Durres Port cash stash linked to euro’s free fall in Albania
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- Despite an early June emergency intervention by Albania’s central bank, Europe’s single currency continues to trade at a 10-year low against the Albanian lek, with a spiral of negative effects for the country’s exporters, local traders, savers and recipients of remittances in Albania’s highly euroised economy
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TIRANA, June 26 – The seizure of €3.5 million in cash at Albania’s main port of Durres this week in alleged drug profits has apparently confirmed speculations that money illegally entering the country is one of the main reasons behind euro’s free fall against Albania’s national currency.
Police authorities in Albania seized about €3.5 million in two Toyotas on a trailer entering Albania from Belgium after being alerted by their European partners, in one of the largest stashes of cash in the country.
The main opposition Democratic Party claims the stash belonged to one of the most dangerous drug gangs operating in the country, allegedly acting under government protection to launder it in the booming construction industry and build new towers in Albania’s capital, Tirana.
The opposition Democrats and some economy experts have earlier linked the national currency’s constant strengthening of Albanian lek to alleged illegal euro inflows resulting from the peak 2016 cannabis cultivation and ongoing drug trafficking in the country, considered a major cannabis producer and a key transit route for cocaine and heroin for European markets.
Despite an early June emergency intervention by Albania’s central bank, Europe’s single currency continues to trade at a 10-year low against the Albanian lek, with a spiral of negative effects for the country’s exporters, local traders, savers and recipients of remittances in Albania’s highly euroised economy.
The euro has fluctuated at about 126 lek in the past couple of weeks, somehow stabilizing following its free fall until the June 6 Bank of Albania decision to buy excess euros from the local currency exchange market in a bid to put an end to negative effects from the national currency’s uncommon rapid strengthening.
However, at about 126 lek this week, Europe’s single currency is yet far below the mid-January peak level of about 134 lek for this year and is about 10 percent down compared to mid-2015 when the euro’s five-year reign of about 140 lek came to an end.
While official data don’t hint of an improvement in the current account, a key indicator of a country’s economic health measuring the flow of goods, services and investment into and out of the country, some experts say the seizure of €3.5 million stash illegally entering the country could be proof that alleged illegal euro inflows are having a key impact on the strengthening of the national currency due to excess euro supply.
“The €3.5 million seized in Durres is a small amount. We don't know if there has been other euro inflows entering the country this way from illegal sources. We can now witness that illegally earned money has entered the market and of course has had an impact on the euro's depreciation at the local currency exchange market,” economy expert Arian Kadareja is quoted as saying by Ekonomix, a local portal focused on economy.
Banking expert Elvin Meka says informal channels is only one of the reasons whose impact cannot be easily measured due to unknown illegal cash amounts that could have entered the country.
“When taking into consideration the €3.5 million seized in Durres, that amount doesn't have any measurable effect, but no one knows how much money has entered the market before without being caught by the authorities," Meka says.
“Informal channels is one of the reasons for euro's depreciation. But that does not explain everything. I have never ruled out the euro's weakening as a result of these informal channels. However, there are other elements that have had an impact on the currency exchange fluctuations. One of them could be the arrival of tourists and the inflow of Europe's single currency,” he adds.
Albania’s central bank and the Albanian government argue the strengthening of the national currency, lek, is a result of the Albanian economy recovering to a 9-year high of 3.8 percent in 2017 and higher euro inflows from FDI-related projects, the tourism industry, exports and remittances.
The euro fluctuations have a considerable impact on the Albanian economy, especially the country's poorly diversified exports, two-thirds of which are destined for Eurozone countries.
Albania’s economy is highly euroised with half of total credit and savings denominated in Europe’s single currency which has forced the country’s central bank to undertake a de-euroisation strategy. The euro is a common currency in real estate and car trade in Albania.
Experts say the euro could still lose ground in the next few months as Albania heads to its peak tourist season and Albanian migrants come home to spend their holidays, further increasing euro supply in the local market and leading to a new strengthening of lek.
However, the central bank’s continued euro buying operations are expected to keep Europe’s single currency fluctuating at about 126 lek until next September and trigger a hike only by the end of the year as tourist numbers fall and major energy-related projects complete their investment stage.
Only 1 percent seized
Europe’s law enforcement agency, Europol, estimates the amount being recovered from crime proceeds is barely at 1 percent even in the European Union, where Albania is hoping to launch accession talks.
“The amount of money…being recovered in the EU is only a small proportion of estimated criminal proceeds: 98.9 percent of estimated criminal profits are not confiscated and remain at the disposal of criminals,” according to a Europol report.
Albanian law enforcement authorities seized about €9 million in suspected money laundering transfers and bank accounts in 2017 with the majority of identified cases originating from drug trafficking and cultivation, according to an annual report by the country’s Financial Intelligence Unit.
Meanwhile, the Agency for the Administration of Seized and Confiscated Assets, says it has put up for sale 40 assets, worth about $5.5 million confiscated because of money laundering from criminal proceeds.
Albania turned into Europe’s largest outdoor cannabis producer in 2016 when police said they destroyed 2.5 million cannabis plants spread over a 213 hectare area nationwide, a 3-fold increase compared to the whole of 2015. The government claims the cannabis cultivation phenomenon came to an end in 2017, but international reports continue placing Albania as a source country for cannabis cultivation and a transit route for cocaine and heroin trafficking to Western Europe.
In late February 2018, Albanian police seized a record 613 kilos of Colombia cocaine with an estimated market value of €180 million at the country’s biggest port of Durres, hidden in a container of bananas.
