IMF: Albania compelled to maintain high interest rates due to high level of euroization

Small, open economies and with a high level of euroization are virtually obliged to keep interest rates higher than they should.

This is the conclusion of the International Monetary Fund in a recent study, referring exclusively to the case of Albania, as a country with a high level use of foreign currencies in its economy.

This is the second study on Euroization of the Fund within a few months, but this time it is mostly focused on the policies of the Central Bank of Albania.

The conclusion of the Washington-based institution is that such economies as the Albanian one are compelled to keep rates at the highest levels, otherwise monetary policies could not be transmitted to the economy.

The fund underlines this several times in the study.

This means that, in practice, the high level of Euroization of the Albanian economy drives higher interest rates.

Lowering the level of use of the euro consequently should also foster a less conservative policy towards the norms of interest from the part of the Central Bank.

Some weeks ago, the Bank of Albania presented a plan to reduce the level of euroization of the economy by about 10%, as the IMF advised.

SCAN

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