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What is happening with the Euro? The Bank of Albania is buying it at a record pace, but the exchange rate continues to fall

2026-07-05 14:02:18Biznes SHKRUAR NGA REDAKSIA VOX

The Bank of Albania is buying euros at a record pace to contain the depreciation of the European currency against the lek. Although the BoA publishes statistical data on interventions in the foreign exchange market with a three-month delay, Kapitali has learned that euro purchases this year are even higher than last year, which was the historical record ever recorded.

According to official data, last year the Bank of Albania purchased 1 billion and 29 million euros from the domestic foreign exchange market, of which 299 million euros were purchased through auctions planned to increase the foreign exchange reserve, while another 729.1 million euros were purchased in out-of-order auctions, precisely to remove the European currency from the market in an attempt to contain its weakening against the lek.

Market sources told Kapital that the intensity and scale of this year's purchases dictate that the amount purchased will exceed last year's level. This is because the Bank of Albania intends to purchase 330-450 million Euros during 2026, just to increase the foreign exchange reserve (i.e. through planned auctions).

But despite the high-intensity interventions, the depreciation of the euro seems to be unstoppable. According to official data, the average exchange rate of the euro with the national currency dropped from 97.7 lek per 1 euro in July last year to 94.7 lek in June, while it currently fluctuates at 1 euro to 94 lek.

Generally, the Bank of Albania begins aggressive purchases of euros in the market in May, intensifying them especially during the summer season, which coincides with the largest influx of foreign exchange into the country. Last year, for the period June-August, the BoA bought over half a billion euros, while this year's figure is expected to be even higher.

The BoA has been in a struggle for more than two years now to contain the unstoppable strengthening of the lek against the euro through direct market intervention, a practice that was used very rarely in the past, only in episodes of high exchange rate volatility to prevent speculation.

Until 2018, the BoA had never intervened in the foreign exchange market. In 2018, when the euro began to weaken rapidly against the national currency, the BoA bought 180 million euros at auctions to contain the exchange rate. After a 5-year hiatus, extraordinary purchases returned again with 650 million euros in 2024 and 729.1 million euros this year.

But now that the BoA's interventions in the foreign exchange market have become systemic, this is not seen favorably by everyone. Last year, the IMF publicly urged the Bank of Albania to stop intervening in the foreign exchange market and leave the exchange rate free.

Through a special working paper, the IMF warned that maintaining the exchange rate artificially poses great risks for the economy, but also losses for the Central Bank's balance sheet, especially from the extraordinary increase in foreign reserves./ kapitali.al


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