PRESS RELEASE
Interview with Gent Sejko, Governor of the Bank of Albania, “Argument” Scan TV

Question: Thank you Governor for agreeing to the interview. Indeed, this is my fist interview with you and I really appreciate the opportunity, especially considering that now we are at the end of a season with many activities and decisions by the Bank of Albania.

Governor: Thank you for the opportunity of this interview.

Question: Let me start with the new policy or decision of the Bank of Albania, a statement that you have also made, about de-euroisation. You have called it like that and I am using the same term. Could you briefly explain the de-euroisation policy?

Governor: The de-euroisation policy has started and has been pursued earlier by the central bank, as well as by the financial system itself, with an orientation and tendency toward increasing the usage of Albanian lek, the domestic currency. At present, we have addressed and have been focused more on this issue, since euroisation has reached levels considered as relatively high. The loan-to-deposit ratio (where the deposit ratio is 50% in euro, but also the ratio of loans and exposures in the banking system is over 45%), although it has fallen as a result of the accommodative monetary policy implemented by the Bank of Albania, continues to remain at considerable levels. We have high levels of euroisation in the financial sector, as I just mentioned, but also in the real sector. The quoted prices of some products traded in the Albanian market remain broadly denominated in euro. Apartments, cars, also cases of wages in particular sectors paid in euro. In this context, we have a considerable high level of euroisation of the economy. Once it was dollarization, so it was the same phenomenon in dollars, but with the increase in the level of trade exchanges with the euro area, the euro has become the prevailing currency. In this context, we are inclined to reducing the level of the euro, that is, the euroisation as we call it in the economy, both in the financial sector and in the real sector of the economy.

Question: There is a tendency to believe that Albania, as it aspires to join the European Union, may also consider the usage of the euro as its currency. Does this policy go against this perception or we are talking about different issues?

Governor: Absolutely not against, rather, parallel to it. The perception is - while true, we have to explain and clarify why this perception is wrong - that exactly because we are set on our path toward integration in the European Union, we must continue to address the use of the domestic currency, in order to increase the flexibility and the impact of the transmission of our monetary policy; but, we must also preserve and maintain financial stability. Regarding financial stability, I mentioned that we have about 45% of euro-denominated loans, where a good part of these clients are unhedged; that is, they generate their income in lek while the loan is in euro and are exposed to the exchange rate risk, which would affect the performance of non-performing loans. So, we have a negative impact on financial stability, but on the monetary policy side we would also like to have more usage of the domestic currency. Precisely for these reasons, we aim to have a series of reforms that would contribute to general economic growth, whereby the central bank has its own role and instruments, like the monetary policy ones. The wider use of the lek would contribute to a better economic performance that would converge faster with the European standards.

We have countries, such as the Czech Republic, a developed country and a member of the European Union, which has a very low level of euroisation and continues to use its own currency. Also, Poland and Croatia are members of the European Union and have undertaken campaigns against the euroisation for precisely these reasons. Reducing the level of euroisation is a process that has also been followed by other countries that are members of the European Union and use their currency. Albania needs to be strengthened economically, implement the reforms, and align with the European Union. In this context, it needs to use its currency at a larger scale, so as to increase the flexibility of the central bank's monetary policy, in order to have macroeconomic and financial stability. For these reasons, we are undertaking this campaign against euroisation, but we are not trying to kill the euro. We should emphasize that the central bank intends to have a gradual decrease in levels close to other countries with an economy similar to ours. This is the goal, we are not aiming with these measures to remove the euro altogether from circulation, since we are aware that our trading partners are in the euro area. There are many clients that carry out their activity in euro, their loans are in euro, and obviously these people will continue to do business, carry out transactions in euro, especially export-import activities. The goal is to avoid the use of euro to a large extent in those cases when it is not necessary. There is an artificial increase of the use of the euro that is not necessary. And this is the goal, to avoid the artificial use of the euro. Of course, if you are going on vacation somewhere abroad you will take euros with you, and payments will be made in euro and not in not lek; but, if you want to buy an apartment or a car in the Republic of Albania, there is no reason to buy it in euro when your income is in the domestic currency and you can buy it in lek. It exposes you to the exchange rate, when you have your income in the domestic currency. Why should you take a loan in euro, and why should you be exposed to the exchange rate risk in the future?! Moreover, mortgages are long-term, and no one can predict how the rate may be in terms of 10-15-20 years.

Question: It is exactly the approach to euro that reflects, above all, the desire to have a strong national currency. Currently, the euro exchange rate has received a lot of attention because the euro has depreciated against the lek, but above all the lek itself has received attention, regardless of the euro or the dollar performance. Are there any factors that affect or favour or support the strengthening of lek?

Governor: What you say is very true, the lek has strengthened lately, but generally in the last 10years, the lek has been a stable currency, with very little fluctuation in relation to other currencies, especially the euro and the dollar. The shock was received in 2008, when the entire euro area was affected; the lek depreciated against the euro as consequence of the crisis. But, since that period the lek has withstood very well. Lately, we have a strengthening of the lek. We certainly pursue a free exchange rate regime, we do not have a fixed exchange rate regime, and hence the exchange rate is determined as a consequence of demand and supply in the market. Obviously, we have a greater supply of the euro, which has made the lek stronger, this is logical. The lek has appreciated as a consequence of a large supply of the euro, a large inflow of euros, of several factors. We refer to the numbers and always talk based on our analyses and the data that we have available; inflows as consequence of tourism have been higher in Albania, the level of import-export has been positive, meaning that we have a growth of Albanian exports. We also have had a growth of foreign investments, there are many euro inflows from these activities, and generally there is also an historical cycle, referred to particular periods, especially summer and winter, when there are many inflows due to emigrants returning home. One result of all these factors has led to a high level of euro supply, which has also led to a strengthening of the exchange rate. Always referring to the historical fluctuations, the exchange rate during the summer period has been strengthened in this period as we have a larger supply of euros in the market, causing a weak euro. So it is expected to have a weak euro throughout the summer period.

Question: To conclude on the currency issue, since you mentioned that the dollar has always been closer to the international economy, currently it is at much lower rates than the euro or there is a chance that the dollar too...?

Governor: The dollar is not a largely used currency since our major trading partners are in the euro area. The euro is the most used currency in the financial system as well; deposits and loans in dollars have a smaller share. The use of dollar is addressed only in the cases of import-export activities for businesses (banks' clients) that operate with oil, while the rest is mainly in euro. The dollar has not had high fluctuations in this context, surely they come together, but the impact of the euro is more significant for us. I emphasize that our trading partners are in the euro area, and most of Albanian emigrants live and work in the euro area, so it is the euro, then the dollar and then the British pound.

Question: There has been good news in the last months, but even before, about the consolidation of the non-performing loans decrease. We are at 16% from a major risk of 25% of the total, as it was discussed two years ago. Why did the non-performing loans decreased and does this low trend continue?

Governor: Non-performing loans have been a problem not only for Albania, and other countries in the region, but also for the euro area. Since the onset of the crisis in 2008, the level of non-performing loans grew significantly; the banks had been much more "aggressive" about lending before the crisis by undertaking more risks and having a more amenable approach to it. With the shocks that followed the crisis, there was a crunch and a contraction, a more conservative philosophy in lending policies. This came as a consequence of low aggregate demand for loans meaning a contraction in the level of demand, but also as consequence of the increase of non-performing loans. Hence, since loans were granted without taking into account certain risk criteria, many of these loans did not perform well in return. This happened in Albania, as well as in many other countries. Lending before 2008 grew at high levels, up to 25% annually, and naturally such very high levels of lending would bring along some non-performing loans, since risk criteria may have been sidestepped. as The Bank of Albania has addressed the issue of non-performing loans seriously; we have made a plan of measures in cooperation with the Albanian government addressing all the elements that would help the financial system and contribute to reducing the non-performing loans. We are here discussing on a ratio between total loans and non-performing loans, and the non-performing loans ratio has to do with new loans as well. Meanwhile, the plan of measures addressed the bad share of the portfolio; this plan of measures consisted in writing off lost loans, restructuring non-performing loans, but also in banks' performance in loan instalments collection.

Question: There is also an instrument that has not been activated, that is the growth of new lending.

Governor: In parallel with the plan of measures for addressing non-performing loans, we also have worked on another plan of measures or philosophy to boost lending, re-orient the financial system towards those potential sectors of the economy that have higher demand and less risk, and where it would make more sense for the banks to lend. Simply put, if before the crisis the banks were oriented towards lending in the sectors of construction, real estate or other sectors related to construction, like cement, iron etc., normally the banks should re-orient towards sectors like tourism, agriculture or other sectors that currently have more space and are more successful and better performing. In this context, we have closely cooperated with the Albanian Association of Banks, the financial system, the Ministry of Finance and the Ministry of Economy. We have organized several forums in cooperation with the International Monetary Fund, the World Bank, and other international institutions. Every year we have organized a forum dedicated to promoting lending in the Republic of Albania, since we have also had ample liquidity; the loan-to-deposit ratio has been 50% and remains stable, so there is a fairly good liquidity situation. Banks have liquidity surplus, above the requirements of the central bank, and our challenge has been to turn it in sound loans for the economy, not such loans, which may create non-performing loans, but sound loans oriented exactly on these sectors. These forums have produced several memoranda... In each forum, the cooperation among the participants: the Bank of Albania, the Ministry of Finance, the Association of Banks, other regulatory institutions, such as the Financial Supervision Authority, or the Deposit Insurance Agency has had a role in re-orienting the financial market towards sound lending. As a result, lending has grown moderately, during the last years, on average of 3-3.3% . So we have not had a decrease, but an increase of lending, moderate increase, where the goal has been a somewhat higher growth than this, over 5% up to 10%, I cannot give a precise number, but to have an increase that should have an impact on the level of economic growth. Notwithstanding this, lending increase has continued, new lending has been good always compared with the financial economic difficulties and the crisis period faced by the euro area and the region. So we are not talking about a different context, we have had lending increase, we have had contraction of the portfolio of loans in euro and a growth of the portfolio of loans in lek.

Turning to non-performing loans, the level of those in lek has decreased considerably. My goal has been to reach 15% and we are have been getting closer to this level, since after number of April we have had further decrease of non-performing loans. In May, the figure has not been confirmed yet, just as soon as confirmed it will be published these days, so the decrease has continued due to this plan of measures. The plan has functioned and has been very detailed and there has been a very good cooperation with the Albanian government towards performance, a good, organized and coordinated cooperation that has boosted confidence to the financial system as well. The financial system, mainly the banks, since 95% of the financial system is composed by banks, has felt the support of the regulators and authorities in their everyday work. A problem has been the legal part, collateral execution remain a problem for banks since often bad clients, which are not able to meet their obligations to the banking sector in the moment of execution, have blocked the banks, the judicial processes that have made the resolution of these cases and these has impacted negatively on the non-performing loans ratio.

However, in this aspect, legal initiatives have been introduced, such as the bankruptcy Law and other legal acts related to bailiffs, collateral executions and other elements. This is a gradual process that comes step by step, it cannot be done at once, it is impossible, this is what it has been dome in the other countries too, but we are following and monitoring the situation closely.

Question: Albania had the highest level of non-performing loans in the region. Currently is this level comparable to the region?

Governor: Albania and Serbia had the highest level of non-performing loans. I want to clarify a moment at this point that we have been more conservative in addressing the non-performing loans ratio.. So, we have taken non-performing loans and put in also those loans that are completely collateralized, covered in collateral. Net non-performing loans have been at 6%, and unhedged ones may be lower today. We have taken very serious measures to address the issue. Many countries take unhedged non-performing loans ratio and if we had calculated this ratio as well, on this basis we would have a lower level. It is often subject of attention or speculation, but it is important that numbers are downwards, that we are comparable with the region, and I am confident that the numbers will fall and this ratio will continue to decrease as a consequence of the measures we are undertaking. We are preparing a further platform of cooperation within the banking sector and with the association of banks, where the central bank will continue to have a coordinating and regulatory role. In particular in the case of large loans that need to be restructured and have exposures in more than one bank.

Question: In addition to this issue, has there been a discussion for a higher concentration of non-performing loans in few entities? Is this a problem?

Governor: This is the problem. Of course, there has been a concentration of non-performing loans, which have been concentrated in a limited numbers of borrowers 25-30-35% , it doesn't matter , but this constitutes 60-70% of the non-performing loans portfolio, and these have been major clients, corporations that had exposures in more than one bank. Normally there are several companies and not all are bankrupted, some are successful and some aren't. It is a complex of problems when a client with a high number of companies with exposures, in more than one bank, uses the income of the more successful company to cover the losses from the unsuccessful ones. Exactly here the bankruptcy Law must intervene, but also the philosophy of large entrepreneurs themselves so that they give up some businesses that have no future, and may focus on those businesses that have one. Obviously, this is a difficult process, it has to do with the mentality of some of the businesses, and not only with the treatment by the banks. Thus, it needs a cooperation with all the parties, and the businesses themselves must understand that if a project has failed they should not continue to invest in it. There should be a policy of stopping losses in this context, so a good part of these businesses with our coordination have been restructured. There is a significant writing off from the list, about 11 businesses have been restructured and are back to a situation that has prospects for their future and thus they can perform.

Question: And this is one risk less?

Governor: This is one risk less. It provided its impact and has led to get out from bad loans that are restructured and are continuing to perform or are paying in the banks. Meanwhile this is a risk less that has affected the decrease of performance. Some have been written off because these are lost cases for more than 4-5 years, and banks have to remove them from their balance sheets because of the indicators. Banks will continue to follow these, often the concept "written off" seems like the banks are forgiving them, but it must be clarified that these loans are not forgiven, but will continue to be pursued in court and with all the other legal and regulatory measures from the banks until the maximal possible recovery of the assets that these clients have. These are removed from banks' balance sheets to improve the indicators, the whole goal is to restore normality to the financial system balance sheets and restore the optimism of the banking system. There are many elements, non-performing loans are one of the elements, but there are also external factors. To be clear, we decreased the non-performing loan rate but often times, a particular element receives more attentions and since does it seems like that was the entire problem. Of course, the financial sector is composed by banks from the euro area and they have had their own difficulties, their own policies and strategies, to decrease particular exposures in the region, so even if there were no non-performing loans, lending would have some other issues that impede normal growth, which would derive from external factors. We are addressing the issue that we have within the territory of the Republic of Albania, as it is our duty as regulator of the public authorities to address it. At least we can be assured that we have delivered on our duty.

Question: In fact the entire commitment by the Bank of Albania, the Albanian government, parliament and other stakeholders, is resulting in a decrease?

Governor: Lending is growing. Lending in lek is upward, this is visible and it has increased above 10%, and non-performing loans are decreasing. This is a positive element for the stability of the financial system and the impact of the financial sector in the future economic growth of Albania.

Question: The financial sector in Albania, mainly the banking sector, is considered the most successful Albanian sector; the most successful, stable, modern, where most of the investments go and the key of the confidence of the Albanian citizens. Does this sector continue to be a basis for confidence in the functioning of the Albanian economy?

Governor: It fully continues to be a basis for confidence. It is very well regulated, monitored and supervised by us, but also by international institutions like the European Central Bank and other institutions. The truth is that it is a model system, not to make compliments, and compared to other sectors is the most regulated and with the best standards. It has had an impact in the growth of the Albanian economy for years. Primarily though lending to the economy, but also it has had a fairly large impact in bringing new technologies in and offering new products to the clients at the financial education level. So, the consequence of this system supervised and regulated by the Bank of Albania has been not only the impact in the economy with lending, but also the impact on growing the financial education of the Albanian population. We should be grateful to the banking system for the role that it had in this context, but obviously it also has issues like any other sector and we as regulators and supervisors are obliged to address these issues, since the financial sector is the most delicate sector based on the fact that it works with the deposits of the population. Exactly because of this point of view we are very careful, conservative might be the right word, to monitor and supervise, so the financial system may always perform within the legal framework, the relevant rules, aiming the exposures of the financial system are within the risk parameters and there are no unpleasant surprised in the future. At the moment, we have a banking system that represents around 90% of the Albanian financial system; around 10% are non-banks financial institutions, so the banking system is the main axis of the financial system. The Albanian banking system is well capitalized, the capital adequacy ratio is at 16%, so, significantly higher than the capital adequacy ratio of 12% required by the Bank of Albania, but also the liquidity ratio is roughly 50-against-50. We have a large liquidity surplus and our challenge is to translate it soundly for the economy. We are in these ratios that are the key prudential ratios for the financial system, but the banking system and the financial system have also had a good profitability in the last years, and this often has been object of attention of "jealousy" from some other sectors or some other analysts, who have commented that the banking system is profitable because it is profiting at the expense of this and that... We need to be aware that the banking system has a high level of formalism in the first place, so it is well-formalised. These histories about two, three balance sheets are not true, it reports according to international financial reporting standards, it is supervised and monitored by us, but many banks have also their parent institutions that operate in the euro area. So regarding formalisation we do not have any doubt in the formalisation of the banking sector. From this perspective, we have full confidence in the figures and based on these figures, we see that there are no deviations from our regulatory requirements, which provide assurance of the continuity of this process. The raw material of the financial sector is deposits, and mainly household deposits, from the population and not businesses. Of course this is a very positive datum when we say we have a well-capitalised financial sector, with liquidity surplus and profitability. Hence, we need to be satisfied with the profitability of the financial sector since the more sound it is, the safer are our deposits.

Question: Compared with the region, is the Albanian banking sector the most stable and the safest in the Balkan region?

Governor: The banking sector is stable, is safe! Most of the banks we have - so that we may be realistic and mention all the issues - for our good fortune, banks operating in Albania are from the euro area: Italian, French, Greek, with Greek capital but Albanian banks essentially, which have survived very well the period of crisis in Greece and continue to perform very well. Also other banks from the euro area dominate the market, and these banks have brought knowledge, products, capital. As I mentioned earlier, at the beginning of the crisis there has been a contraction from their parents, this led these banks to lower the level of lending, but on the other hand we were relatively in agreement with this policy, since we did not want to be exposed and exceed our parameters as a central bank, since deposits are placed there.

Thus, we were lucky that these banks are well-regulated. The European Central Bank, the European Supervision Authority controls their parent banks. We coordinate, exchange information so it is a regulatory supervision activity harmonised and coordinated with other international institutions. The performance of these banks is delicate not only for Albania, but for the entire region, as consequence of the large exposure of these banks in the euro area, and many of their decisions have been not to extend or expand further in this lending activity, so there has been a general contraction of their activity in the euro area and elsewhere. Lately, these policies have started to end since there has been an improvement of the financial situation as a consequence of the taken measures by the European Central Bank as well; these banks have improved, so they have stopped. Of course the return of optimism and lending on pre-crisis levels needs its time, but the process is trending positively. So from the contacts that we have with the steering boards of these banks, which I contact consistently, but also from the contacts we have with the international regulators, we are aware that this policy has mostly stopped, so the hardest part has passed now and we are thinking about growth.

Question: Low interests are good news for borrowers but not so good for depositors, but this is the interest rate policy pursued by the Bank of Albania and has been so consistently. Reading between lines, at least with the forecasts that we know now, there will not be an increase of the interest rate this year. Has this policy been transmitted to all commercial banks? Is it true that until the end of the year within the forecasts that we know today, there will not be an increase of the interest rate?

Governor: It is true. We have highlighted in our press releases after the meeting of the Supervisory Council of the Bank of Albania that the accommodative monetary policy will continue and there will be no change before the first quarter of 2018. Based on these declarations and our analyses we forecast that there will be no change, let's say increase or decrease based on macroeconomic indicators, before the first quarter of 2018. As we have said, we forecast that the output gap will close and the economy will return in equilibrium in the second half of 2018. We have had a gradual economic growth year after year, starting from 1% up to 2-3.5%. We expect to have a further economic growth, given the good climate and the calm transition of the electoral situation. We expect to continue to have a growing economic performance, and this will gradually lead to change of the Bank of Albania's monetary policy, but it is too early to say, we continue the same as the European Central Bank, which has the first elements of improvement of the economic situation but has announced that it will continue its accommodative monetary policy. Naturally, they have taken some measures and used other quantitative easing instruments, which were unnecessary for us to use as a central bank. We have had e reserve plan of measures to use in case there was a deterioration, but fortunately our economy has resisted, has been flexible and there was no need to use other measures. The monetary policy instrument, the decrease of the interest rate has resulted to be sufficient and has been transmitted fairly well in the markets. As consequence of decreasing the core interest rate several times, so from 6% of some years ago -which was the minimal historical level - to the current 1.25%, it has been possible the transmission of the interest rate in all other segments of the financial system, like in the decrease of the lending interest rates, treasury bills interest rates and deposit rates. It was a good transmission, although it cannot be called complete for as long as we have a high level of euroisation. We are talking about the domestic currency part, where 50% depends on the monetary policy pursued by the European Central Bank.

Question: Since we are talking about the decision of the European Central Bank, but also the decision of the American Federal Reserve, the two biggest banks in the western hemisphere, what impact do their decision have on the decision-making process of the Bank of Albania?

Governor: Of course if we consider in our analysis the high level of euroisation, the decision-making of the European Central Bank is reflected directly. If we had a high exposure to the dollar currency, naturally the policy of the American Federal Reserve would have an impact too. We also have a high level of euroisation in loans and deposits in the financial sector. The decrease of the interest rate by the European Central Bank affects the decrease of the interest rate and this is a positive element that runs in parallel with monetary policy of the Bank of Albania. Even on the part of the monetary policy of the European Central Bank, after the decrease of the interest rates of loans in euro, the decrease of interest rates of loans makes it more attractive, so there will be a higher level of lending. On the supply side, the financial system has these instruments, while on the other side there is the low aggregate demand. I want to say that lending comes as consequence of low aggregate demand as well, initiatives for different projects etc., but other financial institutions and the central bank has the duty to decrease supply, to create a more easing supply to the economy. The European Central Bank by decreasing the interest rate has made possible to have lower interest rates in the part of loans and deposits in lek as well. Also, the Bank of Albania with its accommodative monetary policy has aimed to promote lending, consumption and private investments. This is the goal. Lending has been promoted and has been reflected, the transmission of the monetary policy has been good, at 10-11%, growth has come as a consequence of the growth of lending in lek, because the growth of lending in euro has shrunk, and this is a very good element.

Question: When do you forecast we will reach an acceptable level of euroization? Will there be further decrease?

Governor: Yeas, we have prepared a memorandum of understanding with the other stakeholders, the Ministry of Finance, and the Financial Supervision Authority, in the Advisory Group of Financial Stability that meets minimally once every three months and if necessary more often as well. The last time, we signed a memorandum of understanding, defining the measures and duties of each institution to decrease the level of euroisation about which we talked at the beginning of the programme. Surely undertaking these measures will make possible a gradual decrease. As I mentioned, we are in contact with the Albanian Association of Banks in order to see the effects and become sure about the effects the application will have. These measures have to do with the level of mandatory reserve, transparency with the public, but there may be a particular impact in the financial sector and we must be sure that any type of measure taken by the Bank of Albania as regulator shall have a managed, mitigated impact in the financial sector, so there are no negative shocks in the financial sector. In this context, we forecast that these measures will begin to be implemented, so the increase of the obligatory level of the euro or the liquidity reports to affect the banks will begin in 2018. The implementation of this plan will start next year. We have signed the memorandum of understanding and we are collaborating with the stakeholders that are affected by this plan of measures, either positively or negatively. We must have a very precise forecast on the effects. Preserving the equilibrium between the monetary policy instruments and financial stability is one of or main goals. We want to implement an accommodative monetary policy, apply our monetary policy instruments, without a negative impact on the financial stability of Albania The combination and the consideration of both elements is our duty as central bank and we do this continuously.

Question: Mr Governor, there is one last issue I wanted to separate in two questions. It is related to the campaign conclusion, the election and the vote counting that is almost over. I want to ask you about the part of the campaign throughout the month in terms of financial stability of the currency or even the sentiments that all the citizens and companies of the entire banking sector have given about the election campaign, seeing as it was a more peaceful campaign than the others, based on an agreement that worked at least during the campaign. Can we say by now if it had a negative impact in the financial system, the performance of the currency and in all these other indicators?

Governor: I want to be very careful, precise and correct and I would say that in general there was no negative impact. But if there was, we as central bank measure this impact through the economic sentiment indicator. The economic sentiment indicator for the first quarter has increased significantly. The economic sentiment indicator through a questionnaire considers the perception of the business and individuals of several different strata and of the financial sector. There is a low correction for the second quarter. This is the main element by which we measure the perception, then there are other figures, about growth, lending, and others that show the level of economic performance and other macroeconomic indicators emerging from the Bank of Albania and the Institute of Statistics. This about being correct with figures and indicators. Overall, I would say, to be a realist and to read the situation according to the question that you had for me, we are aware that these are the best possible elections that we have had in Albania, as a consequence of the agreement or not, the truth is we had better elections than the previous times.

All political factors have exercised an extraordinary stabilising role without making a political analysis which would be overstepping. Our perception is that the foreign investors in Albania as well as the Albanian investors, the entire economic environment has read positively the election performance and not negatively, there was no uncertainty in particular after the agreement, security is consolidated, even if refer only to the tourism activity we have seen that there is no stagnation, no fall, but growth and this shows the perception towards the elections. The election process went normally. Of course campaigns have their tensions, these are completely normal, but we have avoided many negative elements seen in previous campaigns and this has consolidated the confidence and trust of the investors and the economy in general.

Question: Since now the electoral results is clear, the Socialist Party has taken 74 mandates, it seems that despite what the political forces decide it will have an easier time to undertake reforms and had them approved by the parliament. In the next four year, in the framework of economic reforms, what are the issues that should be the focus and the attention of the future Albanian government with Prime Minister, Mr Edi Rama?

Governor: We, of course have followed a plan of reforms with Prime Minister Rama, who I take the opportunity to congratulate for the victory on your programme as well. A set of reforms have been pursued, naturally the economic growth that we have seen has not fallen from the sky, but it is a consequence of these reforms as well as of external factors, but is mainly the result of the undertaken reforms and there is a series of reforms, which the Albanian government and we as the central bank have elaborated very carefully. Of course, these reforms have also been made in the framework of the International Monetary Fund programme and with the consultancy of our international partners, so these reforms have been monitored, raised, built by addressing critical sectors of the economy such as energy and other sectors. These reforms have had their positive result in boosting the Albanian economy and maintaining macroeconomic parameters and economic and financial stability in the country.

Albania has not fallen into recession. Albania came out of the crisis and continued a moderated economic growth, and Albania is forecasted to continue to have economic growth.

The latest electoral result is a further assurance for the continuation of these reforms. These reforms must continue. Often, the Bank of Albania, the Supervisory Council of the Bank of Albania and I on behalf of the Supervisory Council have called for the continuation of structural reforms. This call has in fact been made by many central banks around the world and the region, thus, in this regard the Bank of Albania has called for the continuation of structural reforms by all stakeholders. The structural reforms have a broad gamma of stakeholders, the government has a major role, but all the other factors and the legal system, the financial system, the government and the parliament, all have a role in the performance of structural reforms and we as Bank of Albania have called for the harmonisation the efforts of all the stakeholders.

The latest result gives us further confidence that structural reforms will continue and economic growth and performance will continue even further, so we trust that the continuation of structural reforms will be in the right direction and with a positive performance, actually we may forecast that there will be an acceleration in growth rates, always anticipating, having positive hope. The central bank, within its legal, legislative and regulatory framework will perform, I personally guarantee on behalf of the central bank, that we will perform all our duties and will continue with our reforms in terms of price stability, the achievement of the level of inflation of 3% within the proper term, but also to maintain the level of financial stability. The alignment of our policies and strategies as a central bank with Albanian politics and strategies will bring a better performance, will have a greater impact on the level of economic growth and the level of welfare growth of the Albanian citizens.

Thank you for accepting the interview.

* The interview was conducted on 28 June 2017