Interviewed by Eglantina Nasi
Mr. Kadare, how would you comment the significant drop of the European currency Euro in the domestic market during the recent months?
Euro’s depreciation in the domestic currency market in our country is a phenomenon which has been lasting for a year and a half now. Before this period, euro was ranged from 139 to 140 lek, while now it is sold at around 134 lek. This means that 3-4% depreciation of the euro against the domestic currency, lek, has been spanning out in a considerable period of time.
In fact, I believe that this was not that much of depreciation for a period of a year and a half, if we consider the fact that other currencies may be depreciated by 1% within a single day. So, this cannot be considered as a great depreciation of the euro.
However, this is unusual in Albania, because for a long period, from 2010 until 2016, euro has ranged at a level from 139 to 141 lek.
Perhaps, this is also due to the fact that Albanian citizens use the euro more, isn’t it? So, the European currency is largely used in the Albanian market and this is the reason why it is felt as a phenomenon.
Yes, it is true, because those who have a loan in euro, for instance, and get their salary in lek, are favored, because their installments in euro will be easier to be paid. Therefore, exports are the ones that suffer more as a result of this. Meanwhile, importers, those who import from the Eurozone, feel better, they buy cheaper and sell more in the domestic market in Albania.
What is happening with those who have deposited their savings in euro?
The ones who deposit their savings in euro take the risk of the currency exchange rates. So, if your spending is in lek and your savings are in the European currency, you’re exposed to the currency exchange risk. If lek gains territory against euro, you will need to take out more euros than before out of your pocket.
Can you explain to us in detail the real causes that have led to this appreciation of the euro in the Albanian currency market? What factors have impacted this situation?
As I said above, this hasn’t happened immediately, but gradually, over a period of a year and a half. The real factors, which can also be seen through the figures, relate to the fact that there has been an increase of foreign investments in major projects such as Trans-Adriatic Pipeline (TAP) and that for the hydro power plant of Devoll. Those projects have brought more euros in Albania, because salaries and other payments have been made in euro and this has led to a larger quantity of the European currency to enter our country. Meanwhile, another factor relates to the fact that remittances have seen a slight increase as opposed to two years ago. So, in the period 2016-2017, we have a relative growth of remittances, however, these levels were much higher than in 2015 and this has increased the amounts of euro entering Albania.
On the other hand, we must admit that there’s a significant growth of the value of exports, especially this year, in 2017. This means that products have been sold outside the country in exchange of the euro and this has led to a larger quantity of this currency to be accumulated. There is also an increase of the price of fuel or minerals and Albania has exported more of these products. So, I think that there’s a relative increase of the amount of euro entering the country, while lek has remained unchanged. This has seen lek gain territory against euro. And this has happened gradually in 2016 and 2017.
Even last year, at the end of summer, I remember euro dropping to 137 lek. So, half of euro’s depreciation happened last year and the other half happened in the recent months.
In case of such fluctuations, what would you recommend to Albanian citizens in order for them to lose less when exchanging their currency?
I think that the ones who need advice are those who save. I suggest to them to keep their savings in the same currency that they make their expenses. For instance, those who save in lek must also have their savings in lek. Even those who obtain a loan, must take the loan in the same currency that they make their expenses, because it is true that the fact that the euro has been depreciated may help them in their installments, but the opposite may also happen, for lek to be depreciated against the euro and for them to find themselves in front of a dangerous situation. So, this is what Albanian citizens must do.
This was in fact a valuable advice for Albanian citizens. What about the country’s economy in general, what are the real consequences of this exchange rate, given that the Bank of Albania has now started a campaign against a massive use of the euro? How is this situation converted into practice for the Albanian economy?
We must understand that savings in the European currency has given way to savings in lek. And in circumstances when more than half of loans are in euro, the monetary policy of the Bank of Albania which helps lek through interest rates is not efficient in stimulating the economy.
Secondly, the exchange rate poses a threat if lek sees fluctuations against the euro, for savings and loans.
Another impact of this fluctuation relates to direct foreign investments, because foreign investors need a stable exchange rate, in order for them to insure their profits in Albania. If there are fluctuations in the exchange rate, then profits become less secure. So, such situation has certainly an impact on foreign investments. This way, we can say that there are several reasons for which changes in the exchange rate in Albania may create problem for the Albanian economy.
At the end of this interview, what do you predict for the situation with the currency exchange rate now that we’re expecting migrant workers to come to Albania for the holidays?
In fact, this is a situation that we see every year, but what has really had an impact on the depreciation of the European currency are the reasons that I mentioned above.
