Domestic Debt Financing Resources, Govt. Raises the Alarm
Albanian Daily News
Published December 28, 2017
Government raises the alarm in relation to the domestic debt financing resources. The Ministry of Finances warns that the premises to finance the debt from internal sources are running out.
Domestic market financing is accompanied by limitations deriving from the relatively short life span of domestic debt (around 2.1 years) and the high level of debt being refinanced, the limited investor base and the concentration in more than 60% on the banking sector, the undeveloped state titles market, the restrictions imposed by major banks towards domestic banks in limiting exposure to sovereign debt and preservation of certain liquidity ratios.
Taking into account the above factors, coupled with the growing absolute value of debt, the level of deposit growth and expectations for the further decline in the level of non-performing loans, it results that the domestic financing is limited and the annual growth beyond ALL 20-22 billion would be difficult to achieve without exerting an upward pressure on interest rates, the Ministry of Finances reports.
Consequently, foreign funding sources in the medium term will serve as a complement to domestic resources and serve, among other things, as optimizer of debt costs, on view of the fact that these resources are well-diversified and provide funding opportunities not only with trade terms, but also in terms of concession.
The Finance Ministry warns that the main instruments that could be used in securing foreign financing are:
1. Loans for financing projects, provided mainly by bilateral and multilateral sources
2. Budgetary support from international financial institutions, in the framework of the reforms undertaken by the Government
4. Partial Guarantee issued by the World Bank