Improving Public Debt Management

In the OIC Member Countries

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Debt reporting

The Albanian MoF publishes indicators on the level, composition and creditor structure of

domestic and external general government debt on its homepage (see MoF 2016c and links

thereon). The MoF also publishes detailed statistics on the level and evolution of debt in its

triennial MTDMS (see., e.g. MoF 2016a). Reports on the exact amount of contingent liabilities

do not exist. Quantifications of total public payment arrears and contingent liabilities are

available.

Debt management strategy (incl. risk management)

Albania’s debt management strategy is based on both, quantitative and qualitative analyses:

the quantitative part compares costs and risks of four alternative debt management strategies

under different economic scenarios with special focus on refinancing, interest rate and

exchange rate risks. Its forecast horizon covers five years. These analyses are based on

analytical tools provided by the World Bank and the IMF. The qualitative part analyses special

topics, e.g. strategies to develop the domestic financial market for sovereign bonds. The 2009

strategy document came up with the following recommendations: reduce the share of debt

denominated in domestic currency (Lek) to below 60%; increase the average duration of debt;

have all external borrowing denominated in Euro; stop to use the Bank of Albania as a source

of funding.

In 2014, the MoF published its “Public Finance Management Strategy 20142020” (MoF

2014a), which pursues the objective of longrun sustainability of public finances. The overall

objective of the public finance management reform strategy is to “achieve a better balanced

and sustainable budget with a reduced debt ratio through stronger financial management and

control and audit processes and where budget execution is properly linked to Government

policies” (MoF 2016a, p.5). The strategy was developed in cooperation with national and

international institutions as it incorporates targets set by international donors, namely the

IMF, the World Bank and the EU. Goals encompass increased accountability and transparency

in public finances, fiscal discipline and efficient management of resources. In this regard, the

following steps will be taken:

1) Revision of the accounting standards to make them compliant with the EPSAS standards;

Implementation of an integrated financial management system;

3) Law amendment to prevent government corruption;

Systematic training for staff.

The section on debt and cash management develops a strategy to better match revenue flows

with payment needs aiming at minimizing costs at a given level of risk. In this regard, the

government will review the current institutional arrangement, formulate a comprehensive

debt management strategy and develop a strategy for the development of domestic markets

for sovereign bonds.

The current MTDMS is a logical extension of the reforms in process and continues to focus on

the reduction of refinancing and interest rate risk (MoF 2016a). For the objectives in the

medium term, please refer to Table 410. In this regard, the following policies are planned and

started:



Financing on the domestic market by longterm securities with fixed interest rates

(issuance of 7year and 10year bonds)



Financing on external markets at concessional terms provided by international institutions