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2025 "black" year for public debt, Eurobond refinancing and private loans, for the 9th month of 2022, the interest is 300 million dollars, the government is ready to manage the new issuance transaction
Written by SOT.COM.AL 26 Janar 2023
Rising interest rates are putting the Government on alert regarding debt service costs. Just to give an example, for the first 9 months of 2022, Albania has paid about 30 billion lek, almost 300 million dollars in interest. Compared to the same period of 2021, in accordance with the 2022 budget plan, the interest expenses for the government debt have increased by 1.6 billion lek, or almost 16 million dollars. But this is not the only concern of the Government. The risk of refinancing the external debt is high in some specific years, such as 2025, when we have large repayments, such as the Eurobond and a loan obtained through a private creditor and supported through a Guarantee (PBG) of the World Bank. As a mitigating measure of this refinancing risk, the option of a liability management transaction (Liability Management) is being considered in advance, which can most likely be implemented together with a new issue, during the year 2023 or 2024, when the financial conditions of the markets are favorable to carry out this transaction . The same may be considered to apply in respect of other senior maturities such as 2027 onwards. According to an analysis on this topic by the Ministry of Finance, Despite positive developments in risk indicators, given the new environment of increased interest rates in 2022, influenced by the Russia-Ukraine War, the reluctance of investors to invest in government bonds and the investor base that is not very diversified, domestic debt remains exposed to interest rate risk and refinancing risk. In this regard, in the medium and long term, debt management will continue to undertake activities aimed at further mitigating these risks. With the aim of further stability of the debt portfolio, the new mid-term debt management strategy, updated in 2022, has defined some more ambitious objectives compared to the previous strategy in terms of interest rate risk, refinancing risk and exchange rate risk.