Albanian farmers warn of bankruptcy risk as lek rallies against euro again

Albanian farmers warn of bankruptcy risk as lek rallies against euro again
The lek fell briefly against the euro in August, but has now returned to its upward trend. / Bank of Albania
By bne IntelliNews September 3, 2023

Albanian farmers and food exporters have warned they risk going bankrupt while the lek remains unusually high against the euro and other major currencies. 

The lek unexpectedly fell in August, but has since resumed its rise against the euro, as well as the US dollar and sterling. As of September 3 the ALL/EUR exchange rate stood at ALL108.42 to the euro. 

Previously the lek rose to a record high of ALL100.49 to the euro, just failing to break through the ALL100 mark before falling back to ALL110.59 in late August, before recovering again to close to ALL108 last week. 

The Association of Agricultural Products Exporters has warned that food producers have benefited from bad weather elsewhere in the region that has resulted in higher prices this year for Albanian agricultural products, but exporters are facing high losses from the exchange rate, which makes their products less competitive.

"Export companies are in a big crisis because of the exchange rate. Almost 30% of exporters have gone bankrupt," said Laurat Mulliqi, chairman of the association, as quoted by 

"Here, the euro is falling day by day and from the export of goods to the collection of invoices, the losses are very high," he said. 

The lek has repeatedly broken new records against the euro after steadily strengthening in late 2022. Last year, the average exchange rate of the lek against the euro was ALL118.9. 

This has made imports more affordable, which has helped keep inflation levels relatively low at a time when inflation was soaring across Europe, but exporters have struggled. 

The hike in the value of the lek has been attributed to several factors, including the large amount of foreign currency on the market, resulting from the rise in tourism revenue and an increase in remittances.

Albania is a popular summer tourist destination, with arrivals concentrated during the peak months of July and August. After a record summer in 2022, when the sector rebounded from the coronavirus restrictions, another strong performance is expected in 2023. 

Anke Weber, International Monetary Fund (IMF) mission chief for Albania, commented in June that the appreciating trend of the Albanian lek is in line with the growth in exports and the structural improvements in the external balances of the Albanian economy. 

The Bank of Albania commented on the rise of the lek, saying the increase in the exchange rate against the euro “is a reflection of the increased supply of the currency in the domestic financial market. It is dictated by the improvement of the balance of payments as a result of high foreign currency inflows, which are estimated to be present in the first months of this year as well … The appreciating performance of the lek is also supported by the widening of the positive difference between the rate of return of funds in lek and that in euros in the domestic market,” a note from the bank said.