Debt, reforms could soften it
18/11/2011 08:15
Fiks Fare/ Tirana’s oncology hospital without medicines and with broken equipment 26/09 21:15
The Albanian debt costs 7% of the GDP in average, and the cost is
expected to increase in the years to come, but some experts believe that
simpler liberalizing reforms could be enough for softening it.
“Shqip” daily newspaper says that the government is expected to spend 500 million USD during 2012, for paying the debt interests. Most of this money will go to the main banks that dominate the market.
The real profit norm is considered as very high, compared to the cost of money in the deposit market. The banks have an influencing power in this market, what has been admitted by the Ministry of Finances and the Authority of Competition. The inner debt in Albania is 437.6 billion ALL, equal to 50% of the total deposits.
The Competition Authority, which has investigated the Treasury bond market has reached the conclusion that the primary market has entry barriers on the minimal participation sum for individuals, and the transfer of the Treasury bond teller from Bank of Albania to second level banks, since 2005, has increased the entry barriers and the participation costs of the primary Treasury bond auctions for individuals and small businesses. The IMF also declared in favor of the depositing investments fund in the primary Treasury bond market at the Bank of Albania teller, as an opportunity for direct access to the primary Treasury bond market by individuals and EMS.
The banks’ influence in the bonds market had a higher impact this year, when the government increased loans due to the crisis and the interests increased as consequence, regardless the fact that the deposits had also increased.
The recommendations for increasing the competition and for decreasing the public debt interests are simple: the government must promote the opportunity to invest in the public debt in a better way for the wide public, offering products that are adaptable for the wide public; a lower participation threshold; or opening for the Albanian public the investment opportunity in the governments’ Eurobonds, which were granted with a 7.5 interest, but that cannot be sold to the Albanians, since the minimal investment value is 50.000 EUR and the only places where one can buy them are international stock markets.
Some of these Eurobonds have been bought by the banks that operate in Albania, which do not see it worthy to look for valid borrowers among the Albanian companies and families, since the government offers investments with high interest rates and without dangers.
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