Chart/ Sovereign risk for Albania from international markets drops significantly

In the first half of 2025, Albania has marked a significant improvement in the perception of sovereign risk by international markets.

According to data updated on June 23, 2025, and published in a European Commission working document, the spread of Albania's sovereign bonds in euros over US Treasury bonds has decreased significantly, compared to the end of last year.

The chart shows that on December 31, 2024, the spread for Albania was higher, while in June 2025 it has decreased significantly, dropping to around 200 basis points (see chart below), signaling an improvement in financial credibility and reduced risk perception by international investors.

Albania ranks better than Egypt, Turkey, Romania, North Macedonia and Serbia, leaving behind a group of countries with higher levels of sovereign risk.

This development reflects a combination of positive factors, including improving fiscal indicators, macroeconomic stability, and a better perception of political stability and prospects for European integration.

The decline in the spread means that Albania can have more favorable access to international capital markets and finance public debt at a lower cost.

Compared to the end of 2024, similar improvements have been recorded by countries such as Serbia and Bulgaria, while Egypt and Turkey continue to remain at the top of the list with the highest risk, as indicated by the highest spread compared to US bonds.

The spread over US Treasury bonds shows how much extra interest investors are willing to pay to lend to a country, compared to a safe investment like US bonds.

A high spread indicates a higher perception of risk, and consequently a higher cost of borrowing. A low spread indicates greater confidence from the markets, which is associated with a lower cost of debt.

In the case of Albania, the decline in the spread in 2025 indicates improved financial credibility and reduced risk perception.

At the beginning of February, the Republic of Albania entered the capital markets for the 7th time, successfully issuing a Eurobond worth 650 million euros.

This Eurobond was issued with a coupon of 4.75% and an interest rate (yield) of 5%. The instrument has a life of 10 years and will mature in February 2035. Investor interest was high, contributing to the decrease in interest.

This is the most successful issue of the Republic of Albania, since the first issue in 2010.

Albania has marked a significant reduction in public debt in the last two years, prompting an improvement in its ranking by international rating agencies, such as Moody's and Standards & Poor's.

At the end of 2024, the country's public debt reached 54.74% of GDP, a decrease of 2.7 points compared to 2023. This was the lowest level of public debt in relation to GDP since 2008.

The decline in risk has also encouraged the diversification of the debt market. Since last year, foreign investors have started investing in Albanian government debt instruments in Lek. Bank of Albania data showed that for 2024, non-resident investors invested approximately 14 billion Lek in debt instruments in Lek.

This amount constituted approximately 28% of the additional borrowing of the Albanian government in the domestic financial market.

The participation of foreign investors is an important development, because it has increased demand and liquidity in the government securities market, contributing to the reduction of yields./ Monitor