De-euroziaton package

The presence of euroziation in the financial system and in the larger context in the economy has an important impact on the effectiveness of economic policies.

In terms of macroeconomic policies, a high level of euroization leads to the reduction of the monetary policy effectiveness, limits the role that of the free exchange rate as an automatic stabilizer in the case of macroeconomic shocks, given the high sensitivity of economic entities to large exchange rate volatility, and undermines the fiscal policy effectiveness through the possible increase in the cost of debt service and unwanted change of its structure. Also, the high level of euroization usually comes with a cost for the central bank in the form of opportunity cost for the maintenance of a relatively high level of foreign exchange reserves and for the loss from seigniorage, which is associated with the replacement of the domestic currency by the foreign currency.

In terms of financial stability, euroization increases the exposure of the financial system and economic operators to unfavourable developments in the exchange rate and to stress situations of foreign currency liquidity.

The process for expanding the use of the national currency in the financial system and in the economy (de-euroization) is not an objective only for the financial system, as the foreign currency is widely used by the public in various transactions. Thus, the de-euroization approach should be inclusive, so that other local authorities can identify and undertake certain measures that encourage the public and economic agents to increase the use of the national currency for their transactions.

For this reason, according to the Memorandum of Cooperation the Bank of Albania, the Ministry of Finance and Economy and the Financial Supervision Authority are committed to identify, in the respective areas of competence and in a harmonized manner, the necessary actions for a more general de-euroization, including communication with the public.

That Memorandum sets out also the monitoring mechanisms that regularly assess and report on the impact of the undertaken measures on various financial and economic indicators.

This section presents the Bank of Albania's actions within the de-euroization strategy framework.