Data published by the Bank of Albania show the public debt dropped to 58.4 percent at the end of 2010, down from a record 59.6 percent of the GDP at the end of 2009.
Tirana Times
TIRANA, May 10 – Albania’s public debt dropped to 58.4 percent of GDP at the end of 2010, remaining within the 60 percent target stipulated by law. Data published by the Bank of Albania in its financial stability report for the second half of 2010 show the public debt dropped to 58.4 percent at the end of 2010, down from a record 59.6 percent of the GDP at the end of 2009. The public debt continued growing in 2008 when it reached 55.9 percent, up from 52.2 percent in 2007.
Meanwhile, external debt registered only a slight increase compared to 2009, climbing to 23.5 percent of the GDP, up from 23.38 percent at the end of 2009. Its increase also started in 2008 when it grew to 18.3 percent of the GDP, up from 14.4 percent in 2007.
Albania’s public debt, at a record 59.5 percent of the GDP in 2009, is the second highest in the region after Greece, posing great risk to the country’s macroeconomic stability.
This is confirmed by statistics published by Open Data Albania which says that Albania’s public debt, which in 2009 was worth 680 billion lek, at 59.5 percent of the GDP is better only compared to neighbouring Greece’s 115 percent. The public debt levels for Macedonia, Bosnia and Herzegovina, Croatia, Serbia, Montenegro and Turkey vary from 23 to 45 percent of the GDP.
The cost of the public debt from 1993 to 2011 is estimated at an average of 4 percent of the GDP. The external debt accounts for 40 percent of the country’s total public debt.
Albania’s debut sale of 300 million euros of five-year bonds at a yield of 7.5 percent at the end of last October 2010 lowered the country’s external debt cost by 20 percent one month later, the Finance Ministry says.
Xhentil Demiraj, the Finance Ministry’s public debt director, said the payment of the costly 200 million euro syndicate loan through the Eurobond has brought positive effects lowering the debt cost by 10 million dollars at the end of 2010.
Under the 2011 budget, government will spend 3.6 percent of the GDP on interest rates and 0.8 percent on principal payments, up from 3.4 percent and 0.5 percent respectively in 2010.
Last year, the International Monetary Fund warned high public debt levels pose major risk to Albania’s macroeconomic stability.
IMF’s Gerwin Bell who headed the IMF mission while Albania was drafting its 2011 budget, described Albania’s current public debt levels, as very high compared to regional countries and developing economies in general. Bell said that IMF considered as immature any draft budget with a revenue growth higher than 6 to 7 percent.
According to him, lowering budget deficits to 2.5 percent in 2011 would also have a positive impact on public debt and achieve the Albanian fiscal policy’s goal of bringing it down to 54 percent by 2013.
The 2011-2013 mid-term budget government has approved foresees to lower the country’s high public debt levels currently at 59.5 percent of the GDP to 54 percent by 2013.
However, IMF experts says Albania’s public debt will continue rising to 68 percent of the GDP in 2013. The IMF prediction for 2010 and 2011 was at 62.8 percent and 65.1 percent respectively, compared to government’s 59.5 percent and 58.2 percent.
