The Bank of Albania has decided to lower interest rates by 0.5 percentage points to 0.5 percent, in efforts to recover the economy amid a troublesome situation caused by the coronavirus pandemic. The decision was announced on Wednesday by the Governor of the Bank of Albania, Gent Sejko.
Sejko said that on the one hand, the pandemic is a challenge for the economy and the financial sector and the decline of employment will bring about a reduction in production and goods in the market. On the other hand, social distancing will lead to a decrease in sales and consumption.
This decision, according to Sejko, “is a necessary measure to reduce the cost of new loans, to reduce the service cost of existing loans and to facilitate the flow of liquidity to Albanian businesses and households. It facilitates the smooth functioning of the monetary policy transmission mechanism as well as relieves pressure on economic operators’ financial balance sheets, giving them more time and space to cope with the shock. “
To minimize the effects of the pandemic on the domestic economy, the Bank of Albania previously stated that it increased its operational capacity to guarantee the economy’s supply of currency and banknotes, as well as to ensure the smooth operation of the electronic payment system.
“Within the curfew set by public authorities, all economic operators should be aware that the payment system will operate normally,” explained the Bank, which is conducting an unlimited injection of liquidity into the banking sector.
Moreover, based on the Supervisory Council’s decision, payments of credit installments were postponed until the next quarter for businesses and households affected by the crisis, thus providing the banking sector with the necessary time and space to do so. The decision adds to the government’s financial assistance plan which seeks to alleviate the ongoing pandemic’s negative impact on the economy, by helping businesses which have been shut down and their employees who are out of work due to the crisis.