The Albanian Ministry of Finance has reported that the country’s public debt is estimated to have reached 80.1% of GDP in 2021, setting a record since the fall of communism. The ministry said that debt increased after the issuance of a Eurobond worth EUR 650 million at the end of last year.
The government used natural disasters, earthquakes and pandemics to increase public debt by about EUR 2 billion in the last two years. Most of it was used to finance disaster-related projects.
The government also authorised the debt increase to finance several long-term projects, such as the construction of the New Ring Road, the National Theater and the Llogara Tunnel while funding is still needed for the pandemic and earthquake recovery. Debt expansion was done through. a normative act, breaking a fiscal rule that is defined in the budget law, which does not allow fiscal measures that increase the debt as a percentage of GDP.
Over the past year, the government has increased public debt at faster rates than the country’s economic growth. Albanians’ per capita income has grown at lower rates than per capita debt, spelling trouble for the future.
The International Monetary Fund (IMF), in its latest report on Albania in December last year, expressed concern about the country’s growing fiscal risks and the lack of accurate data on public-private partnership (PPP) projects. Court rulings, the new guarantee scheme for the private sector and support for energy companies are also seen as added risks that increase unreported liabilities.
However, analysis carried out by Exit.al in 2020 found that public debt was already as high as 86% of the GDP. The discrepancy in figures is due to the fact the government does not formally count the dozens of PPPs it grants towards public debt.
Albania has been criticised internationally for this approach.
Looking at 2020, if we consider only the concessions of roads, health, and incinerators, the total obligation to be paid from the state budget is around half a billion euros if we add this to the total amount of regular state debt, the total increases to EUR 10.7 billion.
That is around 83% of the GDP, an increase from 2019 when it was around the 78% mark. This would mean that 2021’s figure is even higher, and significantly higher than the government’s estimates.
But the debt doesn’t end there. The government also has to consider the bills and arrears for services received.
According to the Ministry of Finance, these liabilities were around EUR 80 million as of the end of June 2020. The government also owes money for international arbitration decisions to the tune of EUR 200 million.
If we add this to the liabilities from official debt and concessions, we reach a total of EUR 10.98 billion, almost EUR 11 billion- 86% of the GDP in 2020 which would have risen again up to the current day.
Since 2014, the Rama government has borrowed around EUR 3.2 billion. The debt is split roughly 50/50 between foreign and domestic lenders. Domestic debt is more favourable as it is in lek, and it can be paid through selling bonds.
External debt is a heavier burden as it’s in a foreign currency, and international markets set its rates. This means the actual value of the debt against lek can vary.
The government owes money to BKT, Raifhaissen, and Credins Bank in Albania. Internationally, around EUR 1.5 billion is through Eurobond and EUR 1.1 billion through the World Bank. The rest is through governments from countries like the United Arab Emirates, Italy, and Germany.
In 2013 the average Albanian citizen owed EUR 2600, but in 2020 it’s EUR 3600, a significant change.