TIRANA, April 23 /ATA/ – Lending in domestic currency, lek, in private sector increased by 6,7% during 2018.
The Bank of Albania governor Gent Sejko announced on Tuesday at parliamentary committee for economy that lowering the policy rate was aimed at further reducing the costs of financing and mitigating appreciation pressures on the exchange rate. The intervention in the domestic foreign exchange market, as a temporary and extraordinary instrument of the monetary policy, was considered as necessary under the conditions when the space for further lowering the policy rate was limited.
Interventions in the foreign exchange market were concentrated in the summer months. Further on, Bank of Albania market interventions have been practically inexistent and the exchange rate reflected the supply and demand situation in the market. Insofar results show that Bank of Albania interventions have accomplished the objectives. The appreciation pace of the exchange rate has diminished and the activity in the foreign exchange market has returned to normal parameters.
In line with these developments, the Bank of Albania kept the direction and intensity of the monetary stimulus unchanged over the second half of the year. The policy rate remained unchanged at 1.0% while the financial market was supplied with the necessary liquidity and informed through the forward guidance on the future path of the monetary policy stance.
The accommodative monetary policy implemented by the Bank of Albania has proven successful for boosting economic growth, inducing better utilisation of production capacities and building up inflationary pressures in the economy. The transmission of the monetary stimulus is noted in several aspects:
First, the monetary stimulus has led to the reduction of financing costs for households and enterprises. Interest rates are close to historical lows, across all the range of financial instruments.
Second, the accommodative monetary policy has led to the expansion of credit in lek, and to the reduction of existing debt service costs. Lek credit to the private sector increased at 6.7%, on average, in 2018. In parallel, the reduction by 5.6 percentage points of the interest rate on lek credit compared to 2011 – when the monetary policy easing started – helps Albanian firms and households to save around ALL 15 billion per year.
Third, the accommodative monetary policy has supported Albania’s financial stability. Growth of demand for goods and services and reduction of debt costs led to the improvement of the solvency of firms and households, and has encouraged loan restructuring. Also, the orientation of lending toward lek credit has reduced the exposure of the economy and of the financial system against exchange rate volatilities.
/e.xh/j.p/sm/
