The foreign exchange reserve increased by 18% last year/ reached a new record of 5.85 billion euros

2024-02-01 07:24:00, Ekonomi CNA

The foreign exchange reserve increased by 18% last year/ reached a new record of

The foreign exchange reserve continued to grow last year and reached a new historical record.

According to the statistics of the Bank of Albania, at the end of the year, the country's foreign exchange reserves had the value of 5.85 billion euros. The value of foreign currency reserve assets has increased by 18% or 895 million euros compared to the end of 2022.

The country's foreign exchange reserve is administered by the Bank of Albania and is mostly held in debt securities and deposits. At the end of last year, debt securities accounted for approximately 71% of reserve assets, while cash deposits accounted for 21% of it. The remaining part of the reserve is invested in gold and drawing rights (SDR) with the International Monetary Fund.

The foreign exchange reserve is an important instrument to amortize possible shocks, related to both the current account deficit and the high level of Euroization of the financial sector in the country. Being an economy with a negative trade position, especially in goods, Albania is exposed to situations where securing the necessary currency can be difficult.

One of the main criteria in determining the minimum necessary value of the foreign exchange reserve is the achievement of a value sufficient to cover at least four months of imports, while according to foreign trade statistics, at the end of last year the country's foreign exchange reserve covered more more than eight months of imports, well above its minimum targets.

Also, the foreign exchange reserve can serve as an instrument to support the financial sector with liquidity in foreign currency or to stabilize shocks in the foreign exchange rate.

The increase of the foreign exchange reserve is realized mainly through purchases of foreign currency in the domestic foreign exchange market. The intervention calendar predicts that the amount intended to be purchased through auctions for 2024 will be between 250 million euros and 330 million euros.

For the year 2024, the Bank of Albania has predicted a total of 20 auctions for the purchase of foreign currency, which will take place between the months of February and December. Half of the auctions will be in the spot variant (with purchase on the day of the auction), while half will be of the one-month forward type (with purchase after one month, according to the exchange rate fixed on the auction date).

In the last three years, the Bank of Albania has applied forward auctions, as an attempt to promote the use of these agreements in interbank transactions and between private entities.

For 2023, the initial auction calendar predicted purchases between 160 million euros and 220 million euros. But, as a response to the strong devaluation of the Euro during the summer season, the Bank of Albania decided to increase the purchased amount in the range between 220 and 300 million euros.

According to official data reported until the end of the 9th month of 2023, the amount of currency purchased reached approximately 200 million euros, an increase of 107% compared to the same period a year ago./ Monitor magazine