Foreigners are buying Albanian debt, financing 28% of domestic borrowing

Investors from abroad played an important role in the Albanian government's Lek debt instruments market last year.

Bank of Albania data showed that for 2024, non-resident investors financed 28% of the Albanian government's additional borrowing in the domestic financial market.

Given that domestic borrowing (excluding refinancing) was around 50 billion lek, it can be calculated that non-resident entities invested around 14 billion lek or approximately 140 million euros in Albanian government debt securities.

The participation of foreign investors in the Albanian government's Lek debt instruments market was an absolute novelty last year. According to market sources, these investors invested mainly in benchmark bonds, with 3-year, 4-year and 5-year maturities.

Although the profile of the investors is protected by confidentiality rules, sources indicate that they are mainly collective investment undertakings (investment funds), which have decided for the first time to include Albanian government bonds in Lek in their portfolios.

A high interest of investors in Albanian government bonds has also been observed in Eurobond issuances in recent years. In February 2025, the Albanian state issued Eurobonds for a total value of 650 million euros, with a yield of 5%. The demand for Albanian Eurobonds presented by investors has been very high and reached a total amount of 3.7 billion euros.

The interest of foreign investors is now also extending to securities issued in the domestic market, in Lek.

The entry of these investors into the lek government securities market has also been influenced by the improvement in sovereign debt ratings in the last two years.

In March of this year, the rating agency "S&P Global Ratings" improved the long-term sovereign debt rating for the second time in two years, from "BB-" to "BB", with a stable outlook.

A year earlier, in March 2024, Standard & Poor's had upgraded Albania's long-term sovereign debt rating for the first time from B+ to BB-. Subsequently, in October 2024, another agency, Moody's, also upgraded the rating from Ba1 to Ba3.

Foreign investor demand is among the factors that has influenced the increase in liquidity and the decrease in yields of government securities in lek during the past year, but also in the first quarter of this year.

The margin between the base interest rate and yields has fallen to historical minimum levels for all debt instruments, and even treasury bills have fallen below the base interest rate level.

According to the 2025 budget, the total value of new borrowing planned to be financed in the domestic market is 50 billion lek, the same value as in 2024./ Monitor