Albania’s general government debt, including state guarantees, increased by 6.8% on the year and by 1.5% on the quarter to ALL 884.9bn (EUR 6.3bn) at the end of 2013, data from the finance ministry showed. The debt was equal to 65.2% of full-year GDP, up by 2.7pps y/y.

Domestic government debt rose by 10.7% y/y to ALL 520.8bn and its share in total debt advanced by 2.1pps to 58.9% at end-2013. Foreign debt also increased but at the weaker annual pace of 6.8% y/y and accounted for 41.1% of the total. The state guarantees totalled ALL 51.3bn, comprising 5.8% of the overall general government debt.

Albania’s total debt servicing increased by 7.6% y/y to ALL 56.1bn in 2013. This was due to repayments, which accounted for ALL 12.8bn, up by 19.7% y/y. In addition, interest payments picked up by 4.4% y/y to ALL 43.3% y/y.

The implicit interest rate, defined as the ratio of total interest-to-total debt stock declined to 4.9% in 2013 from 5.01% year earlier.

In terms of debt composition, the share of government securities was 61.4% at end-2013, up by 1.4pps y/y. Loans accounted for 32.8% of the gross central government debt. As regards to debt maturity, the share of short-term debt dropped by 2.8pps to 29.5% at end-2013.

The IMF, the World Bank and the EBRD have repeatedly warned that the Albanian economy faces increasing challenges from its high public debt that is exceeding its statutory limit of 60% of GDP. The international institutions believe that the relatively high level of indebtedness is putting pressure on the country’s economic growth prospects, while limiting the room for fiscal manoeuvres. According to the updated economic and fiscal program of the Albanian government, the public debt is expected to increase by 1.9pps this year and equal to 63.8% of the GDP.