Improving Public Debt Management
In the OIC Member Countries
132
Figure 4-27: Albania – Public Debt Composition by Instrument Maturity
Source: MoF (2016a).Borrowing and Related Financial Activities
Operations (incl. Islamic finance)Borrowing in the domestic market is undertaken by issuance of sovereign bonds in domestic
currency through an auction process managed by the Bank of Albania, which acts as an agent
for the MoF. The government issues bonds with a variety of maturities: TBills with zero
coupons are issued for three, six, nine and twelve months. Couponbearing TBonds exist for
maturities of two, three, five, seven and ten years. Only 5year bonds have a floating interest
rate, which is annually reset depending on market conditions.
The Albanian banking system is characterised by the dominance of subsidiaries of EUbased
banking groups: in 2015, of a total of 16 commercial banks nine were linked to EUbased
banks. According to the World Bank (2014b) only one bank is classified as an Islamic bank: the
United Bank of Albania is owned by a SaudiArabian financial institution.
For public finances sovereign sukuk seem to play no role so far. Official documents like the
current MTDMS (MoF 2016a) do not mention sukuk financing as an option. In its Stability
Report, loan agreements with other Islamic countries did not meet the conditions for Islamic
banking and were not sharia compliant. An example is a loan contract with the Saudi Arabian
fund for development, which in 2011 agreed to lend $25 million to the Albanian government
for the construction of a highway. Interest payments were part of the contract.
Domestic debt marketAt the end of 2015, general government debt had the following characteristics: 52.8% was
domestic liabilities, whereas 47.2% was external debt (see Figure 426). While domestic debt
was held entirely in tradeable instruments, only 13.4% of external debt was tradeable in
international markets. The major part of external debt consists of loans for development
projects, budget support by the IMF and the World Bank as well as liabilities guaranteed by the
World Bank, which are not traded on financial markets.