Alleviating Funding Pressures and Debt Roll-over Risks in Albania
The 2008 global financial crisis and the subsequent Eurozone crisis considerably slowed the growth and poverty reduction momentum in Albania. Government financing needs in 2015 were very high. A EUR200 million World Bank Guarantee alleviated funding pressure and debt roll-over risk in Albania in a volatile global financial market setting by raising required financing from the private sector at attractive levels.
OUTCOME
The PBG helped Albania raise EUR250 million needed for maturing debt from international banks. The terms achieved —10-year maturity at EURIBOR + 1.3% —were substantially better than those available under a non-guaranteed instrument. This was in line with Albania’s debt management objectives, which are to meet the funding needs of the central government, minimize borrowing costs to acceptable levels, and support the development and efficiency of the domestic debt market. The PBG also leveraged the World Bank’s capital by increasing the volume of funding raised. Having met the roll-over with the PBG and in a more supportive market, Albania issued a standalone 5-year Eurobond at better than anticipated rates two months later.
The Development Policy Financing (DPF) allowed the World Bank to help Albania strengthen public finance management, pension and energy sector reforms. It was the second in a series of two programmatic development policy financing operations focusing on a) strengthening public financial management to address arrears; and b) tax, pension and energy sector reforms to improve fiscal sustainability.