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The year 2025 marks a record for the high cost of debt service, 1.7 billion euros in interest and principal
2025-03-26 12:31:39 / EKONOMI&SOCIALE
The year 2025 will break the historical record for the entire transition period and at least until 2053, where the Ministry of Finance's projections for the ever-higher cost of debt service have been developed.
According to the government's fiscal indicators, debt service (external debt principal + domestic and external interests) will reach 171 billion lek (1.7 billion euros) this year. This value is 77 percent higher than debt service expenses in 2024 and also the highest ever recorded.
After the pandemic, the debt-to-GDP ratio has decreased, but the value has increased. At the end of last year, public liabilities reached 1,364,981 million lek or 54.7% of GDP. In relation to GDP, debt fell by 2.8 percentage points in 2024 compared to 2023, while in value it increased by 2.2 billion lek (22 million euros).
According to a long-term forecast by the Ministry of Finance, debt service costs will peak this year and will decrease until 2053.
Expectations are that in 2030, debt service costs will be only 69 billion lek, and this amount is expected to decrease further in 2034 to only 24 billion lek and in 2053 to 16 billion lek.
Debt service accounts for a significant portion of budget expenditures. Last year, debt service costs were 100.8 billion lek or 4.3% of GDP, marking a historical record. This year, debt service costs are estimated at 22% of budget revenues.
The decline in public debt, both in value and in relation to GDP, frees up more funds in the budget for other public services such as investments, wage increases, and more opportunities to redistribute tax revenues to citizens.
The Albanian government has followed a tactic in recent years by projecting a high budget deficit, which has not been able to be realized according to the program, affecting the reduction of debt in relation to GDP beyond expectations.
The performance of the official debt indicator is decreasing, but a series of hidden liabilities are increasing year after year. At the end of 2024, budget liabilities for work and service contracts with private companies reached a value of 5 billion lek, but also a series of debts have been created by publicly owned companies.
The debts of public entities for unpaid energy bills are increasing year after year, as the Supreme State Audit Office has pointed out several times that hidden debts are higher than declared./ MONITOR
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