PRESS RELEASE
Questions and answers at the press conference, 3 May 2023

Question: The Ministry of Finance and Economy held a meeting today with business companies of exporters on the performance of the exchange rate. Will there be any decision and intervention by the Bank of Albania regarding the depreciation of the euro?

Governor: In terms of the exchange rate, the Bank of Albania has clarified it several times. Today we are addressing again our comment on this issue. The lek exchange rate is appreciated and has been strengthening over a long period of several years. The appreciation of lek this year is even stronger. This is due to several factors. Both official and fundamental factors fully justify the strengthening of the exchange rate. Data from the balance of payments show a significant increase in foreign direct investments compared to the previous year, a significant growth in tourism income compared to the past year, an upsurge in total exports, as well as a rise in remittances. These channels of the euro inflows have led to an ample euro supply in the market.

We have monitored continuously the market and we have noted that the market’s behaviour has reflected the exchange rate smoothly. Thus, we have experienced neither distortions nor speculative behaviours, or no psychological factors that affect the exchange rate. The interventions of the Bank of Albania in the exchange rate are clearly laid down the relevant laws and regulations. We have intervened in the foreign exchange market in 2018 since all the criteria that I mentioned were met in that year. Spreads had been expanded, psychological factor was sharp, and the most important factor, at that time, the exchange rate hit inflation. Hence, we were experiencing a deflationary situation and we wanted to increase inflation rate at 3 %.

Today we are in a completely different situation. We carry out intervention in terms of reserve management. But, this is not called an intervention in the exchange rate. The Bank of Albania publishes the calendar of interventions at the beginning of the year, for the purposes of being transparent and to not impact any speculation in the foreign exchange market.

Whenever, the Bank of Albania intervenes in the market, it aims at preventing speculations and at the same time cushioning inflation. All of these criteria, are not met in this case. The calendar of interventions to increase the Bank of Albania's international reserve is known to the market. Meanwhile, we do not see a speculative behaviour in the market. In this view, we cannot create an intervention precedent due to the current strengthening of the exchange rate as this really reflects the foreign exchange market. This is the real market and these are real inflows. Since there are no broadening of spreads, there is no reason to intervene.

On the other hand, I understand and consider that we should cooperate with exporters or those industries which are affected by the exchange rate effect.

Obviously, while some sectors lose, others win. Some individuals lose, and others win. All those enterprises or individuals whose income is in euro and expense in lek, have losses due to the strengthening of the exchange rate. In contrary, those enterprises and households whose income is in lek and expense in euro have profits, importers in this case.

Albania runs a trade deficit: it is an import-oriented economy. In total, at economy level, profits are higher than losses. Certain parts of export-oriented economies do have losses. To this end, we aim at bolstering the domestic production, in addition to boosting the export-oriented economy. In this context, likewise the Ministry of Finance and Economy, we will establish a swift contact with exporters. We will discuss with them and we are ready to provide trainings on the exchange rate risk management. As the leading financial institution, we have the required experience and expertise in this regard. We are ready to inform and train all those industries and companies that will be hit affected by the fluctuations in the exchange rate. In addition, the Bank of Albania will collaborate closely with the Ministry of Finance and Economy to see what measures we can take to help exporters who suffer losses.

Nevertheless, I would like to emphasize that the current exchange rate is determined by the supply and demand for foreign currency. In this view, allow me to highlight once again: the exchange rate is market-determined. The Bank of Albania, as a central financial institution, announces and communicates the exchange rate, but it intervenes only in those cases as I mentioned above. This clarification is addressed to the public opinion, because experts and professionals are very clear about this.