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<\/figure>\n<\/figure>\n\n\n\nIn the period 2019\u20132021, public debt increased significantly both in absolute terms and as a percentage of GDP, going from around 65% to over 74%. <\/p>\n\n\n\n
This increase was mainly caused by the COVID-19 pandemic crisis, the decline in economic activity and the large need for emergency spending. <\/p>\n\n\n\n
At this stage, inflation was still moderate and the exchange rate was relatively stable, therefore it did not have a significant impact on alleviating the debt burden. The dominant factor remained the strong fiscal expansion.
Since 2022, a clear phase of fiscal consolidation has begun. The debt-to-GDP ratio has started to decline gradually: from around 64% in 2022, to 57% in 2023, and further to 54\u201355% during 2024\u20132025. This improvement came not only from budgetary discipline, but also from the strong effect of nominal economic growth. Here, inflation plays an increasingly prominent role.
Inflation in Albania has remained in a moderate range (2\u20133.5%), contributing to nominal GDP growth without a corresponding increase in the real debt stock. <\/p>\n\n\n\n
This mechanism is known as \u201cinflationary debt erosion\u201d: even when the nominal debt stock remains unchanged or increases slightly, the Debt\/GDP ratio falls because the denominator (nominal GDP) expands. <\/p>\n\n\n\n
This effect is particularly important in Q1 2026, where public debt reached a historic low of 48.79% of GDP. <\/p>\n\n\n\n
A significant part of this decline is explained precisely by the nominal expansion of the economy, where moderate inflation has acted as a silent but effective support for fiscal consolidation.
In addition, inflation has also positively affected public revenues. By nominally increasing the tax base (VAT, profit tax, excise duty), it has created greater fiscal space without proportionally increasing the deficit. Of course, this effect has limits: very high inflation would increase interest rates and the cost of debt service, turning profitability into a problem.
An equally important component is the exchange rate. Since about 40.8% of total debt is in foreign currency (mainly euros), the Ministry of Finance converts this debt into lek using the end-of-period exchange rate. <\/p>\n\n\n\n
As a result, when the lek strengthens, external debt looks smaller in lek \u2192 the Debt\/GDP ratio falls.
But, when the lek will weakens, the effect will be the opposite.
In recent years, the relative strengthening of the lek has created a positive statistical effect, reducing external debt to around 20.2% of GDP in Q1 2026. This mechanism directly affects reporting and calculation, making the debt indicator partially sensitive to monetary and foreign exchange conditions.
When inflation and the exchange rate are analyzed together, they create a very favorable combined effect: inflation expands nominal GDP, while the strengthening of the lek reduces the value of external debt in lek. This doubling has caused the Debt\/GDP ratio to improve faster than would have happened from fiscal consolidation alone. According to a simplified decomposition, of the total reduction of about 25.2 percentage points (from around 74% in 2020\u20132021 to 48.79% in Q1 2026), approximately 55\u201360% comes from fiscal discipline and nominal debt stabilization, while 40\u201345% is explained by nominal inflation and exchange rate effects.
This balance has been an important success for Albania, increasing fiscal space and improving the image of sustainability. However, it also carries risks. A rapid depreciation of the lek or a decline in inflation below expected levels could reverse the \u201cnominal\u201d part of the improvement, increasing the debt ratio even without changes in fiscal policy.
In conclusion, the period 2022\u2013Q1 2026 shows that the reduction of public debt in Albania is the result of a successful combination of fiscal discipline, moderate inflation and a relatively favorable exchange rate. <\/p>\n\n\n\n
This balance has yielded concrete results, but requires continued vigilance to maintain long-term sustainability in an ever-changing macroeconomic environment.<\/p>\n","protected":false},"excerpt":{"rendered":"
The performance of public debt in Albania during the period 2019\u2013Q1 2026 cannot be fully understood as a result of fiscal policies alone, but as a product of the complex […]<\/p>\n","protected":false},"author":2,"featured_media":26365,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[10475],"tags":[20559,11268,16724,8563,20558,16196,20557,9799],"class_list":["post-26363","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-en","tag-albania-2026","tag-exchange-rate","tag-fiscal-consolidation","tag-inflation","tag-inflationary-erosion","tag-macroeconomic-stability","tag-nominal-gdp","tag-public-debt-en-2"],"featured_image_src":{"landsacpe":["https:\/\/altax.al\/wp-content\/uploads\/2026\/05\/image-1-1140x445.jpg",1140,445,true],"list":["https:\/\/altax.al\/wp-content\/uploads\/2026\/05\/image-1-463x348.jpg",463,348,true],"medium":["https:\/\/altax.al\/wp-content\/uploads\/2026\/05\/image-1-300x201.jpg",300,201,true],"full":["https:\/\/altax.al\/wp-content\/uploads\/2026\/05\/image-1.jpg",1168,784,false]},"yoast_head":"\n