Public debt drops to 57% in Q1

TIRANA, May 15 – Albania’s Finance Ministry says public debt fell to 56.89 percent of the GDP in the first quarter of 2012 despite the total debt stock climbing by 2 percent to 788 billion lek. At the end of the final quarter of 2011, public debt stock stood at 772.5 billion lek, accounting for 58.76 percent of the GDP, only 1.24 percent below the legal ceiling of 60 percent of the GDP. The central government holds the overwhelming majority of 99.67 percent of total debt stock with the local government debt reported at only 260 million lek or 0.33 percent. Domestic debt represented 56.7 percent of the total debt stock. External debt accounted for 43.3 percent in the first quarter of 2012 compared to only 39 percent in 2009 before Albania made its Eurobond debut.
Around 34 percent of public debt is short-term by original maturity meaning it has to be paid within one year. Data show government borrowed 8.3 billion lek in the first quarter of 2012 to finance budget deficit in domestic borrowing through T-bills in lek.
Albania paid 48.7 billion lek (Euro 341.7) million in debt services in 2011, up 618 mln lek (Euro 4.3 mln) compared to 2010 as external debt interest payment rose by 14 percent, according to a detailed public debt report published by the Finance Ministry. Data show the Albanian government paid around 6.9 billion lek in external debt interests, up 847 mln lek compared to 2010 when Albania issued its first ever 300 mln Eurobond.
For 2012, the Finance Ministry plans to spend around 59.7 billion lek or 10 percent more on debt service compared to the 2011.
The Finance ministry says that external debt, which accounts for 25.4 percent of the GDP saw an increase because of rising loans at commercial terms representing 49.5 percent of total external debt. The majority of around 70 percent of Albania’s total external debt, estimated at 333.8 bln lek is in Euro with 3/4 of it under fixed interest rates.
Albania’s short-term debt represented by T-bills issued in the domestic market in the national currency lek and with a maturity of up to one year, represents 33 percent of the total debt stock. Financial instruments such as T-Bills and bonds, and the Eurobond represent around 65 percent of the public debt, and loans the remaining 35 percent. Domestic lenders account for 60 percent and lek is the currency for 59 percent of total debt stock.
Data show that Raiffeisen Bank, the country’s biggest commercial bank, is the biggest internal debt holder with around 31.2 percent followed by other commercial banks with 37.8 percent and the central bank with 13.6 percent. Both individuals and non-banking institutions slightly increased their domestic debt shares to 13.3 percent and 4.07 percent respectively in 2011.
Under the 2012-2014 macroeconomic framework, government expects public debt to remain within the 60 percent legal limit; at 59.4 percent for 2012, at 59.1 percent for 2013, and at 58.4 percent for 2014.
What puts the Albanian public debt more at risk is that it accounts for more than double the annual revenues, while interest expenditure has risen to 3.4 percent of the GDP, compared to an average of 1.3 percent in the SEE 6, the IMF has warned.