Albania plans debut eurobond

TIRANA – Albania plans to issue a debut eurobond worth around -300 million by spring 2008, Finance Minister Ridvan Bode said on Friday, shortly after Moody’s Investors Service gave the country its first credit rating. «We plan to start procedures now to issue around 300 million euros’ worth of eurobonds, and believe we will able to do this by Q1 2008,» Bode told Reuters. Moody’s gave Albania a B1 rating with a stable outlook, four notches below investment grade. It is now on par with Ukraine, a notch behind Turkey and a notch ahead of Bosnia. «There is great interest from a number of institutions, including from Deutsche Bank, because they want to become active in Albania’s secondary treasury bills market,» Bode said. Transition Moody’s said the ratings reflected the fact that Albania began its transition to a market economy from an isolated, administered economy, and a very low per capita income level. It cited weak export performance, a shortage of energy, poorly defined and enforced property rights, a «sub-optimal» court system and a generally cumbersome business environment as reasons for the rating level. Isolated for over 40 years under Stalinist dictator Enver Hoxha, Albania was in ruins when the regime fell in 1991. The next decade was largely taken up by political turmoil and armed riots over the collapse of pyramid schemes, resulting in a lingering reputation for corruption, crime, infrastructure shortages and legal tangles. But the economy has grown strongly in recent years on the back of remittances from Albanians working abroad. Foreign direct investment, including remittances, totaled some $300 million in 2006. Appetite for emerging market debt is currently very strong, with plenty of cash on the sidelines ready to be put to work despite rising global interest rates. Tim Ash, emerging markets economist at Bear Stearns in London, said there was «no doubt in his mind» there would be plenty of investor interest, despite expectations of monetary tightening later on in the year. «They don’t need to rush,» Ash said. «Investors would be grateful if the government took their time instead and made clear how they plan to use the money. Investing in infrastructure should be their key priority.» Brighter future Bode said earlier that he expected the rating, which was conducted at the government’s request, to attract investors and help the development of the internal capital market. «The Finance Ministry considers this first evaluation as positive,» Bode told reporters. «This will make possible – in the not-too-distant future – an even better evaluation of Albania for its borrowing capabilities.» Bode said the internal public debt, estimated at 54.89 percent of Albania’s $9 billion annual GDP, had so far been «serviced with entirely backward and primitive instruments.» «Some of Europe’s biggest banks waited for this to enter the Albanian market to restructure the internal public debt,» Bode said, adding they had agreed to convert their six-to-12 month T-bills into five-year or 10-year bonds convenient for Albania. The Albanian government expects the economy to grow by about 6.0 percent again in 2007 due to a boom in consumption and construction, mainly due to inflows from the Albanian diaspora. But they acknowledge the high growth may not be sustainable without foreign investment inflows, so far deterred by perennial power shortages and unresolved property rights. The state has also made efforts to pull small and medium-sized enterprises out of the gray economy by rationalizing the tax system, and plans to use the higher revenues to invest in infrastructure, health and education. A modern airport and a new road to the capital Tirana, inaugurated this year, mark the first stage of an 85-million-euro ($114.3 million) public investment program, the most ambitious since the fall of Stalinism in 1991.

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