Preliminary data released by the Finance Ministry on Wednesday show the decline was driven not only by economic expansion but also by a real reduction in the debt stock.

By the end of March 2026, total central government debt, including state guarantees, stood at around 1.357 trillion leks, down from 1.401 trillion leks at the end of 2025, marking a nominal reduction of about 44 billion leks within three months.

The 4.08 percentage point drop in the debt-to-GDP ratio reflects a combination of two main factors: an expanding economic base and a gradual reduction in financial liabilities.

For 2026, GDP is projected to reach approximately 2.78 trillion leks, automatically increasing the economy’s capacity to absorb the debt stock.

An analysis of the debt structure shows that external debt made the largest contribution to the decline.

Its share of GDP fell to 20.20% in the first quarter of 2026, from 21.49% at the end of 2025.

The decrease reflects several concurrent developments, including the strengthening of the lek against major currencies, the maturity of some obligations, and the impact of economic expansion.

Domestic debt also continued its downward trend, falling to 28.59% of GDP from 31.38% at the end of 2025.

State-guaranteed liabilities for enterprises or strategic sectors declined to 1.49% of GDP, from 1.73% at the end of last year, reducing public finances’ exposure to potential risks stemming from contingent liabilities.

The improvement in public debt indicators signals stronger macroeconomic stability, as a lower debt-to-GDP ratio enhances market confidence and increases room for more flexible fiscal policies.

The downward trend in public debt reinforces the medium-term objective of maintaining fiscal sustainability and gradually reducing exposure to both external and domestic liabilities.

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“Public debt fell from 54.21% of GDP at the end of 2024 to 53.04% in 2025, a reduction of around 1.2 percentage points,” Malaj told Parliament of Albania.

He added that over the past five years, Albania has reduced public debt by about 21 percentage points, a sharper decline than in Serbia, North Macedonia, Bosnia-Herzegovina and Kosovo.

By the end of December 2025, domestic debt accounted for 59.4% of central government debt, while external debt made up 40.6%. The weighted average yield on government securities fell to 4.23% in 2025, down from 4.56% in 2024, while the average cost of external debt declined to 3.53% from 3.70%.

Risk indicators also improved: the average maturity increased to 2.8 years (1,001 days) from 2.6 years (923 days), and the share of debt in foreign currency fell to 40% from around 42% at the end of 2024.

Malaj said the figures reflect the resilience and stability of Albania’s economy over the medium term.

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The Finance Ministry forecasts debt at 54.1% of GDP by the end of 2025. Officials said meeting borrowing targets through the remainder of 2025 and in 2026 will be key to achieving the goal.

The projections include the possible extension of the state guarantee scheme for the agriculture sector into 2026 to ensure fuller use of this support instrument.

The government plans to raise 45 billion leks on the domestic market, mainly through long-term securities, aiming to reduce risks and meet investor demand.

External borrowing will focus on financing priority projects and budget support, totalling about 47 billion leks, with net borrowing estimated at 10.3 billion leks after repayments.

The Ministry of Finance said easing inflation in 2025 had created room for more accommodative monetary policy. The Bank of Albania cut its key interest rate to 2.5% in July and has kept it unchanged since.

According to the draft budget, interest payments on domestic and foreign debt are expected to remain broadly unchanged from 2025 levels, while repayments on external principal are projected at around 36.7 billion leks.

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Official data show that foreign debt segment saw the strongest decline to 23.55% of the GDP from 26.2% in the end of 2023.

Albanian government projects public debt to further decline in 2025.

Efforts to reduce public debt remain a top priority with the government projecting public debt to fall to 55.8% in 2025, down from 56.3 by end of 2024.

According to the base scenario, gross public debt is expected to fall to around 55% in 2026 and further to around 48.5% in 2031 as part of the fiscal consolidation policy and the relevant fiscal rule defined in the organic law of the state budget.

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Presenting the next year’s state budget draft at a meeting of Parliament’s Chairmen Conference, Finance Minister noted that progress in steadily cutting the country’s public debt is driven by the measures undertaken by the government.

“In 2023, Albania recorded a positive primary balance, while the ratio of public debt to GDP decreased significantly by 6.6 percentage points compared to 2022, reaching 57.5%, the lowest level since 2008. We intend to maintain this positive trend, maintaining fiscal stability and consolidating public finances for a more stable economy,” he said.

Finance Minister pointed out that the country’s positive performance has also been reflected in the improvements in the credit ratings, an indicator of the confidence of the international financial markets in the stability and the direction that the Albanian economy.

“In April 2024, S&P raised Albania’s rating from “B+” to “BB-” and recently, in October 2024, Moody’s also raised the rating from “B1, positive” to “Ba3,” he said.

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In his remarks during a debate on the government’s Normative Act on the 2024 State Budget changes at the Parliamentary Committee on Economy and Finance, Malaj said that appreciation of Lek against leading international currencies has helped Albania to reduce its public debt by 5.4%.

Finance Minister noted that Albania’s public debt stood at 74.5 % in 2021 and it has fallen to 58.9 % in the end of 2023.

“The effect of Lek appreciation from 2021 to 2023 is 5.4 percentage points from an estimated 15% decrease in the country’s public debt during this period,” he said.

However, Malaj noted that the national currency appreciation has negatively affected the customs revenue.

Finance Minister also underlined that the foreign direct investment flows in Albania rose over 15% year-on-year in the first quarter of 2024.

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In his remarks at a meeting of the Parliamentary Committee on the Economy and Finances to discuss the government’s Normative Act on changes to the 2023 state budget, Finance Minister stated that the country’s public debt will shrink below the 60 %  of the GDP in the next two or three years.

“A significant trend of the public debt has been recorded. The public debt vis-à-vis the country’s GDP is now lower than the pre-pandemic level. In other words, all the increase in public debt due to the pandemic, the earthquake and the war has been paid off and we are now at a lower level of public debt than we were before the pandemic,” Mete said.

Finance Minister said that the projections align with the International Monetary Fund (IMF) projections about the public debt to stand at around 60% of the GDP by end of the year.

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Finance and Economy Minister is attending a World Bank Forum, titled “Managing Debt in a High Interest Rates Environment” in Berlin, Germany.

Ibrahimaj said that on first day, a Forum’s high-level forum discussed challenges to economy and measures aimed at effective public debt management.

“Our medium-term and long-term projections expect further decline of the debt-to-GDP ratio to below 60% within 2030,” Finance Minister said.

Ibrahimaj also said that the Forum was a discussions platform on possible debt management strategies amid an uncertain environment, where the need to increase transparency and efficiency are important to maintain sustainability and economic development.

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According to Tabaku, public debt has been a real matter of concern for the centre-right opposition since the Socialist government took office.

According to her, “the 80% rate of the public debt is very high, yet not the real one, as it doesn’t include the debt accumulated due to the decisions by the arbitration court and the cost of public and private partnership contracts, the country’s real debt is estimated at 92% of GDP.”

Tabaku said that “the government excuses for the earthquake and the COVID-19 pandemic are just an alibi as the governments are voted to precisely deal with such situations.”

The DP Vice Chair noted that “pubic debt has been a hotly debated issue as it has often been subject of discussions at the Parliamentary Committee on Economy and Finance, given that the government has issued a EUR 700 million Eurobond just a few weeks ago.”

“The country’s public debt has increased to over 80% for first time in 20 years. However, the real public debt-to-GDP ratio stands at 92%,” Tabaku stated.

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