Albanian public debt has reached historic levels- as much as 86% of the Gross Domestic Product.
The Socialist Party government has not made the total figure pubic but through thorough analysis of it by Exit.al for In a Few Words on Euronews, a picture of its value and growth during their tenure has emerged.
Debt calculation is difficult given that the government has granted dozens of PPP concessions and contracts which it doesn’t formally count as public debt. Albania has been criticised internationally for this approach.
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.
But the debt doesn’t end there. The government also has to take into account the bills and arrears for services recieved.
As of the end of June, according to the Ministry of Finance, these liabilities were around EUR 80 million. The government also owes money for international arbitration decision 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.
There is no law or regulation that determines which level of debt is optimum but it is generally considered that 60% of the GDP is manageable.
To keep governments in check, many countries pass laws to limit the amount of debt that can be acquired. Albania did have such a law but in 2012 the law was repealed. The lifting of this law brought with it debt growth beond the 60% level, leaving governments to borrow indefinitely.
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 its rates are set by international markets. This means the actual value of the debt against lek can vary.
In Albania, the government owes money to BKT, Raifhaissen, and Credins Bank. 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 such as the United Arab Emirates, Italy, and Germany.
But how does the increase in public debt compare between administrations?
The Berisha (PD) government between 2005 and 2013 increased the public debt by EUR 2.5 billion. The Rama (PS) government between 2014 and 2020 increased the public debt by EUR 3.2 billion.
In terms of the average Albanian, in 2013 the average citizen owed EUR 2600 but in 2020 it’s EUR 3600- that is a significant change.