the tax burden on consumers while public spending lags behind in human capital. 62% of additional tax revenue will be secured from VAT and excise duties, while corporate profit tax contributes only 2.4% of the increase.
Capital investments grow by 14.4%, absorbing over one-fifth of the budget, but education funding increases by only 4%, while the health insurance fund grows by just 1.5%.
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No general salary increase is planned for public administration, while 81% of additional pension funds are distributed as bonuses that are not guaranteed on an ongoing basis.
The budget deficit widens to 68.2 billion lekë in 2027, even though in the first nine months of 2026, the budget recorded a record surplus of 70.3 billion lekë, mainly due to unrealized spending.
Experts assess that this budget structure weighs heavily on consumption and labor, while education, healthcare, and agriculture remain underfunded.
The 2027 budget will rely increasingly on consumption taxes, which are borne primarily by citizens, while in the distribution of public funds, investments in physical infrastructure continue to take priority over relatively low funding for education and healthcare.
While consumers will contribute more to the growth of fiscal revenue, public services that directly impact quality of life and human capital development are not benefiting from the same pace of fund expansion.
According to fiscal indicators from the 2027 draft budget, for every 100 lekë of tax revenue the government expects to collect in 2027, about 42 lekë will come from VAT and excise duties alone, compared to 40 lekë in 2026.
In contrast, the weight of corporate profit tax will fall from 7.6% of total revenue to 7.3% next year. Of the approximately 55.4 billion lekë in additional tax revenue, 34.3 billion lekë, or 62%, is expected to be secured from VAT and excise duties alone — taxes collected directly on consumption and passed through to prices.
On the other side of the budget, public spending is projected to increase by 69.3 billion lekë compared to 2026, reaching 976.1 billion lekë, a figure that for the first time approaches the value of 10 billion euros.
Over one-third of this increase will be directed toward capital investments, which grow by 14.4%, reaching 201.5 billion lekë.
Meanwhile, funding for certain education and healthcare programs is growing more slowly than the projected inflation of 3%, limiting the real purchasing power of available funds for these services.
This disparity in funding rates is particularly significant for our country, which is facing population decline, emigration, and labor shortages.
Albania continues to devote 20% of public resources to capital investments, far more than comparable countries in the region, while education, healthcare, and social protection receive a much lower share.
According to the World Bank, during 2015–2024, these three sectors together absorbed just over half of public spending in Albania, compared to 56% in the Western Balkans and 71% in the European Union.
Even in social protection, a considerable portion of additional funds for pensioners will be distributed through bonuses, which do not constitute a permanent increase in the base pension.
Meanwhile, funding for healthcare and basic education remains under pressure from rising costs and growing needs.
According to economics expert Pano Soko, the budget continues to rely on a fiscal model that weighs primarily on consumption and labor, while failing to adequately address wealth taxation and the fight against tax evasion by large economic groups.
“The fiscal burden continues to weigh on broad consumption and honest labor, while bypassing real wealth taxation and closing evasion channels among oligopolies,” says Mr. Soko.
According to him, public investments also remain concentrated primarily in road infrastructure, with high costs per kilometer and often questionable impact on long-term economic productivity.
Meanwhile, essential sectors like education, healthcare, and agriculture continue to have insufficient funding. Experts express concern that the budget distribution model shows a distortion in the relationship between citizens’ fiscal contribution and the benefit they receive through public services.
The weight of taxes on consumers rises, while that on business profits declines
The 2027 budget will rely increasingly on consumption taxes, while the share of corporate profit tax in fiscal revenue will continue to decline.
According to fiscal indicators from the 2027 draft budget, revenue from VAT and excise duties will account for 41.7% of total tax revenue, excluding social and health contributions, up from 40.3% projected for 2026.
In absolute terms, the government expects to collect 356 billion lekë from VAT and excise duties in 2027, up from 321.7 billion lekë in 2026, an increase of 34.3 billion lekë, or 10.7%. Corporate profit tax is expected to bring in 62.1 billion lekë, up from 60.7 billion lekë in 2026, an increase of only 2.2%.
The difference is also notable in the contribution these categories will make to the additional fiscal revenue. Of the approximately 55.4 billion lekë increase in tax revenue in 2027, about 34.3 billion lekë, or 62%, is expected to be secured from VAT and excise duties alone.
Profit tax will contribute about 1.35 billion lekë, or only 2.4% of the projected increase. VAT, which is the largest source of tax revenue, is included in the prices of goods and services and is borne to a considerable extent by consumers.
The same applies to excise duties on fuels, tobacco, and alcoholic beverages. As a result, a significant portion of budget financing is secured through the daily spending of households.
The growth in revenue from these taxes is partly linked to changes in tax rates made in the 2027 Fiscal Package. Budget collections from consumption taxes, as in previous years, are coming largely from price increases.
Albania more dependent on consumption taxes than the European average
The structure of fiscal revenue in Albania differs significantly from that of European Union countries, where a larger share of budget financing comes from taxes on labor and capital. According to the latest Eurostat data on tax structure, in 2024 consumption taxes accounted for an average of 26.8% of tax revenue in the EU. For example, VAT revenue in the 27 EU countries accounted for about 18.3% of tax revenue in 2024, while in Albania the weight of VAT in tax revenue is more than 30%.
In Albania, VAT and excise duties alone are projected to secure 41.7% of tax revenue in 2027. The difference of about 15 percentage points compared to the European average is significant. According to the OECD, in 2023, profit tax accounted for an average of 11.9% of tax revenue in member countries, compared to 7.3% projected for Albania in 2027.
The tax structure in OECD countries also shows a more diversified reliance among financing sources. In 2023, VAT represented an average of 20.5% of tax revenue, while other taxes on goods and services 10.8%. Together, these categories secured 31.3% of revenue, compared to 41.7% that Albania expects to collect from VAT and excise duties alone.
The other half of revenue from labor and other taxes
In addition to consumption and profit taxes, about 51% of projected tax revenue for 2027 is expected to come from other sources. The most important portion consists of social and health insurance contributions, as well as personal income tax.
In 2027, personal income tax revenue is projected at 107.4 billion lekë, while social and health contributions at about 210.3 billion lekë. Taken together, these two categories represent about 37% of tax revenue.
Of the additional tax revenue of 55 billion lekë, taxes on labor are estimated at 17.3 billion lekë, contributing 31% of the increase. A portion of these obligations is paid directly by employees, while another portion by employers. Budget projections show that the growth of fiscal collections in 2027 will rely primarily on consumption, while the relative contribution of profit tax will continue to diminish.
Defective redistribution
The 2027 budget projects a significant increase in public spending, but the distribution of funds continues to favor investment in physical infrastructure and combat forces, while education, healthcare, and human capital development remain relatively underfunded. Of the approximately 69 billion lekë in additional spending the government plans for next year, over 25 billion lekë will go toward increased capital investments. In contrast, funding for some basic services is growing more slowly than inflation, limiting opportunities for their real improvement.
According to the draft budget, public spending is expected to reach 976.1 billion lekë in 2027, up from 906.8 billion lekë in the revised 2026 plan. The increase of 69.3 billion lekë, or 7.6%, creates room for additional financing in the economy, but distribution priorities show that physical investments continue to take a considerable share of new resources. Capital investments are projected at 201.5 billion lekë, an increase of 14.4% compared to 2026, nearly double the pace of overall spending expansion. They will represent about 20.6% of the budget and 6.9% of Gross Domestic Product.
The bulk of investments is directed toward transport infrastructure, energy, defense, and other construction projects. In the list of projects with domestic and foreign financing, the Ministry of Infrastructure and Energy administers about 75 billion lekë next year, with an annual increase of 23%, while the Ministry of Defense has a budget of 76 billion lekë, with an annual increase of 11%. Just for road transport, 35 billion lekë are planned, for railways about 9.4 billion lekë, and for maritime transport 10 billion lekë. The new Commercial Port project at Porto Romano receives about 9.9 billion lekë in financing in 2027.
These investments may improve transport connections and logistical capacities, but the concentration of funds in large physical projects creates a contrast with the funding pace of sectors that directly impact workforce quality and long-term productivity. For Mr. Soko, this is particularly true in education, where funding of 2.3% of Gross Domestic Product remains less than half of the 5% target promised for years.
According to him, this level is much lower than the regional average and does not respond to the needs for qualitative reform of schools and universities. Low spending on research and development also demonstrates the absence of a vision for building a qualified workforce, which, according to the expert, is one of the factors driving young people to leave the country. He identifies a similar situation in healthcare, where funding has for years fluctuated at 2.9–3.1% of GDP, compared to a level of about 7% that Mr. Soko considers necessary.
The expert emphasizes that a significant portion of additional funds goes to payments for concession contracts and Public-Private Partnerships, limiting resources that could be used directly for healthcare services. As a result, citizens continue to bear a considerable portion of the costs of basic services and medications from their own incomes.
Education and healthcare funding growth barely at inflation level
The country’s economy and budget revenues have continued to grow year after year, but they have not been distributed evenly among sectors. For next year, budget spending will increase by an average of 7%, while spending on education and healthcare grows by only 4%. While capital investments will record an annual increase of 14.4% in the 2027 budget, funding for education and healthcare programs expands at much lower rates, barely above inflation.
Compared to this year’s plan, the Ministry of Education’s funding in 2027 has increased by about 2.7 billion lekë, or 4%. About 1.2 billion lekë of this addition goes to university education, while funding for basic and preschool education has a much lower increase of only 1.6%. This distribution is particularly significant given that Albania is facing population decline, emigration, and a shortage of qualified workers.
Investment in early education, teaching quality, and vocational training is the main path to improving the productivity of generations entering the labor market. According to the World Bank, Albania spends only about 0.08% of GDP on early education, a level approximately ten times lower than the OECD country average.
A similar situation is observed in healthcare service funding. According to draft budget tables, the health insurance fund, which finances healthcare services, is projected to increase from about 69.3 billion lekë in 2026 to 70.3 billion lekë in 2027, or only 1.5%. This increase is half of projected inflation.
Healthcare funding must cover not only infrastructure and equipment needs but also costs for medical personnel, medications, materials, and patient treatment. Meanwhile, the draft budget projects an increase in the volume of hospital services and specialized treatments in the coming years.
The difference between the growth of funds for infrastructure and military equipment raises concern that the expansion of physical capacities may not be accompanied by the same improvement in services without a prepared and educated human capital. The disparity in fund distribution is particularly evident in agriculture.
According to Mr. Soko, although the sector generates about 15% of GDP and employs over 30% of the active labor force, it consistently benefits from less than 0.6% of GDP from the state budget. This lack of support, according to him, is contributing to the decline of livestock farming, abandonment of agricultural land, and growing dependence on imports of basic food products.
“In essence, this budget consolidates the privileges of sectors closely tied to state contracts, while leaving the pillars of citizen welfare without protection and without perspective,” he added.
2027 without general salary increases, pensioners get an average of 1,500 lekë extra per month
The 2027 budget projects record growth in public revenues and spending, as well as an expansion of the budget deficit, but without a general salary increase in public administration, while additional funds for pensions and bonuses translate into a theoretical average benefit of about 1,500 lekë per month for old-age pensioners.
The revenue growth will also be supported by the new fiscal package, which provides for changes in dividend taxation, Value Added Tax, and other taxes, increasing the fiscal burden on certain categories of businesses and consumers.
However, the expansion of financial resources available to the government will not be accompanied by a general increase in administration salaries. The salary fund for 2027 is projected at about 122 billion lekë, only 1.7% more than in 2026, or an addition of about 2 billion lekë.
This marks a sharp slowdown compared to 2026, when the salary fund increased by 12.8%, or about 13 billion lekë. Exceptions include special categories, such as State Police employees, for whom differentiated salary increases are planned. On the other hand, for pensioners, funds projected for new policies and bonuses increase from 11.6 billion lekë in 2026 to 24 billion lekë in 2027.
The addition of 12.3 billion lekë, if distributed equally among the approximately 673,000 old-age pensioners expected next year, would represent an average of 1,529 lekë per month, or about 18,350 lekë per year per pensioner. But this amount is not equivalent to a permanent increase in the monthly pension. Of the additional financing, 10 billion lekë goes to the increased bonus fund and only 2.35 billion lekë to new pension policies.
About 81% of the financial addition is thus linked to bonuses, while only 19% to new pension policies. Although the budget provides more money for pensioners, the overwhelming majority of additional financing does not automatically represent a permanent increase in the base pension. The concrete benefit will depend on how funds are distributed and which categories benefit.
Rising deficit for 2027, while the government fails to realize planned spending
The government has planned to further increase the budget deficit in 2027, to 68.2 billion lekë, from 63.7 billion lekë programmed for 2026, even though budget execution data show that institutions are not managing to spend the funds at their disposal.
At the end of the first nine months of 2026, the budget recorded a record surplus of 70.3 billion lekë, about 45 billion lekë more than the planned level. About 95% of this difference came from unrealized spending and only 5% from additional revenue.
To realize the programmed annual deficit of 63.7 billion lekë, the government must move from the surplus of 70.3 billion lekë at the end of September to a deficit of 134 billion lekë in just the last three months of the year. Although the concentration of spending at year-end is characteristic of the budget, the scale of the difference raises questions about the feasibility of fiscal programming.
The contradiction becomes more evident in public investments. For 2027, the government aims to increase them by about 22 billion lekë, bringing them to 201.5 billion lekë, while in the first nine months of 2026 it had realized only 75.2% of the capital investment plan. Planning a higher nominal deficit does not in itself pose a problem for fiscal sustainability, as its weight relative to GDP remains around 2.3%.
But budget execution data raise a more fundamental question: How realistic is it to continually program more spending and financing when a portion of approved funds cannot be converted into investments and public services?
The inability to execute the budget deepened further in this nine-month period, casting doubt on the government’s aims to further increase the fiscal burden and budget revenues through it, at a time when the capacity to spend these funds is worsening year after year.
The government, instead of correcting this anomaly and turning taxes into services and investments for citizens, has decided to shift the burden once again, further increasing the fiscal burden for next year, which citizens and the economy will have to bear.
Although the new 2027 Fiscal Package provides for a reduction in VAT on food from 20% to 6%, the increase in VAT from 20% to 21% for all other products almost offsets this reduction. Additionally, businesses will be taxed on dividends at 15%, up from the current 8%. But while the government is raising the fiscal burden to the highest level in the region, on the other side it is showing itself to be defective in realizing public spending, worsening year after year.
Historical data show that the ratio between revenue and spending has changed significantly. In the first nine months of 2019, for every 100 lekë collected, the government spent about 101 lekë. In 2026, for every 100 lekë in revenue, only 89 lekë are spent. While the state manages to collect planned funds from taxes and other sources, a portion of programmed spending is not realized within the period, also postponing the effects these funds would have had on the economy.
The scale of non-realization compared to plan raises questions about the quality of budget programming and the ability of institutions to execute funds within deadlines. Unlike savings that may come from reducing administrative costs or improving spending efficiency, the non-realization of public investments according to the programmed calendar creates negative effects on the economy.
Funds planned for roads, water supply, schools, hospitals, and other public infrastructure aim to finance projects that generate economic activity during construction, improve services and productivity, and stimulate economic growth over the long term.
If in the past the main challenge of public finances was securing sufficient revenue to cover spending, data from recent years shift attention primarily to the capacity to realize programmed spending and especially to the effectiveness of funds spent. / Monitor.al
