Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

ALBANIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article XIVYes.
Exchange Measures
Restrictions and/or multiple currency practicesThe staff report for the 2006 Article IV consultation with Albania states that as of July 10, 2006, Albania’s exchange rate arrangement was free from exchange restrictions and multiple currency practices subject to Fund jurisdiction under Article VIII. However, the country still availed itself of the transitional arrangements under Article XIV and maintained exchange restrictions in the form of outstanding debit balances on inoperative bilateral payment agreements, which were in place before Albania became a Fund member. These relate primarily to debt in nonconvertible and formerly nonconvertible currencies, which the authorities are working to resolve by mid-2007 for official creditors, and by end-2007 for private sector creditors. (Country Report No. 06/286)
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Albania is the Albanian lek.
Exchange rate structureUnitary.
Classification
Independently floatingThe exchange rate of the lek is determined on the basis of supply and demand in the foreign exchange market. The Bank of Albania (BOA) intervenes occasionally in the exchange market only to smooth excessive fluctuations of the exchange rate and to meet foreign currency reserve targets. The BOA may also intervene to ensure that the exchange rates reflect macroeconomic fundamentals. The BOA calculates and announces the daily average exchange rates for the dollar and 10 other major currencies and the prices of gold and silver. No margins are set between buying and selling rates for the official exchange rate, but commercial banks charge commissions ranging from 0.2% to 2%, depending on the amount, for cashing traveler’s checks. Government transactions are conducted at market rates.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
References to legal instruments and hyperlinksLaw No. 8269 of December 23, 1997, on the Bank of Albania; Regulation on the Procedure of Intervention of the Bank of Albania in the Domestic Foreign Exchange Market; www.bankofalbania.org.
Arrangements for Payments and Receipts
Prescription of currency requirementsPayment for all merchandise trade is made in convertible currencies. All transactions under bilateral payments agreements were suspended in 1992, and the settlement of clearing accounts is awaiting the outcome of negotiations. All contracts denominated and payable in foreign currencies are valid.
Controls on the use of domestic currencyn.a.
Use of foreign exchange among residentsn.a.
Payments arrangements
Clearing agreementsAlbania maintains outstanding balances under inoperative bilateral clearing agreements in nonconvertible currencies with Bulgaria, Cuba, the Democratic People’s Republic of Korea, Poland, and Vietnam. Albania also maintains outstanding balances under inoperative bilateral clearing agreements in convertible currencies with Algeria, Bulgaria, Cuba, Egypt, Greece, the Democratic People’s Republic of Korea, the Republic of Montenegro, the Republic of Serbia, and Vietnam.
Administration of controlThe BOA is vested with the powers to administer exchange controls. The BOA is the only authority that has the right to (1) license, authorize, regulate, supervise, and revoke the licenses of foreign exchange market participants, as well as second-tier banks; (2) define the limits of their activities; and (3) regulate and supervise foreign exchange operations and international payments in order to prevent any participant from dominating the market and undermining the value of the lek through speculation.
In accordance with anti-money laundering legislation, banks are required to maintain records of all cash transactions in excess of the equivalent of lek 2 million and of all other transactions in excess of lek 20 million, and to report these to the authority in the MOF responsible for the prevention of money laundering.
Payments arrears
OfficialAlbania has outstanding debit balances under inoperative bilateral agreements with Algeria, Cuba, Greece, the Republic of Montenegro, Poland, the Republic of Serbia, and Vietnam. Arrears with Hungary, the Czech Republic, the Slovak Republic, and Romania have been rescheduled.
PrivateAlbania has incurred private payments arrears with creditors (banks and companies) in Austria, Belgium, the Czech Republic, Denmark, Greece, India, the Netherlands, Sweden, Switzerland, and the United Kingdom. An agreement has been reached to reschedule arrears to private creditors in Germany. Arrears with private creditors in the former Yugoslav Republic of Macedonia have been rescheduled.
Controls on trade in gold (coins and/or bullion)
On domestic ownership and/or traden.r.
On external tradeResidents and nonresidents may transfer standardized gold and precious metals to and from Albania only through entities specially licensed by the BOA.
Residents and nonresidents are entitled to transfer nonstandardized gold and precious metals to and from Albania, subject to documentary requirements regarding the source; the purpose of the transfer; the quantity; and whether the transfer involves the returning of the precious metals and, if so, the form in which they should be returned. There is no requirement for transfers of jewelry for personal use.
Controls on exports and imports of banknotes
On exports
Domestic currencyNatural and juridical persons are allowed to take out up to lek 50,000 a person in banknotes and coins. The BOA may authorize larger amounts.
Foreign currencyForeign natural persons may take abroad in cash or traveler’s checks foreign exchange in an amount equal to the amount declared when entering the country. Albanian natural or juridical persons are not allowed to export amounts larger than lek 3.5 million or its equivalent. For export of amounts larger than lek 1 million or its equivalent, a declaration of the source is required.
On imports
Domestic currencyNatural and juridical persons are allowed to import up to lek 50,000 in domestic banknotes and coins. The BOA may authorize larger amounts.
Foreign currencyOn entering or exiting Albania, resident and nonresident individuals are required to declare cash, traveler’s checks, precious stones or metals, and antiques valued at lek 1 million or more.
References to legal instruments and hyperlinksRegulation No. 64 on Foreign Exchange Activities, dated July 30, 2003; www.bankofalbania.org.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksRegulation No. 64 on Foreign Exchange Activities, dated July 30, 2003, amended by decision of the Supervisory Council of the Bank of Albania, dated December 12, 2003; www.bankofalbania.org.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
Letters of creditYes.
Import licenses used as exchange licensesYes.
OtherFor imports equal to or larger than the equivalent of lek 3.5 million, the following documents must be submitted: (1) an application for carrying out the transaction as well as a declaration specifying in detail the nature of the transaction; (2) a contract and an invoice (or a pro forma invoice) issued by the natural or juridical person supplying the goods; (3) a declaration that the underlying document has not been used to support previous transactions, which is to be issued by the natural or juridical person wishing to carry out the transaction with the bank; and (4) a customs clearance document (within 3 to 12 months, depending on the settlement of the invoice).
Import licenses and other nontariff measures
Positive listYes.
Open general licensesYes.
Licenses with quotasAutomatic licensing restrictions are applied on fuel products to support the implementation of domestic technical standards.
Other nontariff measuresThe import of the following products is prohibited: (1) dangerous waste, such as toxic corrosives, residual waste from explosives, and radioactive materials; (2) military poisons, chemical weapons, and other strong poisons; (3) narcotics and psychotropic substances; and (4) animal products from countries with cases of livestock diseases.
Import taxes and/or tariffsExcise taxes on domestic and imported goods are unified. Customs tariffs are applied to the c.i.f. value at rates of zero, 2%, 5%, 10%, and 15%. Effective January 1, 2006, a new customs tariff rate of 8% (previously, 6%) applies to the c.i.f. value.
State import monopolyNo.
References to legal instruments and hyperlinksLaw No. 9461, dated December 21, 2005, for the Nomenclature of Goods and Custom Tariffs; Guideline No. 7, dated December 21, 2005, on the Value-Added Tax of the Ministry of Finance.
Exports and Export Proceeds
Repatriation requirementsAll private and public companies or individuals operating in the export sector are required to repatriate their foreign exchange receipts.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesExport bans apply on copper and articles made thereof; works of art; arms and ammunitions, as well as their parts and accessories; and explosives and pyrotechnic products.
Without quotasYes.
Export taxesNo.
References to legal instruments and hyperlinksGuideline No. 3, dated January 30, 2006, on the Value-Added Tax of the Ministry of Finance.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersSupporting documents are required for transactions exceeding the equivalent of lek 3.5 million, including on the reasons for the transfer, the source of funds, and the payment of taxes.
Trade-related payments
Indicative limits/bona fide testYes.
Investment-related payments
Indicative limits/bona fide testYes.
Payments for travel
Indicative limits/bona fide testYes.
Personal payments
Indicative limits/bona fide testYes.
Foreign workers’ wages
Indicative limits/bona fide testYes.
Credit card use abroad
Indicative limits/bona fide testYes.
Other payments
Indicative limits/bona fide testYes.
References to legal instruments and hyperlinksRegulation No. 64 on Foreign Exchange Activities, dated July 30, 2003, amended by Decision No. 101, dated December 10, 2003; www.bankofalbania.org.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksRegulation No. 64 on Foreign Exchange Activities, dated July 30, 2003, amended by Decision No. 101, dated December 10, 2003; www.bankofalbania.org.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsNo.
Controls on capital and money market instrumentsPurchases of these instruments abroad by residents may be conducted through entities licensed by the BOA, subject to documentary requirements. For prudential reasons and money laundering prevention, the BOA monitors and reviews these transactions.
On capital market securities
Shares or other securities of a participating nature
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Bonds or other debt securities
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On money market instruments
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On collective investment securities
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Controls on derivatives and other instruments
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsn.r.
Controls on credit operations
Commercial credits
By residents to nonresidentsYes.
Financial credits
By residents to nonresidentsYes.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsYes.
Controls on direct investment
Outward direct investmentThe regulations governing capital and money market instruments apply.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase abroad by residentsThe regulations governing capital and money market instruments apply.
Purchase locally by nonresidentsControls relate only to the purchase of land.
Controls on personal capital transactions
LoansThe regulations governing capital and money market instruments apply.
By residents to nonresidentsYes.
To residents from nonresidentsThese transactions are subject only to anti-money laundering regulations.
Gifts, endowments, inheritances, and legacies
To residents from nonresidentsThese transactions are subject only to anti-money laundering regulations.
References to legal instruments and hyperlinksRegulation No. 64 on Foreign Exchange Activities, dated July 30, 2003, amended by Decision No. 101, dated December 10, 2003; www.bankofalbania.org.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Lending to nonresidents (financial or commercial credits)Lending is subject to capital controls.
Differential treatment of deposit accounts held by nonresidents
Credit controlsYes.
Investment regulations
Abroad by banksYes.
In banks by nonresidentsYes.
Open foreign exchange position limitsThe limit is 20% of the bank’s capital for a single currency and 30% for all currencies.
Provisions specific to institutional investors
Insurance companiesn.r.
Pension fundsn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksRegulation on Credit Risk Management, applicable as of August 5, 2004; Regulation on Foreign Exchange Activities; Instruction No. 69 on Reporting of Foreign Exchange Transactions, as of August 23, 2003.
Changes during 2006
Imports and import paymentsJanuary 1. The customs tariff rate was increased to 8% from 6% of the c.i.f. value.

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