BoA concerned by the extensive use of euro transactions in Albania

TIRANA, March.24 – BoA has confirmed with its research data that the widest used currency in Albania is the euro, taking the traditional role of confidence once possessed by the dollar, especially during the first transition years. Euro is becoming prominent in all the function previously done by the dollar like housing projects, airplane tickets, service sectors and deposits in banks.
The real inflation rate thus cannot be a reliable figure because a lot of the transactions are not done in the domestic lek. Moreover, the extensive use of foreign currency makes monetary policies less effective.
In the most recent study addressing trends in monetary policy BoA says that there is a very high degree of euro transactions that makes monetary policy escape the parameters of developed financial market requirements. It also adds that the money market is characterized by extreme versions of liquidity, either lack of it or surplus. Addressing the efficiency of monetary policies BoA illustrates the problem with an example. If the bank operates to, lower or increase the value of lek, it will only touch the sectors that operate in domestic currency and not the entire economy. This would leave indifferent a large part of the economy, such as the real estate sector or even construction that use the euro. This would put the latter under the influence of the Central European Bank.
Euro entered the markets in 2001 and even then within the year the dollar presence in Albania was lowered by 30 percent. The use of the foreign currencies (euro or dollar) has been dependent on macroeconomic and financial stability with every crisis provoking a larger use of currencies with confidence. Actually the confidence level explains the phenomena better than the difference between interest rates between different deposits. The later is no more than 0,7 percent.