New debt to pay the old debt

New debt to pay the old debt

IBNA Special Report/Ministry of Finance in Albania emits the new Eurobond. We hear from minister Shkelqim Cani. He comments the criticism coming from experts about the rise of the level of debt in the country

Tirana, November 12, 2014/Independent Balkan News Agency

In Albania, the minister of Finances has decided to emit a new Eurobond, which would enable the payment of the matured Eurobond, something which would secure extra funds for investments.

The news is confirmed to IBNA by official sources of the Ministry of Finance. According to them, the Euro Bond which will be emitted is under way and will come out in the international debt market next year.

Minister of Finance, Shkelqim Cani explains the details of the new Eurobond: “We’re emitting the new Eurobond, in order to allow businesses to borrow more. Meanwhile, we’re also aiming new markets”, says Cani. The minister says that the Eurobond’s value may be from 300 million Euros to 500 million Euros.

Minister Cani said that the government aims at finding an optimal solution which also takes into account risks and benefits, thus the best alternative for the economy.

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Albania’s challenges with crediting are closely linked to the high level of debt, which may amount to 73% in 2015 and also, the high level of borrowing due to the needs for refinancing domestic debt and refinancing the Eurobond in November 2015.

The government says that it’s closely working with multilateral institutions to improve the stability of the structure of domestic debt, which is characterized by the short maturity and its support by the banking system, which is already overburdened by a high number of non performing loans.

Minister of Finance, Shkelqim Cani says that with the emission of the Eurobond, a new loan is being borrowed for an old one. He says that the government is aiming at preserving the same level of debt through this Eurobond and criticizes several analysts who attack the government for increasing the level of debt. “If a 300 million Euro bond is matured, we borrow 300 million Euros in order to preserve the same level. We have never said that we will decrease it and that we will not borrow. Why must someone talk as if we have committed a crime? Yes, we’re borrowing in order to pay a debt. It’s been 20 years that renewals of debts happen in Albania. It’s been 20 years that treasury bonds are matured and that we refresh our loans. From year to year, the Ministry of Finances has not paid this debt, but what’s happened is that we’ve increased the debt. In 20 years, Albania has systematically increased the level of debt, because deficit is nothing else than the debt of one year, from January 1 to December 31.

The government is projecting deficit to continue for the next two years too. It says that although this situation will continue, “what’s important is for Albania’s economic growth to catch up and cover the rate of the debt increase. We’re heading toward this”.

Albania entered the Eurobond market for the first time in 2010, when it managed to sell a 300 million Euros bond at a 7.5% interest rate.

Its maturity date was November 5,  2015, while the first installment was paid on November 4, 2011. /ibna/