BANK OF ALBANIA STATEMENT
Interventions in the money market and foreign exchange market during the first quarter of 2006

During the first quarter of 2006, the banking system was characterised by excess liquidity. The growth of deposits at higher paces than lending in ALL, and the high liquidity position at the government's account were the main factors that brought about growth of excess liquidity in the banking system. The government's liquidity passed to commercial banks through reducing the Treasury bill issuing in the primary market and through reverse repurchase agreements between the Ministry of Finance and the banking system.

Given the forecasts on the continuation of the excess liquidity position, based also on government's forecast for the surplus position of the budget during the first part of the year, as well as for facilitating the pressures this excess exercised on market interests, the Bank of Albania reduced its investment in treasury bills of 6-month maturity at the amount of ALL 1.50 billion in treasury bill auctions of the second week of March.

To manage the liquidity and the interest level, along with the main open market operations, (repurchase agreement of one week maturity), and the permanent withdrawal of liquidity through the primary market, the Bank of Albania used also the fine-tuning operations, repurchase agreements of one-month and three-month maturity. The liquidity withdrawn through repurchase agreements of three-month maturity was ALL 3.44 billion, and of one-month maturity was ALL 0.95 billion. On a weekly basis, the Bank of Albania withdrew on average ALL 3.6 billion through repurchase agreements of one-week maturity.