The summary of the analysis of the budget financing needs with direct monetary financing is published

ALTAX experts in a recent paper, with a joint approach of the education and legal sectors, have summarized analyzes and proposals on the budget deficit, financial crises and natural disasters and direct monetary financing as an effective instrument for government arrears.

The publication is intended to provide a broader commentary and approach to discussion and debate on how the government’s high debt can be met differently using ways outside of current monetary policy.

The publication deals in three parts with 22 analyzes precisely addressing issues such as:

Budget deficit and its financing through quantitative easing
Public debt for economic growth and direct monetary supply
Natural and pandemic disasters and direct monetary financing

The adaptation prepared from the analyzes and presentations of fiscal, financial, and economic experts is an approach that has summarized and adapted analyzes carried out by international and domestic experts on monetary and fiscal policy.

But the degree of economic slowdown in the entire last decade and especially the increase in financial risk and a general collapse of confidence in the domestic market and economy require the Bank of Albania to look for new options beyond the conventional stimulus.

Therefore, this difficult global financial moment limits the ability of the Bank of Albania to influence the increase in interest rates to control inflation. To address this, and still with the aim of controlling inflation, the Bank should start a bold program due to the unsustainable and complete conditions for the implementation of Quantitative Easing (eng. Quantitative Easing).

Monetary financing is the direct transfer of money spent by the government. This can be done through the direct purchase of debt by the central bank, where the Bank of Albania expands its balance sheet through purchases of government debt.

If we mention Quantitative Easing (QE), it does not constitute direct monetary financing/money printing. QE is like open market operations, where purchases are made in the secondary market, meaning that, at least directly, the government receives no additional revenue from the transactions.
Money printing is different from QE. Printing money is an inflationary approach. Unlike money printing, which involves distributing printed money to the public, central banks use quantitative easing to create money and then buy assets using the printed money.
If the central bank rapidly prints a lot more money and immediately puts it into circulation, then more money will be used to buy the same amount of goods and services.
But if this money is to be used to pay the budget bills for the old owners, for the persecuted of the communist regime, as well as many other overdue bills, then the printing of money takes on a different and much more stimulating meaning.
However, given the fact that Quantitative Easing pushes interest rates down, it may be more effective and may serve as a valuable countermeasure at this time to influence the effects that interest rate hike policy may have.

You can find the latest publication in full (in Albanian) by clicking on the link It’s the money supply, idiot!