Debt cost increased
The government is taking high priced loans for affording the budget expenses for the first months of this year.
The Treasury one-year-term bond interests in the last auction stayed in the highest level of 7.35%.n The Bank of Albania data show that compared to the end of last year, the Treasury one-year-term bond interests increased with 0.65%. This has affected all bonds of all kind of terms, making the citizens’ burden even heavier.
And the cost is not small. The Albanian government has taken 440 billion ALL in the interior market, which means that the interest rates increase costs more than 28 million USD annually to tax payers.
Two are the main reasons why the interior debt is increasing. The first is related with the government market behavior and the way how it is administering the public finances. In the first three months of this year, the budget expenses increased beyond any prediction. This made the budget deficit for this period to reach 275.8% of the plan, and the Ministry of Finances has covered it by increasing loans in the interior market.
According to the official figures, the government took 18 times more loans in the interior market than the budget predicted.
This increase made the banks benefit by making the interests more expensive. But the government’s high demand for money is not the only cause why the public budget burden is heavier. Another reason is related with the financial market juncture and the consequences that the Eurozone crisis is bringing to the Albanian economy.
The European Commission has set conditions to the European Banks - some of which are present in Albania- to restore their shocked balances by increasing the capital or by reducing the loans that they give.
This measure has also affected Albania, where some of the biggest banks of the country - which now hold the major burden of the Treasury bonds - have started issuing less loans for the government, by even not renewing the existing debt. Both these reasons are keeping the interior debt interests in high levels, and have excluded the relieving monetary policies from the Central Bank. Compared to last July, the interest base has reduced with 1%, by keeping the historical minimum of 4.25%.
But the interests that the government pays for the same period have decreased with only 0.3%, making the difference between the one year term bonds and the interest rate to stay in its highest levels, same as in 2009, when the government’s finances were dissipated by the high deficit.