EURO FLOODS ALBANIA, €8 BILLION WERE EXCHANGED IN 2022

The circulation of the euro currency in the Albanian market has reached historical records. KRONOS has managed to provide the official data of the Bank of Albania on the amount of euro currency exchanged over the years, which show that the flow of euros last year increased by 30% and 23% during the period from April 2022 to April 2023.

 

In the domestic foreign exchange market (FOREX) of the banking system and exchange offices, 7.9 billion euros have been converted for the entire year 2022, and from April of last year until today, 8.7 billion euros have been exchanged. Only in the first 4 months of the year, the value of the euro exchanged is 2.432 billion euros, 186 million higher than a year ago.

The increase in the euro currency amount in circulation during the last years is higher than the progression of economic growth or its natural growth trend.

The data provided by KRONOS show that in 2022, 2.27 billion euros more than in 2021 have circulated in the market, despite the fact that the historical trend of increasing the circulation of this currency varies between 50 - 100 million euros per year.

 

"The currency moves happens due to the demand and supply that importers and exporters have for their transactions. If we refer to the official import-export statistics, we do not see a match between these currency in-flows and economic indicators. We have an increase of about 10% in the last two years, but that does not correspond to the 30% increase in the domestic market euro exchange process, both last year and during this period", says Artan Gjergji, an expert on financial markets.

The historical record, as the amount of European currency exchange concerns, was set in December last year with 933 million euros exchanged. 607 million euros were exchanged in January, 530 million in February, 700 million in March and 595 million euros in April. In-flows are 20% higher than the historical average.

"It is not only related to remittances or income from tourists as we are now in the lowest part of the tourism season, we expect the peak after June. Albania receives 50% of her tourist visits from June to August." says Zak Topuzi, chairman of the Tourism Association.

The common European currency reached its lowest historical level against the Albanian Lek (ALL) since entering the local market for the first time. 1 euro was exchanged for 110.7 Lek, while its new equilibrium is expected to be this for long time. The fear and uncertainty about the overvaluation of the Albanian Lek during the touristic season and after the elections has worried many producers and exporters who are suffering losses from the euro devaluation.

"We are right at the edge of the summer season, and it is not clear how long this overvaluation of Albanian Lek will last. That's why I say that it should not be seen only as a financial market phenomenon, because it will damage many industries." says Artan Gjergji, expert on financial markets.

"The world of crime becomes present during the electoral campaign, mainly in the last two or three days. It is just in that time payments to buy votes start, to be finished in the last day before elections. The volatility of the exchange rate takes place on the day of the elections and the week after the elections because then those who received euros for their votes, start to exchange it." says journalist Artan Hoxha, an investigative journalist.

"We asked the attention of the state institutions because we’ve been affected a lot as exporters, but we don’t know how far we will have this impact because in the summer there may be an even greater euro depreciation, then we will go bankrupt. Only during the first 4 months of 2023 the losses of the garment sector in Albania reached the level of 8 million euros." says Florian Zekja from the "ProExport" Association.

"It is expected that the euro will continue to fall until the end of August, this is an alarm for us." explains Zak Topuzi of the Tourist Association.

For the Bank of Albania, the reasons for this euro depreciation are related to factors of the formal economy. The increase in the euro supply, according to the central bank, has come about for several reasons: exports have increased and brought greater euro in-flows, as well as revenues from tourism, emigrant remittances and foreign direct investments.

KRONOS has analyzed the data on these fundamental factors with which the central bank and the government explain the high in-flows of the European currency, but they do not match the large amounts exchanged in the domestic market.

The euro currency entered the domestic market during 2022 through exports, remittances, foreign direct investments (FDIs) and tourism revenues, according to the data reported in the balance of payments, shows an inflow of 7.11 billion euros. 3.01 billion euros have come from exports to the EU countries and Kosovo, 2.463 billion from tourist inflows, 834 million euros from remittances, 698 million euros from EU and Kosovo FDIs and 142 million euros from operations in the internal market from the central bank. Of all this money that has circulated in the domestic market, 807 million euros remain unclear from which channels they entered Albanian market. This amount of euros constitutes 5.2% of the country's national production.

 

"The forms to bring euro in Albania are different, but the majority remains the traditional form, transporting the "cash" in bags or using the currency exchange points, where you hand over the amount in an EU country and for the same amount including the commission you pay, and he gets the same amount in Albania." says journalist Artan Hoxha.

But experts argue that not all the amount entering the market from exporters is exchanged into the domestic market as some is kept making purchases of raw material.

"A part is kept in the form of savings, and it is not exchanged, a part goes back to euros to buy raw materials abroad," says Artan Gjergji, an expert on financial markets.

"A part of the euro brought by the producers is kept to buy raw materials, they don't exchange it in Albanian Lek, and some foreign investments, even though it looks like they come in euros, they come in the form of finished materials and are accounted for with invoices as if they are in euros." says Florian Zekja from the "ProExport" Association.

Experts explain the increase in the in-flow of euros into the domestic market with the factor of dirty money.

"They might come from illegal sources such as organized crime, but also from fiscal evasion. Is this a big figure? Let’s say that it is a significant figure to be from unclear revenues sources.” says Artan Gjergji, expert on financial markets.

"It is visible wherever there is movement of black money that every Albanian citizen sees in the air." says Zak Topuzi of the Tourist Association.

The data provided by KRONOS show that the euro in-flow at domestic foreign exchange offices has historically been worth 5.5 billion euros per year from 2010 to the end of 2014. Then its amount increased by 500 million per year, reaching the record in 2018. The increase in euro in-flows was also accompanied by the appreciation of the national currency during these years. Its value from 140 lek in 2014 to 110 today has depreciated by 20%, where 9% is only from December of 2022 until today.

"It is not a short-term phenomenon, it is a phenomenon that has been going on for years." says Artan Gjergji, expert on financial markets.

The available data of the money received in euros even for the first 3 months of this year 2023 do not match the increase of 185 million euros the same year in the foreign exchange market, nor its devaluation. Compared to a year ago, exports have increased by 25 million euros, and if the income of the balance of payments from remittances, tourism and FDIs is 10% higher than the normal flow, it would not be more than 100 million euros, while 85 million are not related to the fundamental factors of the balance of payments.

"If this amount is real and proved officially, this amount has been greater in the real domestic exchange market because there is also informality in their declaration." says Artan Gjergji, expert on financial markets.

Albania has recently become one of the desired countries to launder dirty money, while the European Anti-Money Laundering Intelligence unit Moneyval has included Albania in the gray list, considering it a high risk in this field. Albania is on the list of 23 countries in the world with high risk in money laundering. On the map of Europe, this list includes only Albania and Turkey, while Cambodia and Morocco have recently been removed from monitoring.

 

Source: This article was prepared by the journalists of KRONOS, on MCN TV in Maj 2023. The original article link in Albanian can be found here: http://www.mcntv.al/2023/05/11/euro-mbyt-shqip-rin-8-miliard-u-konvertuan-n-2022  

 

The KRONOS TV Show:

Short Version Video: https://www.youtube.com/watch?v=4JnnPm20EBI

Long Version Video: https://www.youtube.com/watch?v=wBDg6M2so2Y