Albania's public debt broke the historical record in 2021, reaching the highest level ever recorded, at 78.1 percent of Gross Domestic Product (GDP), according to official data from the Ministry of Finance.

Debt as a percentage of GDP increased by 2.5 percentage points over the past year despite a fiscal rule that was set in the organic budget law in 2016 to bring the debt / GDP ratio down from year to year until it approached 45% of GDP.

The stock in value of debt reached ALL 1.38 trillion with an increase of ALL 1.5 billion (EUR 1.3 billion) compared to last year. This is the highest annual expansion undertaken by Albanian governments over the years.

In relation to GDP, the largest increase was in external debt, which at the end of 2021 reached 38.4% of GDP from 35.8% at the end of 2020. Compared to the pre-pandemic period, external debt was increases by 8 percentage points. Its value increased mainly through successive Eurobond issues in 2020 and 2021.

Domestic debt has also increased, but in milder proportions. In 2021, its level reached 39.6 percent of GDP with an expansion of 0.2 percentage points of GDP compared to 2020, while in relation to pre-pandemic domestic debt increased by 4.3 percentage points of GDP.

Meanwhile, during the last year, the Government spent about 69 billion ALL (560 million euros) on debt repayment, of which 35.8 billion were interest and 33.1 billion ALL were principal.

Earlier in 2021, the World Bank announced that increasing the country's public debt to record highs would reduce the government's ability to spend on investment projects or other areas after 2021.

The government used natural disasters, earthquakes and pandemics to increase public debt by about 2.5 billion euros in the last two years, while part of it was used to finance disaster-related projects.

Over the past year, the government has expanded public debt at faster rates than the country's economic growth. Albanians' per capita income has grown at lower rates than per capita debt.

The International Monetary Fund (IMF), in its latest report on Albania in December last year, expressed concern about the country's growing fiscal risks and the lack of accurate data on public-private partnership (PPP) projects. Court rulings, the new guarantee scheme for the private sector and support for energy companies are also seen as added risks which increase unreported liabilities.

(Source: Monitor)