Overview of Public Investments and Priorities in light of the draft budget for 2026

The public investment budget for 2026 is structured around a combination of domestic and foreign funds, primarily supporting infrastructure, energy, and urban/rural projects.

The following analysis shows that real priorities are often dominated by the continuation of existing projects, while the need for new investments in social and innovative sectors remains limited.

Overall Investment Structure

Funding Category	Total Value (mln ALL)	Share of Total	Main Sources
Domestic Funds	~153,000	66%	State budget, transfers, reserve fund, Albanian Development Fund
Foreign Funds	~79,000	34%	KfW, EIB, EBRD, World Bank, JICA, EU, Saudi Fund
Total	~232,000	100%	Mix of loans, grants, and budgetary funds

The budget structure shows that over two-thirds of public investments are still funded domestically, while foreign funds focus on sectors requiring technology, standards, and international institutional support.

Sectoral Allocation

Main Sector	Domestic Funds (mln ALL)	Foreign Funds (mln ALL)	Total	Share %
Infrastructure & Transport	67,000	37,000	104,000	45%
Energy & Natural Resources	12,500	18,000	30,500	13%
Water Supply, Sewerage & Environment	8,800	14,500	23,300	10%
Education & Health	21,400	2,600	24,000	10%
Agriculture & Rural Development	9,200	2,300	11,500	5%
Tourism, Culture & Urban Development	10,700	5,900	16,600	7%
Reconstruction, Emergencies & Housing	8,200	1,200	9,400	4%
Justice, Administration & Digitalization	15,200	2,000	17,200	6%

This allocation clearly shows the relative priorities of the 2026 investment budget and the distribution between domestic and foreign funds.

1. Infrastructure and Transport

Sector	Total Investment 2026 (000 ALL)	Domestic Funds	Foreign Funds	Comment
Roads / Bypass	9,347,253	4,493,323	4,853,930	Most funds continue existing projects; new networks are limited.
Railways	21,731,000	7,092,202	14,638,798	Main priority is rehabilitation of Durres-Tirana, Vore-Hani i Hotit, Rrogozhinë-Pogradec lines; high continuity of ongoing projects.
Maritime Transport	10,000	0	10,000	EU projects for port management, with limited impact on new urban priorities.

Investments in national roads, bypasses, railways, and multimodal hubs dominate the infrastructure budget. Total sector allocation is ~104 billion ALL, with 67% funded domestically and the rest via foreign loans and grants (WBIF, EBRD, EIB, KfW).

This indicates that:
(a) existing networks require continued financing, projects started in previous years cannot be interrupted, requiring additional funds for completion;
(b) new strategic investments, including green transport or urban hubs are often delayed.

The increasing weight of rail transport financed by EIB, EBRD, and WBIF reflects efforts toward sustainable transport.

The sector remains fundamental to the country’s economic infrastructure, but carries the risk of concentrating public capital in long-term infrastructure with slow returns, leaving limited space for social, environmental, and innovative projects.

2. Energy and Energy Efficiency

Sector	Total Investment 2026 (000 ALL)	Domestic Funds	Foreign Funds	Comment
Electricity Network & SCADA	1,628,779	1,070,000	558,779	Investments in smart meters, SCADA, substations, and network balancing.
Hydropower / PV	1,800,000	300,000	1,500,000	PV Belshi, rehabilitation of Fierze and Vau i Dejës; large physical investments dominated by foreign funds.

Most energy investments are continuations of existing projects (hydropower, OSHEE network). KfW, AFD, and CDP projects¹ focus on network modernization, energy efficiency, and smart meters, while domestic funds complement interventions for energy security and infrastructure rehabilitation.

Priority is on diversification and decarbonization, but there is no dedicated fund for private renewable energy, so the government emphasizes the public grid rather than promoting small-scale producers.

Green energy and innovative projects are limited by existing priorities.

3. Water Supply, Sewerage, and Environment

Sector	Total Investment 2026 (000 ALL)	Domestic Funds	Foreign Funds	Comment
Municipal Infrastructure / RWS	3,756,325	538,100	3,218,225	Municipal projects in Himara, Tirana; foreign funds dominate to meet EU standards.
Sewerage Tirana	95,948	20,000	75,948	Investments to complete urban network.
Environmental Projects “Blue Sea”	100,000	0	100,000	Limited but strategic focus.

Foreign funds are essential for meeting EU standards and sustainable environmental projects, including urban network modernization, wastewater management, and digitalization of water services.
Domestic funds mainly cover rural networks and maintenance.

This sector is closely linked to EU integration requirements, focusing on environmental standards and quality of life.

However, continuation of existing water and sewerage projects consumes most of the budget, leaving limited space for new initiatives.

4. Tourism, Urban Development, and Regional Integration

Sector	Total Investment 2026 (000 ALL)	Domestic Funds	Foreign Funds	Comment
Tourism / Urban Integration	2,828,000	1,200,000	1,628,000	Projects linked to tourism development, “Alps Gateway,” and multimodal hubs; partially continuation of existing projects.

Funds are divided between ongoing projects and new initiatives. Domestic funds are used for city and historical center upgrades, while foreign funds support integrated sustainable tourism programs (EBRD, WB, EU).

The sector supports economic diversification, with investments aimed at increasing territorial value via tourist infrastructure.
Although the sector has potential for expansion, co-financing with existing projects slows new priorities.

5. Education and Health

Sector	Total Investment 2026 (000 ALL)	Domestic Funds	Foreign Funds	Comment
Education / Dormitories	606,953	306,953	300,000	Energy efficiency projects and dormitory rehabilitation, mostly continuations.
Health	0	0	0	No major new investments in 2026 budget.

Education funds are limited and tied to previous projects. Health depends on operational funds and receives little capital investment.
Domestic funds are used for school infrastructure, regional hospitals, and medical equipment, with minimal international support except for digitalization and emergency equipment projects.

This underfunding highlights a development model focused on physical rather than human capital.

6. Agriculture and Rural Development

Sector	Total Investment 2026 (000 ALL)	Domestic Funds	Foreign Funds	Comment
Agriculture & Rural Development	11,500,000	9,200,000	2,300,000	Domestic funds cover most projects, funding rural infrastructure and sustainable development programs; foreign funds support specific rural roads and tourism development.

Despite agriculture representing up to 16% of GDP, funds for this sector are ~11.5 billion ALL, less than 5% of total investments.
The main reason: existing infrastructure projects require continued financing, leaving little space for new or innovative agricultural investments.

Support continues in 2026 for national schemes and irrigation investments, with foreign loans and grants used for water network modernization and agricultural processing.

The sector has strategic potential, but limited funds hinder economic diversification and innovation.

7. Administration & Digitalization

Sector	Total Investment 2026 (000 ALL)	Domestic Funds	Foreign Funds	Comment
Administration & Digitalization	17,200,000	15,200,000	2,000,000	Investments mainly in public service modernization, digital processes, and IT systems.

Domestic funds cover most projects, while foreign funds are limited, restricting adoption of advanced technologies.
Projects focus on communication networks, online services, ERP systems, smart meters, and SCADA.
This reform-oriented sector aims to reduce administrative costs and corruption, though infrastructure project continuity limits funding for large digital improvements.

Planned investments for 2026 clearly reflect a trend linked to limited fiscal capacity. Approximately 65–70% of funds are allocated to ensure continuity of existing projects, which maintains stability and development momentum, but limits flexibility for new or emergent priorities.

Infrastructure and energy dominate due to strategic importance, while social sectors like education, health, rural development, agriculture, tourism, and technological innovation receive a modest share, indicating that long-term priorities lack sufficient funding for transformative impact.

Foreign funds are essential, especially for capital projects and EU-aligned initiatives, but are largely tied to ongoing projects, leaving limited room for new innovative projects that could strategically enhance domestic capacity.

The 2026 investment framework reflects a common dilemma: the need to complete ongoing projects and fulfill international commitments limits opportunities for pursuing new priorities.

While continuity is necessary, to maximize long-term impact, the government should seek flexible funding models that allow investments in emerging priority sectors, without tying all resources to ongoing projects.

1. Domestic funds are used for regional roads, reconstructions and maintenance, while foreign funds are used for strategic corridors (railways, bypasses, international connections). ↩︎