ardian fullani : overview of albania ’ s latest economic and financial developments speech by mr ardian fullani, governor of the bank of albania, on the monetary policy decision - making of the bank of albania ’ s supervisory council, tirana, 29 january 2014. * * * today, on 29 january 2014, the supervisory council of the bank of albania reviewed and approved the monetary policy statement of the bank of albania on the second half of 2013. given albania's latest monetary and economic developments and discussions on their outlook, the supervisory council of the bank of albania decided to keep the key interest rate unchanged, at 3. 0 %. the supervisory council deems that the inflationary pressures from the real and financial sectors of the economy are weak and will remain so. these circumstances require maintaining a stimulating monetary policy over the period ahead. the monetary stimulus, transmitted through the low key interest rate and ongoing liquidity injection, provides the proper conditions for meeting our inflation target in the medium term. let me now proceed with an overview of the economic developments and key issues discussed at today ’ s meeting. * * * year 2013 was a difficult one for the albanian economy. aggregate demand and economic growth remained at low levels ; inflation fluctuated around bank of albania's lower targeted band, while the budget deficit and public debt increased sharply. the unfavourable economic environment, both at home and abroad, led to this performance. moreover, albania ’ s june parliamentary elections added uncertainties to the economy and financial markets. as we have already stated, consumption and investments continue to suffer from low confidence and tight lending terms. fiscal policy is faced with a high public debt level, which has limited the possibilities for macroeconomic stimulus. on the other hand, the external environment was characterised by ongoing euro - area problems, hence limiting our export growth and making financial markets pursue conservative policies in terms of lending to developing economies. however, 2013 saw positive developments. financial markets were characterised by improved liquidity and downward interest rates, in response to bank of albania's easing monetary policy. also, introducing new financial agents and instruments has further deepened these markets. the banking system remains solid and well - capitalised, regardless of increase in non - performing loans. the current account deficit has dropped, creating better premises for a sustainable external position of the economy and stable exchange rate. these developments have contributed to maintaining macroeconomic stability. analysing the specific developments in the second half of 2013, the official data show a slowing economic

, which will also be moved to the bank of england. the new committee partly consists of the same people as the monetary policy committee. bis central bankers ’ speeches the krona ’ s exchange rate if necessary. however, it has not been used for this purpose since 2001, and, when it was used, the results were unfavourable. the financial crisis made abundantly clear that the foreign currency reserve was also needed to provide the banks with liquidity in foreign currency in the event of a crisis. this is a matter of the central bank ’ s fundamental function as lender of last resort. as i mentioned earlier, it can no longer be seen as only concerning liquidity in kronor. of the four major banks ’ lending to the public of about sek 7 000 billion, about sek 2 500 billion was funded with securities issued in foreign currencies, of which about half had times to maturity of less than one year. the riksbank ’ s gold and foreign currency reserve was not enough to meet the need for dollars that arose during the crisis. this amounted to about sek 200 billion and was invested in various currencies and different types of asset. during the autumn of 2008, our lending in dollars peaked at about sek 250 billion. in addition, we increased our international commitments to the imf and concluded swap agreements with the central banks of iceland, latvia and estonia so as to be able to give them loans in foreign currency if necessary. the swedish banks also borrowed significant amounts in foreign currency from other central banks and made great use of the government borrowing guarantee. to manage the situation, we were forced to rapidly establish a swap agreement with the us central bank ( the fed ), which gave us the possibility of borrowing usd 30 billion. the fed concluded similar agreements with several other central banks as it had an interest in ensuring that the european banking system did not collapse as a result of a shortage of dollars. we also concluded a swap agreement with the ecb, which gave us the possibility of borrowing eur 10 billion. 13 in addition, we also ensured that it would be possible to borrow from the bank for international settlements ( bis ). the agreement with the fed has now expired and it is not likely that we would be able to conclude a similar agreement in the event of a new crisis, among other reasons because the fed has received criticism at home for its support to the european banking system. the question of a suitable size for the foreign currency reserve