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Albanian Lek Continues Heady Rise, Approaching All100 to the Euro

The Albanian lek has continued its sharp appreciation against the European single currency, edging close to the ALL100 to the euro mark in recent days. 

As of the morning of July 24, the exchange rate stood at ALL101.07 to the euro, according to the Bank of Albania, having risen as high as ALL100.49 to the euro on July 20. 

There is speculation that the lek will rise above ALL100 to the euro during the peak summer tourist season. 

The hike in the value of the lek has been attributed to several factors, including the large amount of foreign currency on the market, resulting from the rise in tourism revenue and an increase in remittances.

Albania is a popular summer tourist destination, with arrivals concentrated during the peak months of July and August. After a record summer in 2022, when the sector rebounded from the coronavirus restrictions, another strong performance is expected in 2023. 

Anke Weber, International Monetary Fund (IMF) mission chief for Albania, commented in June that the appreciating trend of the Albanian lek is in line with the growth in exports and the structural improvements in the external balances of the Albanian economy. 

The lek has repeatedly broken new records against the euro after steadily strengthening in late 2022. 

The Bank of Albania commented on the rise of the lek, saying the increase in the exchange rate against the euro “is a reflection of the increased supply of the currency in the domestic financial market. It is dictated by the improvement of the balance of payments as a result of high foreign currency inflows, which are estimated to be present in the first months of this year as well … The appreciating performance of the lek is also supported by the widening of the positive difference between the rate of return of funds in lek and that in euros in the domestic market,” a note from the bank said.

The strong lek has made imports more affordable, which has helped keep inflation levels relatively low at a time when inflation has soared across Europe. 

It also influenced the size of Albania’s recent Eurobond issue. Tirana issued its sixth Eurobond on June 6, to high demand. The issue has a five-year maturity and a total principal of €600mn.

The bond was 20% larger than the originally planned issue of €500mn, which Finance Minister Delina Ibrahimaj said was due to the liquidity situation, as the lek strengthened sharply against the euro. 

However, the strength of the lek is causing difficulties for export-oriented businesses in the country.

The government announced in June that it decided to extend the deadline for exporters to pay their income tax to help them cope with the high value of the Albanian lek.