TIRANA, April 30 – Albania’s public debt hit a historic high of around 1 trillion lek (€7.1 bln) or around 72 percent of the GDP including government arrears of around 2.6 percent of the GDP in the first quarter of this year, according to Finance Ministry data. Total debt service, which includes interest payments plus the repayments of principal to creditors, cost the Albanian government 11.4 billion lek (around Euro 80 mln) in the first quarter of this year compared to around 12.5 billion in the first quarter of 2014 on lower interest rates on domestic debt as the key interest rate stands at a historic low of 2 percent.
Total debt service cost the Albanian government a record of around 57.8 billion lek (Euro 404 million) in 2014, almost the same amount government spend on public investments, as public debt rose to 72 percent of the GDP, according to a report published by the Finance Ministry.
The public debt service rose mainly as a result of repayments of principal and an increase in external debt interest while interest rates on domestic debt considerably dropped due to a significant cut in 12-month T-bill yields, the key instrument of government’s internal borrowing, fuelled by consecutive cuts to the key interest rates.
The high spending on debt repayment, which is a key barrier to other priority investments, had a considerable impact on public investments.
Public investments hit a record low for the past seven years in 2014 when they dropped to 60.5 billion lek (Euro 426 million) the lowest level since 2007, according to Finance Ministry data.
Public debt is expected to drop by 0.2 percent to 71.8 percent in 2015 before dropping to 68.9 percent in 2016, 65.7 percent in 2017 and 62 percent in 2018, registering the first decline since 2010.
Albania’s public debt, a sizable part of which is domestic, has a large short-term component, implying risk of rollover because of maturing in less than one year, warn the international financial institutions.
