FLASH
Shkruar nga Pamfleti
The risk of refinancing the domestic public debt this year appears at the highest levels of the last seven years.
According to data from the Ministry of Finance and Economy, the value of the internal debt that matures within a year at the end of the 6th month constituted 50.9% of the total internal debt. This is the highest level since 2016, when debt maturing within one year accounted for 53.5% of the total domestic debt portfolio.
After 2017, this indicator marked a downward trend, reflecting MFE's strategy to increase long-term borrowing. This move was aimed at reducing the risk of refinancing, while also taking advantage of the historically low interest rates. From 2018 onwards, the share of debt with short-term maturity in the total structure of public internal debt has been constantly below the level of 50%.
However, clear signals of the increase of this indicator appeared as early as last year. The rapid increase in interest rates by the Bank of Albania caused high uncertainty in the financial market and especially institutional investors, mainly banks, were reluctant to invest in long-term instruments.
In this situation, the MFE was forced to adapt and orient its domestic borrowing more towards treasury bonds. At the end of 2022, the debt maturing within one year reached 47.9% of the total domestic debt, while the peak was marked at the end of the first quarter of 2023, with 51.9% of the total.
Starting from December of last year, the bond and bond market began to calm down, thanks to the declining inflation signals and the slowdown in interest rate increases by the Bank of Albania.
This year, MFE has returned to the strategy of gradually increasing debt maturity. In the middle of this year, the average maturity of domestic debt instruments increased to 814 days, from 780 days at the end of last year.
This increase proves precisely the greater use of instruments with long-term maturity during the first 6 months of this year. But, nevertheless, the consequences of last year continue to be felt and in the middle of this year the refinancing risk indicator remains close to the highest levels of the last seven years.
The internal debt of the Albanian government in the middle of this year reached about 745 billion ALL, increasing by 4.5% or about 32 billion ALL compared to the end of last year. Domestic borrowing is all realized through debt securities.
In the first two quarters, domestic borrowing had higher values than the projections of the borrowing plan, mainly to take advantage of the favorable market conditions and the short-term downward trend of yields in this period./Monitor
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