By Neritan Sejamini/ Who are the biggest winners and losers from the strengthening of the lek?

2023-07-26 13:01:00, Ekonomi Neritan Sejamini

By Neritan Sejamini/ Who are the biggest winners and losers from the The economic consequences are complex and dynamic (in part due to the psychology of consumers and entrepreneurs), but roughly, more as a trend than as a quantitative assessment, it can be said: The
biggest winners

1. The biggest winner is the government: the government has over €5.5 billion in foreign currency debt that today 'costs' cheaper. The government has revenues in lek which it converts into euro to pay the debt, and today it needs about 20% less lek than a year and a half ago to pay the external debt. De facto, only from currency devaluation, the country's external debt has been 'reduced' by around €1 billion.

2. One, two, three oil importers (oil import is a monopoly/duopoly/oligopoly)—they import at least €600 million of fuel per year, which now costs 20 percent less (in lek) to buy. The selling price of fuel has not changed, so just from the strengthening of the lek, the profits of fuel importers have increased by around €150 million per year.

3. Importers in general: the cost (in Lek) of purchasing goods in foreign markets has decreased by approximately 20%, while their income from sales has increased (prices have remained unchanged or increased). Therefore, importers' profits may have increased by approximately 20% from the exchange rate alone. The country's total imports are around €8.5 billion per year.

4. Albanian tourists abroad: vacations of Albanians abroad are about 20 percent cheaper in lek. It should be borne in mind that Albanians spend in a year on tourism abroad almost as much as foreigners spend on tourism in Albania. Due to the devaluation of currencies, today it is relatively cheaper to take a vacation outside Albania than in Albania compared to a year ago.

5. Borrowers in euros: all those who have received loans in euros and the conditions or interest have not been changed/structured. Among them, the main beneficiaries are large borrowers who usually take loans in euros (consumers usually take loans in Lek).

The Biggest Losers

1. Albanian immigrants: their remittances (approximately €850 million in 2022) have lost 20 percent of their purchasing power—for example, €850 million today buys roughly as much as €680 million in 2021. About 26 percent of households Albanians live completely or partially on remittances from immigrants and have been significantly affected by the strengthening of the lek.

2. Exporters: revenues in lek of exports have fallen, including the revenues of agricultural products that Albanian farmers have managed to export to foreign markets. Their production costs are in Lek, so the income of the exporters has decreased by approximately 20%. For some, this situation is a risk of bankruptcy. In 2022, Albania exported around €4.5 billion.

3. Foreign tourists and Albanian tourism: tourism in Albania has practically become 20 percent more expensive. Tourism revenues were around 1 billion euros in 2022; this year, to get the same level of services, tourists must spend at least 200 million euros more.

4. Anyone who is paid in euros: local residents and foreigners who have their salaries or income in euros, including landlords with contracts in euros. An important group are the foreign diplomats in Tirana, who now have personal reasons to denounce (to their bosses) the main cause of the devaluation of their currencies against the lek.

Winners or losers not yet determined:

1. The banking sector: it is difficult to assess the net impact on the banking sector as it operates both in Lek and foreign currency.

2. The energy company (KESH or as it is now) which imports and exports energy depending on the present factors, including rainfall in the country (avoiding the fact that a large part of its sales-purchase decisions are made on non-economic considerations and not of public interest)./ CNA