Exchange rate developments with the continuous fall of the Euro against the domestic currency Lek are significantly damaging the economy and especially export production, but on the other hand this situation has greatly helped the government to reduce external debt costs.

The Ministry of Finance has calculated that during 2024 it has saved about Lek 4 billion, or about Euro 40 million from external debt interest payments as a result of the exchange rate.

The exchange rate has been one of the fundamental factors for reducing debt compared to GDP in the last three years.

In the last days of 2024, one Euro was exchanged for Lek 98.1 from Lek 123 it was in January 2021. In three years, the Euro has lost 20 points against Lek. In the third quarter of 2024, the euro-denominated debt was 78.2 percent of the external debt (Euro 4.5 billion).

The government has always been able to buy the euro cheaper in the last three years than it calculated in the state budget at the beginning of the year. The depreciation of the euro against the lek much more than expected has relieved the government of the debt burden, but on the other hand, the income of individuals and businesses in euros has fallen significantly in the last three years.

As a result of both exchange rate developments and fiscal stability, the Ministry of Finance expects public debt to decrease to around 55% of GDP in relative terms in 2024, while in the medium-term budget, it was expected that debt in relation to GDP would be 58% of GDP.

The Ministry of Finance in the medium term expects that the debt level of GDP will continue its downward trajectory by the respective fiscal rule set out in the Organic Budget Law, where specifically during 2024 the debt level is expected to decrease by around 2.3 percentage points (from 57.5% to 55.2%), during 2025 it is expected to decrease by 0.4 percentage points (to 54.8% and during 2026 it is expected to decrease by 0.8 percentage points.