Government debt continues to expand,reaching over all 872 billion, approximately 62 percent ofgross domestic product (GDP), as of end-September 2013.Domestic debt grew sharply in the first half of 2013,emanating largely from poor tax revenue performance,together with the accumulation of a large stock of unpaidbills and arrears. External debt creditors comprisemultilaterals, bilateral creditors, and private creditors.The concentrated nature of the investor base and the highdomestic debt stock limit the choices available to debtmanagement, particularly with regards to extending thematurity of the domestic debt. Public debt management inAlbania follows an organized process but will benefit from anumber of technical changes. The domestic borrowing plan hasbeen revised frequently due to unexpected flows in thetreasury account. In an environment of volatile treasurybalances, cash flows safety nets or minimum cash buffersshould be implemented. A number of initiatives arerecommended to improve the transmission of price signals inthe primary market - overall this will provide incentivesfor secondary market development. To support the developmentof the secondary market the General Directorate of publicdebt management should modify its issuance program and focuson key maturities on the yield curve. It is suggested thatthe issuance program takes a small step in this direction bylimiting the number of tenors and focusing on for example,two, five, seven, and ten-year treasury bonds as well asincreasing the frequency of 5 and 7-year maturities fromquarterly to bi-monthly. This will provide more frequentprice discovery in the primary market that will supportportfolio valuation.
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