In the first nine months of 2023, the Bank of Albania has made significant currency purchases, acquiring approximately 200 million euros in the domestic foreign exchange market. Official data reported up to the end of the third quarter reveals a staggering 107% increase in the amount of currency purchased compared to the same period in the previous year.
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Purposeful Currency Acquisition:
The data indicates that the Bank of Albania has procured a total of 182.7 million euros through planned auctions aimed at managing the country's foreign exchange reserves. During the third quarter alone, the bank purchased a total of 66.5 million euros through these auctions, including two with a maximum allowable purchase limit of 18 million euros each.
Direct Interventions to Stabilize Exchange Rates:
In addition to planned auctions, the Bank of Albania conducted two direct market interventions, purchasing five million euros on June 9 and 12.1 million euros on July 20. The latter date marked a historic low for the euro against the Lek. Including interventions aimed at preventing further depreciation of the exchange rate, the Bank of Albania acquired a total of 199.8 million euros during the first nine months of 2023.
Upcoming Auctions and Reserves Growth:
In the final quarter of the year, four additional auctions were conducted, with estimations suggesting purchases exceeding 50 million euros. Looking ahead, the Bank of Albania aims to acquire between 220 and 300 million euros through auctions in 2023. The forecast for the next year indicates a potential increase in purchase amounts in the range of 250 to 330 million euros.
Lek Strengthening and Economic Factors:
The surge in currency acquisitions by the Bank of Albania in 2023 and the projected figures for 2024 are closely tied to the unprecedented strengthening of the Lek against the foreign exchange rate and the need to mitigate this strength. During 2023, the Euro-Lek exchange rate hit a historic low of 100.49 Lek, with an annual depreciation of 14%.
According to the Bank of Albania, the strengthening of the Lek is primarily attributed to a significant improvement in the Balance of Payments. For the first time in its history as an open economy, Albania has achieved a positive current account balance. In the third quarter of 2023, the current account balance was positive at 354 million euros, a stark contrast to the 145 million euro deficit recorded during the same period a year earlier.
Fiscal Policy and Lek Resilience:
The reinforced Lek has also been influenced by the government's stringent fiscal policy. Fiscal surplus this year reached historic levels, peaking at 51 billion Lek in September. This surplus has considerably constrained the supply of Lek in the foreign exchange market.
As of the latest update, the Lek remains robust. On Wednesday, the Euro was exchanged at 103.54 Lek, representing a 9.1% decrease compared to the same period a year ago. Particularly in November, the Euro experienced a notable decline, primarily due to significant currency sales by energy trading companies to settle the extraordinary tax imposed on them.
However, in December, the Lek depreciated slightly, mainly due to a substantial concentration of public spending during the month, boosting the supply of the local currency in the foreign exchange market.