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Achieving economic growth is an important goal of any country. However, in recent years it has increasingly been realized that economic growth is a necessary but not a suffi cient condition for human development. Albania provides a good example of a country which has historically enjoyed a respectable GDP growth rate and yet failed to translate this positive development into a satisfactory level of human development. Offi cial education spending is around 3 percent of GDP—much lower than most high growth emerging economies. Overall, the education system is under funded, but relatively effi cient in its use of inputs. However, some effi ciency measures may critically affect quality and, subsequently, demand. Spending composition and fi nancing arrangements should be signifi cantly enhanced to support the needed improvements in secondary enrollment, in higher education outcomes and in quality. The relatively large capital investment program and wage bill have left little room for spending on other teaching inputs that can affect quality. Across the transition countries are increasingly focusing on decentralization of decision-making authority to lower levels of government. The Albania has not been excluded from this phenomenon. Several years on, we fi nd that the process has progressed; the central government has delegated the administration of many activities to lower levels of government. While service responsibilities have been delegated or devolved, central governments are often reluctant (and often for valid reasons) to give up control over revenues.