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The local currency, the lek, has appreciated higher in the exchange rate compared to the currencies of the Western Balkan countries.
According to the updated data in a graph of the International Monetary Fund, the real effective exchange rate began to increase rapidly after 2016. The Fund built the index “Real effective exchange rate (2010 = 0)” and shows that from 2010 to July 2021 the lek has appreciated in the foreign exchange market by at least 23 percentage points. The trend of lek appreciation has somewhat softened during 2021.
The Fund reasoned that the exchange rate has appreciated so far, as a result of the improvement of the current account and the continuation of capital inflows.
After the Albanian lek, it can be seen that the Serbian dinar has the highest appreciation. Since 2010 where the index = 100, the Serbian dinar has appreciated by about 20% in the exchange market.
Before 2016, the Serbian Dinar was the most overvalued currency in the Region in the foreign exchange market, but 5 years ago the competition was won by the Albanian Lek. The Serbian currency has strengthened as a result of strong growth in value-added exports in this period and improved fiscal balance with a significant reduction in public debt.
While in the other two Balkan countries, Macedonia and Bosnia, the national currencies have been declining since 2010.
The Bosnian currency, the Marka, is seen to have depreciated by at least 10 percentage points since 2010. The Denar of Northern Macedonia also depreciated by 4 percentage points over the same period.
Overall in the Eastern and Central European countries of the CESSE region, which includes about 20 countries, domestic currencies have lost an average of 5 percentage points of value in exchange for foreign currencies since 2010.
The appreciation of the lek has helped Albania amortize the increased costs for the foreign exchange. By buying more euros with less lek, Albania with the same amount of lek has repaid more debt in 2021 compared to 2016.
In 2017, one euro cost an average of 134 lek, while this year one euro cost an average of 123 lek.
But in the event of a depreciation of the lek, the exchange rate could turn into a serious risk for debt financing, since the appreciation of the local currency, the external debt in euros has increased significantly by the issuance of Eurobonds. In the last days of November, the Albanian government issued a Eurobond worth 650 million euros which it will repay in 10 years./monitor/
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