Short-term public debt has fallen to historic lows

2024-12-02 14:38:00, Ekonomi CNA

Public debt risk indicators this year fell further in the third quarter of the year. According to the information published by the Ministry of Finance, the risk of refinancing the domestic public debt this year is at the lowest historical levels.

The value of domestic debt that matures within one year at the end of the 9th month of 2024 was 41.1%, in further decline from the level of 44.7% at the end of last year.

In the last decade, the Ministry of Finance has followed a strategy of gradually extending the maturity of the public debt, with the main aim of reducing the risk of refinancing, but also benefiting from the cycle of low interest rates.

At the end of September, the average maturity of domestic debt instruments increased to 2.58 years, from 2.32 years at the end of last year. This increase proves precisely the greater use of instruments with long-term maturity even during the 9-month period of this year.

Other public debt risk indicators are also following a downward trend this year. Exchange rate risk, expressed as the ratio of foreign currency debt to total public debt, decreased to 42%, from 45.6% at the end of last year.

To the greatest extent, the reduction of this risk is based on the strengthening of the lek in the exchange rate, which has reduced the value of the debt in foreign currency and its specific weight.

Interest rate risk, expressed as the percentage of debt that is re-fixed within a year against the total public debt, decreased to 41.5%, from 45.4% at the end of last year.

In the market in recent years, Albania's public debt is following a downward trend, supported by the strengthening of the lek in the exchange rate and a more consolidated fiscal policy, with lower budget deficits.

After reaching a record level of more than 74% of GDP in 2021, public debt has been declining in the following years and at the end of 2023 it was down to 57.5% of GDP. According to the preliminary estimates of the Ministry of Finance, at the end of the 9th month of 2024, the public debt was 55.45% of the GDP.

The strongest decline has been achieved in the external debt segment, which at the end of September was estimated at 23.55% of GDP, from 36.45% that had been in 2021 and 26.2% at the end of 2023. This proves the strong impact that mainly the strengthening of the lek contributed to the reduction of the public debt.

Debt appears to be decreasing even in absolute value. According to the Ministry of Finance, the debt stock at the end of September had a value of less than 1.35 trillion lek, with a decrease of about 13 billion lek or approximately 1% compared to the end of last year./ Monitor magazine