TIRANA, Dec. 26 – Yields on government securities have embarked on upward trend in the past few months and are expected to continue their gradual rise even in 2018 as the government continues to rely on the domestic market for its debt financing needs and the central bank does not expect to further ease its monetary policy.
Yields on 12-month T-bills, the government’s key instrument for internal borrowing, rose to 2.63 percent in early December, up 0.9 percent compared to a month earlier and about 2 percent last March when they embarked on upward trend.
T-bill yields hit a historic low of 1.24 percent in mid-2016 soon after the central bank cut the key rate to all-time low of 1.25 percent before climbing to 3.22 percent late December 2016.
Meanwhile, yields on 2-year notes, the government’s key instrument for long-term debt in the domestic market, rose to 3.25 percent in the latest December auction, up from 2.55 percent last June, but were down from 3.8 percent in January 2017.
Yields at a record low both internally and externally have considerably cut the Albanian government’s debt servicing needs, but costs are expected to increase as central banks are putting an end to the easier monetary policies.
Albania spent about 36 billion lek (€270 million) in debt interest rates in 2016, some 2.4 percent of the GDP, compared to about 5 percent of the GDP for about a decade until 2013 with a negative on public investment, especially priority infrastructure, health and education.
In its 2018 budget, the Albanian government expects spending on internal and external debt interest rates to gradually increase over the next three years from a current 2.4 percent of the GDP to 2.7 percent of the GDP by 2020 when Albania is forecast to pay about 51 billion lek (€380 mln) in interest rates.
The Bank of Albania organizes 3-month and 6-month T-bill auctions every month and 12-month T-bill auctions every two weeks. T-bills are issued and guaranteed by the Ministry of Finance on behalf of the Albanian government.
