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The increase of interest rates by the Bank of Albania, in addition to loans to citizens, will also increase the government debt.
Our country is in a delicate situation in terms of public debt as it has reached 78.15% compared to GDP, according to recent estimates of the Ministry of Finance.
39.7% of this debt is taken from domestic markets and recent auctions conducted by the Bank of Albania are showing that interest rates are rising, which signals that our country will pay more for debt interest this year.
Last year, the country paid almost ALL 35.8 billion (EUR 300 million) for debt interest, as much as 2% of GDP, the highest amount paid since 2018.
Paying for debt services means that the government will have less fiscal space to make capital investments, such as nurseries or roads, or to finance citizens during this price crisis.
The World Bank has also raised the issue of debt financing risk
“At the current level, the high debt of the government is at considerable risk of refinancing. The fiscal balance could deteriorate further if the international environment is unfavorable, forcing the government to cut capital spending to prevent an increase in the debt-to-GDP ratio, the bank warns.
The Ministry of Finance has planned to receive record amounts of debt from the domestic market in the first 6 months of the year, money that will mainly go to refinance of old debts and to cover the budget deficit. The strategy that the government is pursuing in this case is to take long-term debts, in order to extend the period of their immediate payment.
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