State owned companies deep in debt, reports BoA

TIRANA, June 3،atest data from Bank of Albania revealed that up to end of March many public companies like KESH and OSSH had increased their debt by 147% to 112 million euros. A year ago, the debt of these companies totaled about 48.5 million euros. According to BoA, most of the debt accumulated during the November 2008 – January 2009 period and most of it is in euros.
Distribution System Operator (OSSH), privatized by CEZ, a Czech company, for 102 million euros, holds the biggest among the companies. OSSH borrowed heavily to pay its imported energy bills and to cover for declining revenues and increased losses due to mismanagement. Chances are the government will be obligated to pay the debt itself or return part of the 102 million euros to the new owners.
In April alone, state owned companies collected 3.5% of the loans issued by the banking system. 62% of the debt was in euros, despite many warnings from BoA that citizens and businesses alike should switch to loans in Lek in order to avoid risks from currency exchange rates. To make matters worse, stated owned companies show a tendency to borrow at higher interest rates than the private sectors thanks to the guarantee offered by the government. Despite the lower risk state owned companies carry because of such guarantees, borrowing at higher interest rates than what usually the market offers is, at best, speculative and distorts the market at the expense of the private sector and the taxpayers money.