The Eurobond issued by the Albanian government in February has further increased the country’s foreign exchange reserves to nearly Euro 7 billion.

According to data from the Bank of Albania, the value of the reserve assets at the end of February reached Euro 6.9 billion, up 10% since the beginning of the year and 23.8% compared to the same period a year earlier.

In February, the government issued its next Eurobond on the London Stock Exchange. At the end of the process, Euro 650 million of Eurobonds with a 10-year maturity were issued and the funds secured from them were transferred to the government’s accounts at the BoA. This has given a further boost to the growth of foreign exchange reserves.

At the end of February, debt securities accounted for 67% of the reserve assets, while cash deposits accounted for 25%. The remaining part of the reserve is invested in gold and SDR drawing rights with the IMF.

Last year, the increase in the foreign exchange reserve was influenced by the large purchases of foreign exchange by the Bank of Albania in the domestic foreign exchange market.

According to official information published at the end of March, BoA purchased approximately 933 million euros in the domestic foreign exchange market in 2024. The amount of foreign exchange purchased increased by 249% compared to the previous year.

Seeing the continuation of strong appreciation pressures on the domestic currency during 2024, the Central Bank decided to intervene in the foreign exchange market, withdrawing part of the large supply of euros and increasing the money supply of the lek. This intervention was mainly motivated in function of the inflation target.

BoA’s direct purchases continued until the last days of 2024. But, despite these purchases, the exchange rate between the Euro and the Lek continued to decline during the past year, touching new historical records, near the level of 98 Lek.

The Bank of Albania has planned a further increase in foreign exchange purchases in 2025, at least in the part related to the foreign exchange reserve, although, as the data so far last year have shown, the largest purchases have been direct ones, to control the exchange rate.

The Bank of Albania aims to purchase Euro 270-350 million this year through auctions, or Euro 20 million more compared to the 2024 target, both in the lower and upper ranges.

The foreign exchange reserve is an important instrument to cushion potential shocks, related to both the current account deficit and the high level of euroization of the financial sector in the country.

On the other hand, the reserve can also be important to guarantee the stability of the exchange rate and the financial system.