Bank of Albania is expected to increase purchases in the domestic foreign exchange market during the coming year. According to data from the central bank, the estimated value of euro purchases is expected to be between 160 and 220 million EUR. 

This amount represents a significant increase compared to this year's expected figures. According to the revised objective, for this year the amount purchased in the domestic foreign exchange market is expected to be between 125 and 145 million EUR. 

These forecasts refer only to planned purchases for the purpose of increasing the foreign exchange reserve. In special cases, the Bank of Albania can intervene by buying or selling currency to avoid disturbances in the market. 

For 2023, the Bank of Albania has predicted a total of 16 auctions for the purchase of euros, which will take place between August 17 and December 20. For the next year, an increase in the upper range expected to be purchased in the first round of the auction is expected. 

The estimated amount to be purchased initially will be between five and 9 million euros, while until this year the purchases in the first round were made in the range between 5 and 8 million euros. Furthermore, the Bank of Albania can also carry out the purchase in a second round, usually at the average rate of the bids accepted in the first round. 

For 2023, the Bank of Albania intends to further develop the use of forward agreements (for future purchases). The use of these agreements is seen by the Bank of Albania as a step that can encourage commercial banks to take steps towards the development of the money market. 

Of the 16 anticipated auctions, half are anticipated with forward agreements and half with classic spot agreements (with purchase on the auction date). In the last two years, the Bank of Albania has usually used forward agreements with a one-week term, while for 2023 it is expected that the forward agreements will have a longer term, one month. 

At the end of October, the country's foreign exchange reserves had the value of 4.96 billion euros, increasing by 17.7% compared to the same period a year ago. The size of Albania's foreign exchange reserve is generally assessed by specialized institutions as quite satisfactory for covering the economy's foreign exchange needs. 

One of the main criteria in determining the minimum necessary value of the foreign exchange reserve is the achievement of a value sufficient to cover at least four months of imports, while according to the latest estimates of the Bank of Albania, the country's foreign exchange reserve currently covers about 7.3 months of imports. being significantly above its minimum targets. 

Despite the significant purchases of the Bank of Albania, which on average are expected to be more than 12 million euros per month, the exchange rate of the Euro with the Lek has followed the downward trend during 2022. From the beginning of the year until the middle of December 2022, the Euro-Lek exchange rate has fallen by approximately 5%.

(Source: Monitor)