TIRANA, Feb. 15 – Albania’s central bank governor says the de-euroization measures will target a gradual reduction in the current widespread use of Europe’s single currency by about 10 percent to below 40 percent as the International Monetary Fund has suggested.
“Euroisation is currently 10 percent above the optimal rate. De-euroisation is not war against the euro, but stimulus on the increased use of the national currency, lek, in the national economy and this is mainly being carried out to increase the efficiency and flexibility of the monetary policy and consolidate financial stability in Albania,” Sejko told a press conference this week.
About half of deposits and lending in Albania’s banking system is carried out in Europe’s single currency limiting the impact of the central bank’s easier policy on boosting sluggish lending and exposing borrowers and savers to currency exchange risks especially when their income is in the national currency.
The governor said the central bank could consider new measures related to what he called ‘unnecessary transactions’ in Europe’s single currency if euroization does not drop in the next three to five years.
“The high level of euroization is a result of some unnecessary transactions such as in the real estate, vehicles etc. We haven’t made it compulsory for these transactions to be carried out in lek, but we could do it in the future if euroization does not drop. For the moment these measures are only related to banks,” said governor Sejko.
The measures involving higher reserve ratios for foreign-currency assets are expected to make it more expensive for banks to provide Euro-denominated loans, triggering an eventual hike in interest rates and discouraging borrowing in Euro, currently accounting for more than half of the total.
The governor says the euro-lek pair will not be affected in Albania’s free floating exchange where supply and demand are the decisive factors.
Commenting on whether the move affects Albania’s EU integration bid, governor Sejko said the initiative does not run counter to country’s aspirations.
“It’s exactly because our integration aspirations that we have to strengthen the national currency. It has also been proved in other countries that this is the right moment. The EU suggests that accession countries use their own currencies up to two years after joining,” said the governor.
