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The drastic fall of the Euro, how the Government is taking advantage to repay the foreign debt

2026-08-11 20:30:51Biznes SHKRUAR NGA REDAKSIA VOX

The drastic fall of the Euro, how the Government is taking advantage to repay

The continued strengthening of the Lek in the exchange rate is keeping public debt in foreign currency near its lowest levels in at least a decade.

According to the Ministry of Finance, exchange rate risk, expressed as the ratio of foreign currency debt to total public debt, was 40.1% in the middle of this year, almost at the same level as at the end of last year and down from the 40.9% level a year earlier.  

In absolute terms, net external debt in mid-2026 was around 5.6 billion euros, roughly similar to the end of last year. The external debt surplus, expressed in euros, appears relatively stable since 2024. However, in the meantime, the exchange rate effect has reduced both its value in Lek and its weight in the structure of the overall public debt.

The Euro-Lek exchange rate has declined at an accelerated pace during 2026.

At the end of June, the Euro-Lek exchange rate suffered a further decline of 2.7% compared to the beginning of the year. The decline deepened further during July and August.

According to figures from the Ministry of Finance, other public debt risk indicators also appear to be improving.

The risk of refinancing the domestic public debt, expressed as the value of domestic debt maturing within one year to the total, reached 33.4% at the end of June, further decreasing from the level of 40.9% a year earlier. This indicator has currently reached its historical low.

In the last decade, the Ministry of Finance has pursued a strategy of gradually extending the maturity of public debt, with the main aim of reducing refinancing risk, but also benefiting from the cycle of low interest rates.

In the middle of this year, the average maturity of domestic debt instruments increased further to 1179 days, from 1002 days at the end of 2025. This increase demonstrates precisely the greater use of instruments with long-term maturity.

In the medium-term debt management strategy, 2025-2029, the Ministry of Finance assesses as necessary the continuation of the measures taken to further reduce exposure to refinancing risk, with the objective of increasing the concentration of medium- and long-term securities in the domestic debt portfolio.

Also, interest rate risk, expressed as the percentage of debt that is refixed within one year compared to total public debt, decreased to 33.4%, from 41% in the same period a year earlier.

In the market in recent years, Albania's public debt has been following a downward trend, supported by the strengthening of the Lek in the exchange rate and a more consolidated fiscal policy, with lower budget deficits.

After reaching a record level of more than 74% of GDP in 2021, public debt has been declining in the following years and in the middle of this year it dropped to 54.02% of GDP. (Monitor)


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