TIRANA, March 29 – Albania’s central bank says it is not planning to make any intervention in the exchange rate regime following a considerable strengthening of Albania’s national currency in the past few days.
“The Bank of Albania pursues a free-floating exchange rate regime, determined by demand and supply. The policies of the Bank of Albania do not aim at reaching a certain exchange rate regime,” governor Gent Sejko said this week as the national currency traded at 131.13 lek, up from a nine-year high of 129 lek last week.
“The Bank of Albania intervenes in the market in case of sharp fluctuations in the exchange rate, and the occurrence of circumstances specified by the central bank. In the concrete case, we deem that the circumstances specified for intervention are not in place,” said Sejko.
Albania’s national currency, lek, has gained significant ground against Europe’s single currency during the past couple of months in an uncommon trend for the beginning of the year which some experts explain with a psychological effect from the de-euroization package that Albania’s central bank has recently unveiled.
“For the moment, the exchange rate has re-stabilized after last week’s market fluctuations. We do not forecast other fluctuations, but I emphasize once again, that the exchange rate is determined by the demand and supply in the market. It is not an objective of the Bank Albania to intervene in the exchange rate,” Sejko told journalists.
Albania’s central decided to keep the key interest rate at a record low of 1.25 percent this week, in an ongoing easier policy it has been following since mid-2016 in a bid to stimulate lending and consumption.
The national currency, lek, has been on a gradual upward trend that began in mid-2015 as the euro’s five-year reign of about 140 lek came to an end, negatively affecting Albania’s poorly diversified exports, two-thirds of which are destined to Eurozone countries.
On the positive side, the depreciation of the euro against the national currency is good news for borrowers in Europe’s single currency who have their income in lek, the government’s external debt payments as well as imports whose cost has slightly dropped.
Albania’s central bank attributes the strengthening of the national currency against the euro to higher GDP growth fuelled by an increase in FDI and tourism revenue, but some experts say the euro inflows from rising cannabis cultivation and trafficking in 2015-2016 have also had an impact.
