Increased foreign debt weights on consumers

TIRANA, Oct.22- The long term foreign debt of Albania has reached $1.674 billion as projected through the end of this year. Finance Ministry data reveals the same trend is expected to continue over the next two years. Debt obligations of Albania to other countries have increased by $316 million during the last twelve months, out of which only a partial sum includes interest payments. As a rule, foreign debt allows one country to consume and invest more than the domestic production allows, creating a capital structure by exploiting both internal savings and the savings of those countries who have a capital surplus. At the end of 2006, the debt of Albania increased by 23 percent compared to the end of 2005. Compared to trade balances, the increase in foreign debt is three times the average of exports. The IMF has approved Albania’s overall debt, though it remains skeptical about how the foreign loans will be used in large scale investments. Just in 2008 the government is planning to borrow some $750 million. This is the equivalent of increasing the debt held by each Albanian by $250 (only principal payment). Most of this debt is needed for the funding of the largest infrastructure project carried out in the country, the Durres-Kukes road.