Albania's external debt marked the strongest annual growth in three decades as a result of meeting the financing needs triggered by the November 26, 2029 earthquake and the 2020 pandemic crisis.

This increase brought the total foreign liabilities to ALL 7.7 billion with an increase of 16% compared to 2019, according to the Ministry of Finance. The increase in this measure was caused by the issuance of a new Eurobond of EUR 650 million and the disbursement of quotas to the IMF of more than EUR 170 million.

As can be seen from the table below, EUR 835 million or 78% of this amount went to support the budget. Following the budget, the energy sector was financed with EUR 106 million, which were foreign debt financing. The transport sector was financed with EUR 71 million, water supply with EUR 38 million, health with EUR 8 million were the sectors that were mostly financed with foreign debt in 2020.

The increase in public debt on this scale is putting pressure on budget expenditures for debt service. The stock of public debt reached over ALL 1.2 trillion at the end of 2020 and in relation to Gross Domestic Product marked 77.8%. According to official data from the Ministry of Finance, during 2020, the increase over the debt stock was over ALL 111.7 billion or EUR 908 million, as a result of unusual events related to the earthquake and pandemic.

Referring to the forecasts of the Ministry of Finance in the baseline scenario according to which interest rates over the medium term will remain at levels comparable to current rates and the debt stock in gross terms will be accompanied by an increase in line with fiscal needs, it turns out that government debt in absolute terms could reach up to about ALL 50 billion at the end of 2023. Debt costs in relative terms to GDP and budget revenues are expected to increase.

Over the past five years, foreign borrowing has averaged about 17% of the government's total loan needs. The main sources of funding remain multilateral and bilateral resources, which have been mainly used to finance priority projects, as well as development policies and reforms undertaken by the government. These resources have had a significant impact mainly in terms of optimizing debt costs and securing the currency needed to service foreign currency debt obligations. But during 2020, the trend changed, as external financing met over 80% of new debt needs in 2020.

The external debt portfolio, despite the diversification of recent years, is dominated by over 70% of the Euro currency, making it sensitive to EUR / LEK exchange rate fluctuations.

Monitor