Public debt increased both in value and gross domestic product (GDP) in the first quarter, according to official data from the Ministry of Finance.

In January-March 2025, the debt-to-GDP ratio increased slightly to 54.18% from 53.95% at the end of 2024 but remained well below the average of the last decade.

Despite the slight change in GDP, the debt increased strongly in value. The stock of liabilities reached Lek 1,419 billion in the first quarter or 4.0% more compared to the last quarter.

The data show that the stock of debt expanded by Euro 540 million in January-March compared to the end of the year.

The increase in debt in the quarter was mainly dictated by foreign financing. Domestic debt reached the value of Lek 781 billion, accounting for 55% of the stock, down by 0.9 from the end of the year. External debt expanded by 10% compared to the end of the year. The increase in liabilities in foreign currency increases the risk of exchange rate fluctuations.

Short-term instruments of less than one year accounted for 13.4% of the debt portfolio. Debt repayment payments reached Lek 28.2 billion during January-March, of which Lek 17.9 billion were interests.

More detailed data show that the increase in public debt in the first quarter came from external disbursements such as Eurobonds and multilateral loans. The increase in external borrowing exposes public finances to exchange rate fluctuations and conditions in international capital markets. Meanwhile, the volatility of global yields could increase the average cost of the portfolio when long-term instruments are renewed.

In 2024, public debt reached 54.74% of GDP, a decrease of 2.7 points compared to 2023. This was the lowest level of public debt in GDP since 2008.

The decrease in debt last year did not come due to a planned program, but from the failure to realize budget expenditures according to plan. The inability to spend led to a forced fiscal consolidation.

In 2024, the country's public expenditures were around 28% of GDP, but in the following decade they will have to reach over 38% of GDP, due to higher needs for financing the pension scheme and for greater financing in the health sector, as a result of the aging population.