The strength of Lek and the paradox of Albania’s Foreign Exchange market

A typical day at the foreign exchange offices in downtown Tirana on 28 October 2025 reveals more than any statistical report. While the official euro exchange rate stands at around 96.8 lek, several currency exchange offices in the physical market offer 96.4 lek for each euro in cash. This difference has become common, reflecting the persistent divide between the formal and informal segments of Albania’s currency market.

This phenomenon represents only part of the paradox currently shaping the Albanian economy: the national currency appears strong in official data, yet in the real economy, this “strength” is not felt in terms of living standards or competitiveness.

Interventions by the Bank of Albania

In December 2024, the Bank of Albania announced the largest monetary intervention in its history, purchasing €930 million from the market in a single year—an average of €77.5 million per month. The declared objective was to stabilize the exchange rate and support exporters facing an overvalued lek. During the first half of 2025, the intervention pace continued, with more than €800 million additionally withdrawn from circulation.

However, while financial institutions were absorbing foreign currency from the banks, a significant amount of euros continued to circulate outside the formal system.

Informal Currency Flows

Along the coast, during the summer of 2025, a foreign family paid €1,200 in cash for a seaside apartment. The transaction never passed through any bank. The property owner pocketed the money and exchanged it at a local exchange office, no invoice, no trace. The same day, a returning emigrant brought home €5,000 in cash, handing it to family members to buy a used car. These funds, too, went unrecorded anywhere in the financial system.

Estimates suggest that real remittances reach between €1.3 and €1.5 billion annually, several hundred million euros higher than the official figure of €1.045 billion. Officially, net tourism income stands at €2.291 billion, but €2.7 billion in outbound spending by Albanian citizens abroad narrows the actual balance. A large share of these inflows continues to circulate outside the banking system.

According to ALTAX estimates, real emigrant remittances range from €1.3 to €1.5 billion per year, or €300–500 million above official data. At the same time, tourism inflows of around €5 billion are substantially offset by €2.7 billion in travel spending abroad, resulting in a much thinner real balance than reported. A significant portion of these flows, moreover, remains outside formal financial circulation.

Impact on the Export Sector

In a garment factory near Durrës, the owner calculates daily losses:

“When the euro was at 122 lek, I paid 100 lek to produce a shirt. Now, at 96.5 lek, I pay 126 lek for the same shirt when selling abroad. I’ve lost 20% of my profit margin in two years.”

The central bank’s interventions keep the rate artificially higher in the banking system (96.8 lek), while in the real market, the euro trades between 96.4 and 96.5 lek.

According to ALTAX analysis, the Bank of Albania’s interventions have prevented a deeper depreciation of the euro, yet they have not eliminated the parallel market, where the rate remains 0.5–1 lek lower than the official one.

Alternative Scenario

A hypothetical scenario calculated by ALTAX suggests that if the Bank’s interventions had been more limited, around €320 million in 2024, or 35% of the actual level—the exchange rate would have dropped to approximately 95 lek per euro, resulting in 8–10% losses for exporters.

The data indicate that, despite record interventions, the strength of the lek is largely nominal[1], sustained by ongoing central bank operations, while the informal market and off-bank flows create a parallel financial reality.

Policy Implications

The core message from the ALTAX analysis is clear:

“Without formalizing at least 50% of informal financial flows within three years, any monetary intervention remains temporary. The strengthening of the lek without transparency and integration of real financial flows is a statistical illusion.”

As citizens and businesses continue to face rising prices and shrinking profits, the paradox of a “strong” lek persists. On paper, the national currency appears robust; in practice, purchasing power remains weak. The key question for policymakers remains:
How long can this equilibrium, built on a dual market, formal and informal endure without deep financial transparency reform?

[1] The high value of the lek against the euro and other currencies does not reflect a real strength of the Albanian economy, but rather results from technical or temporary factors, mainly the Bank of Albania’s interventions and informal currency inflows.