Improving Public Debt Management
In the OIC Member Countries
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The share of government debt denoted in domestic currency amounts to 51.4%. It decreased
by 5.5 percentage points during 2015. While domestic debt is mostly denoted in domestic
currency (97.2%), external debt is entirely denoted in foreign currencies. Among foreign
currencies, the Euro is dominant making up 70% of foreign currency debt. This concentration
on the Euro is motivated by the relative stable exchange rate between the Albanian Lek and
the Euro, the intensive trade links with the Euro area and Albania’s plan to become a member
of the EU.
Albania has a functioning, albeit narrow domestic debt market. Government securities
auctioned in 2015 were bought by the banking sector (50.3%), the Bank of Albania (20.1%),
individuals (15.5%), financial institutions (13.5%) and nonfinancial institutions (0.7%). The
concentration of securities in the banking sector reflects the narrow investor base. Moreover, a
secondary market for government securities is missing. Compared to 2014 these numbers
show a tendency towards the intended diversification: While the share of the banking sector
has decreased, individuals and nonfinancial institutions have become more important players.
Figure 428 shows the breakdown of outstanding debt between types of holders. The figures of
outstanding debt and new purchases, show that the lower share of the banking sector in new
purchases is covered by a larger share of the Bank of Albania. This indicates that the Bank of
Albania has become a more important player on the market for government securities. An
important question is however whether these transactions are motivated by monetary policy
or by government financing needs.
Figure 4-28: Albania – Creditor Structure of Domestic Public Debt
Source: MoF (2016a).
Foreign borrowingExternal public borrowing has consisted of multilateral and bilateral official credits, syndicated
bank borrowing and Eurobonds. Among the most important multilateral creditors have been
the World Bank, the European Bank for Reconstruction and Development, the European
Investment Bank, the Council of Europe Development Bank and the Islamic Development Bank.
Official credits have been the government’s preferred source of external financing because of
its concessional nature. These generally have been related to a reform programme. The most
important bilateral creditors have been Germany (through KfW Development Bank), Italy and
Austria. In 2010, Albania issued its maiden Eurobond amounting to €300 million. Before
entering the Eurobond market some prerequisites had to be fulfilled – including the existence
of a sovereign credit rating – such that the first Eurobond issuance was considered an
important step in accessing external financial markets.