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Public debt is planned to be around 60% of GDP in 2024, but can a real reduction be achieved?

2023-11-01 12:06:09Biznes SHKRUAR NGA REDAKSIA VOX

Public debt is planned to be around 60% of GDP in 2024, but can a real reduction

The good fiscal situation has helped the government to claim a reduction in public debt. Next year, the ratio of debt to GDP is expected to reach 59.8% of GDP, the lowest level since 2011.

According to the Ministry of Finance, the level of public debt in relation to GDP, at the end of 2023, is expected to decrease to about 61.5%, while at the end of 2024 it is planned at the level of 59.8%. However, the expected level of debt remains dependent on the realization of the borrowing plan during the remainder of 2023 and during 2024, as well as the realization of the Eurobond buy back transaction planned during 2023.

Domestic borrowing during 2024 is planned at a value of 50 billion ALL, higher than domestic borrowing in 2023, under conditions where it is predicted that during 2024 it will not be necessary to go to international markets.

New borrowing in the domestic market is expected to be realized mainly through long-term government securities in accordance with the objectives for reducing risks, but also adapting to investors' preferences for securities.

Foreign borrowing is expected to be realized mainly through the disbursement of loans that finance the progress of the implementation of the government's priority projects, as well as the disbursement of budget supports whose procedures and preconditions can be fulfilled during 2024.

In total, foreign borrowing during 2024 is estimated to be around ALL 36.6 billion, and considering the foreign debt that is repaid during the year, net foreign borrowing is expected to be at negative levels.

Taking into consideration the recent statements and decisions of the Federal Reserve and the ECB, these institutions may continue to pursue tight monetary policies for at least 2023 and this may continue at the beginning of 2024, as a result an increase can be expected further interest rates in the foreign market.

Under these conditions, the costs per unit of foreign and domestic debt are expected to increase further compared to 2023, specifically for foreign debt from 3.4% to 4.3% and for domestic debt an increase from 4% to 4.4%.

Consequently, the expenses for debt interests during 2024 are planned with an increase of about 9.8 billion ALL. In terms of external debt repayments (principal), in 2024 they are planned to be in the amount of ALL 52.1 billion.

The weighted average rates during the period January-September 2023 have increased compared to the end of 2022, in almost all categories of instruments, this was influenced by the increase in interest rates, mainly during 2022, and therefore the replacement of securities with lower interest rates that mature, with securities issued in terms of increased interest rates.

In March 2023, the Bank of Albania decided to increase the base interest rate to 3.00% from 2.75% at the end of 2022.

 


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