The financial market is giving the first signs of reaction to the
government’s high demand for the debt. A few days ago, the Ministry of
Finances tried to take a 40 million USD loan with a two-year term from
the internal market, but banks and individuals funded only half of it.
This is the third time that the market doesn’t meet the government’s demand for a long-term debt. The first case was marked in October, when the government increased the internal debt with 224 million USD, to face the budget crisis that they say was left by the Democratic Party before they changed seats. Since then, the interest rates for two-year terms have increased from 4.67 to 4.92 , although it is still under the historic average.
Sources from the Ministry of Finances say that this is a seasonal situation that is related to the end of the year, but some experts think that there could be another cause too. With the change of the budget in October, the internal debt went up to 528 million USD. Besides a historic record, this figure means that the government has taken three times more debt than the increased deposits in banks for the first ten months of the year.
But the budget’s debt request will remain high even for the next year, at 458 million USD.
Due to the private sector crisis, the government has always been comfortable in financing the debt, especially in the past year, when the interest rate fell under the historical minimum. Will the market be able to fund 1 billion USD of internal debt in two years, when the increase deposits in banks has almost stopped? Bank of Albania experts say that this will not be easy.
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