When Albania began its transition to a market economy, its education was geared to meeting the productive needs of a controlled economy and the social and ideological needs of a socialist state. Expanding the economy's long-term productive capacity in a market environment and building a democratic system called for thorough reform of the education system. Rather than embark on comprehensive reform, in the 1990s Albania introduced partial reforms that--together with social unrest and the country's increasing fiscal pressures--worsened education in several ways. For example, resources devoted to education shrank. Education spending fell from over 4 percent of gross domestic product in the early 1990s to 2.8 percent in 1998. The education sector responded to fiscal pressure and low enrollment by reducing the numbers of teachers, classes, and schools. Changes in Albania's economy and education system have made schools less accessible to students in rural areas and from low-income families. Four broad tasks must be tackled to improve education in Albania: increase enrollment rates, improve the quality of education, increase public spending on education, and make better use of teachers and schools. The report ends with a technical appendix, statistical appendix, and list of references. (Contains 18 references.) (RT)