Public debt, a lasting burden with partial benefits

Public debt is not inherently negative.

It is a financial instrument that governments use to cover the gap between expenditures and collected revenues (taxes, fees, tariffs, etc.). When there is a budget deficit, the government finances itself through borrowing from domestic and international markets.

At a time when terms like “fiscal consolidation” and “macroeconomic stability” are often mentioned in official statements, the reality of the state budget for 2024 paints a more complex picture.

The Albanian government is covering part of its expenditures through public debt, while citizens are increasingly paying not only for public goods and services but also for the interest on this debt.

Confirmed figures for 2024 show a slight fiscal improvement but also reveal a reality where citizens continue to pay not only for goods and services but also for interest on past debt, often without feeling concrete benefits in their daily lives.

In 2024, Albania’s public finances present a more stable picture compared to the previous year, with indicators signaling cautious—but insufficient—consolidation regarding budget and public debt management.

Total government revenues have been confirmed at 710.3 billion lek, a significant increase compared to 643.4 billion lek in 2023. This growth of over 10% reflects both economic growth and strengthened tax administration. At the same time, total expenditures for 2024 reach 728.5 billion lek, exceeding revenues and creating a budget deficit of 18.2 billion lek—significantly lower than the 31.2 billion lek deficit in 2023.

Despite this improvement in the primary balance, a large portion of the budget continues to be consumed by interest payments on existing debt. In 2024, interest payments on debt amount to 54.4 billion lek, unchanged compared to 2023. This indicates a persistent debt servicing burden despite the reduction in new borrowing.

At the end of 2024, total public debt reaches 1,365 billion lek, a very slight increase from 1,362 billion lek in 2023, reflecting nominal stability in debt levels but also structural reliance on borrowing to cover fiscal needs. Spread across a resident population of about 2.4 million, this means each Albanian citizen carries roughly 569,000 lek of public debt at the end of 2024.

From a macroeconomic perspective, 2024 marks a slight improvement in economic growth. The real growth indicator reached 4.05%, compared to 3.94% in 2023, showing an accelerated pace—though still within the country’s economic potential limits.

Comparing these indicators between 2023 and 2024 shows efforts toward budget discipline and financial stability but also highlights the limitations of the current model: an economy generating more revenues but still relying on public debt to meet its needs. In this context, debt remains not just a financial instrument but a clear reflection of how the state manages the relationship between development and long-term obligations.

In 2024, only 2.5% of public expenditures are financed through borrowing, down from 4.6% in 2023. This indicates improved deficit management but not necessarily relief in the debt burden, as interest payments remain high and consume a significant portion of the budget.

How much does each citizen pay for this debt?

In 2024, total public debt reaches 1,365 billion lek, while the resident population is approximately 2.4 million. This means each Albanian citizen carries an average burden of 568,750 lek in public debt, or about 569,000 lek per capita.

This figure is slightly higher than in 2023, when the per capita burden was 567,000 lek, reflecting a steady but not declining load.

Beyond this symbolic figure, what truly weighs on the budget and citizens is the annual cost of debt servicing: in 2024, 54.4 billion lek, or 7.5% of all public spending, is used solely to pay interest without generating new investments or tangible improvements in public services.

Thus, the cost of debt is measured not only by the amount owed but also by public revenues consumed annually without producing added value, limiting space for development policies and social support.

What has borrowing achieved?

Public borrowing in Albania has played an important role in supporting state functions and coping with difficult economic periods, but its effectiveness remains limited and debatable.

On the one hand, debt has financed capital projects in road infrastructure, energy, and public buildings, helping modernize some essential segments for state functioning.

During major crises, such as the COVID-19 pandemic or the 2019 earthquake, borrowing was a necessary tool to maintain budgetary stability and finance social and economic aid packages.

Also, when fiscal revenues have fallen sharply, debt has covered immediate gaps, preventing drastic cuts in public expenditures.

However, the effectiveness of borrowing in promoting economic development and improving citizens’ quality of life is limited.

Many debt-financed investments have not been accompanied by deep cost-benefit analyses, leading to investments with low or uncertain returns. The widespread use of public-private partnerships (PPPs), often contracted without competition and with high long-term costs, has shifted the debt burden from the public sector into forms that are not always transparent and off official balance sheets.

Furthermore, a high percentage of debt is denominated in foreign currency, exposing the economy to risks from lek depreciation and rising debt servicing costs amid global financial instability.

Fundamentally, while debt has helped keep the state functional and finance immediate needs, it has failed to generate sufficient long-term impact on economic growth and public service improvement. The high annual interest cost and rising future budget commitments without clear impact analyses make the benefits of borrowing not only partial but also uncertain over time.

What has public borrowing in Albania yielded?

Despite accelerated economic growth in 2024, when Albania recorded a pace of 4.05% compared to 3.94% in 2023, the public debt burden remains largely unchanged. Total debt levels remain above 1.3 trillion lek, showing the fiscal structure still relies heavily on continuous borrowing.

This situation shows that although the economy is growing faster, debt obligations are not decreasing proportionally. As a result, the fiscal burden remains heavy and significantly limits space for other development policies or social spending.

Fundamentally, the main challenge lies not only in economic growth but also in careful and responsible borrowing management to ensure a sustainable balance between economic development and long-term fiscal sustainability.

Public debt management in Albania has entered a phase where maintaining formal fiscal sustainability is no longer sufficient. Achieving responsible and efficient management requires concrete and sustainable steps beyond daily fiscal policies.

One of the top priorities is reducing the real debt by establishing a legal fiscal rule that limits the deficit and debt level clearly and obligatorily. This will ensure long-term fiscal discipline and prevent uncontrolled debt growth.

Another important dimension is increasing budget revenues, which requires special focus on formalizing the economy and strengthening tax administration. This will broaden the revenue base and reduce reliance on borrowing.

Furthermore, public expenditure efficiency must improve through clear cost-benefit analyses for every project funded with external funds. This will help prioritize investments with real economic and social impact.

Finally, transparency is a fundamental pillar of responsible debt management. Regular publication of reports on public debt impact will increase accountability and help citizens and institutions monitor fiscal performance.

Albania’s public debt is not currently out of control but remains a structural burden on public finances and citizens.

In a context where an average of 50 billion lek (~500 million Euro) is paid annually in interest while public service quality remains debatable, it is time to treat debt not only as a balance sheet figure but as a direct part of economic policy and citizen welfare.

Manageable debt does not mean fair debt, and any figure that does not translate into real impact is a debt that does not justify its own existence.