By Elvin Meka*
De-dollarization and de-euroization has been a much used term in the academic realm for a long time, as well as a much targeted and sought-after practice to be applied in the developing world in different periods and realities. Practical results unveil both success and failure because the measures and action undertaken have been different in different countries and even different within the same country (the case of Peru).
Albania has been one of the countries where dollarization/euroization has moved in the fast lane since the change in the political and economic system in 1991. This process was especially triggered by macroeconomic instability and high inflation rate during the first transition years and during the 1997-1998 turmoil. These events engraved on Albanians’ memory the landmark status of the American dollar and later that of the euro as preserving the value for their savings and investments. Then, that status received a blow after the outbreak of the global financial and economic crisis in 2008-2009 and from that time to present day, the role of those currencies became more relative. Albanians and our national economy paid somehow dearly for the currency exchange risk and that was reflected on the rapid growth in non-performing loans as lek quickly depreciated during the whole of 2009. However, the euro and to a lower degree even the U.S. dollar still remain strong within the Albanian financial system and the economy as a considerable amount of savings, loans, investments and big purchases (real estate, cars, holidays etc.) are still carried not carried out in lek and that does not favor the economy and the financial industry. And, it is now time we think of and work on their further de-euroization.
But why is de-euroization needed at a time when we are targeting and trying to join the European Union and at a time when Albania will later join the Eurozone? There is more than one answer, but the first one is: Heaven can wait – Albania will have to wait a little (in fact for many years) until it joins the Eurozone, because usually this integration is not based on desire and aspirations, but a crucial restructuring of the economy as a structure, model, competitiveness and functionality. The second answer is that we have to work hard on a well-functioning economy where monetary and fiscal policies are efficiently applied as well as on the Albanians’ well-being, offering them better protection from currency exchange risks and a more qualitative and deeper financial intermediation.
Of course, de-euroization is not and will not be an easy undertaking; on the other hand it is a very complex challenge. To date, we have managed to ensure and maintain a stable macro-economic environment and low inflation rate thanks to the established and efficient Bank of Albania policies. In the meanwhile, there is still a lot to do in converting the fiscal deficit to surplus and the development and deepening of the national capital market (securities). This challenge will unavoidably require strong commitment and cooperation among the government, the Bank of Albania and the Financial Supervisory Authority (which have now signed a trilateral memorandum of cooperation), in order to apply much-needed structural and institutional reforms that will shape another key element for a successful de-euroization: the sustainable and high economic growth!
(Elvin Meka is a banking expert and editor-in-chief of the ‘Bankieri’ magazine published in Albanian)
