Will the new Eurobond shake the euro in Albania? - Experts: The course is shaken, the scenario of how measures can be taken
By March 2025, the government plans to issue a new Eurobond worth 600 million euros. But how will the injection of such a high amount of foreign currency affect the market, at a time when the depreciation of the euro in relation to the lek continues? Experts say that in the first moment it will bring new pressure on the European currency.
"Definitely there will be a pressure to further devalue the Euro, for the reason that it is a new flow of money, bearing in mind that at the same time it is a normal action, it is the maturity of the previous Eurobond that will be replaced by this one, but all that flow in the first moment will have an effect of a few days, but since it is predictable, the market players will also take measures, but it will shake the course for a short period. Usually the ones that cause the most shock are the unforeseen events. In this case, this is an anticipated activity and market actors will take measures.
But how prepared are market players for such a high monetary injection and can measures be taken?
"We have to look at the balance of the total impact it has, because of course in this case the monetary supply in euros is increased, but on the opposite side we have an increase in the monetary supply in Lek, because every year the amount of Lek in the market increases and the formula is economic growth plus inflation, money supply in lek is added. And this is how the effect of this Eurobond, which the Albanian government will receive, should be seen.
"If we can speculate we can build a scenario of how the market itself can balance this predictable decline. If we expect the injection of 600 million euros from a new Eurobond, we have foreign banks in the country that can decide that, taking advantage of this fall in the euro exchange rate, they will transfer their capital in lek to the euro and take this euro out to their parent banks. A large flow of Euros bought simultaneously by the banks would bring the situation to where it was.
According to the Ministry of Finance, the new Eurobond worth 600 million euros will be used to repay the 2018 Eurobond, as the remaining value of about 367 million euros matures. While the interests seem to be more favorable than in previous issues.
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