As the national currency reaches record highs, economists question whether Albania’s construction boom and suspected money laundering are flooding the market with euros and distorting the real economy.
Tirana Times July 29 2026 – The Albanian lek has become one of Europe’s most unlikely currency champions. One euro was exchanged this week for as little as 93.62 lek, the lowest level recorded against Albania’s national currency. The exchange rate has moved so dramatically that a euro worth about 140 lek in 2013 now buys roughly one third less.
Prime Minister Edi Rama calls the stronger lek a success and a “stubborn indicator” of economic growth. His government says the explanation is straightforward. Record tourism revenues, foreign investment and remittances have flooded the market with euros, increasing their supply and lowering their price in relation to the lek.
Official figures appear, at first sight, to support that argument. Foreign visitors spent about 5.7 billion euros in Albania in 2025, according to figures cited by the government. Foreign direct investment reached about 1.6 billion euros, while remittances exceeded 2 billion euros. Together, the government says, these inflows have created an entirely lawful currency surplus.
The International Monetary Fund has broadly supported the view that economic fundamentals, particularly tourism and foreign investment, have been the main forces behind the appreciation. Its most recent assessment said fundamentals were the principal driver of the real exchange rate, while speculative forces played only a modest role. It has also defended Albania’s floating exchange rate as an important protection against economic shocks.
But the strength of a currency is not the same thing as the strength of an economy.
In theory, the appreciation should make imported food, fuel, machinery and consumer goods cheaper. Businesses should pay less for imported materials, while households should gain purchasing power. Albania imports much of what it consumes, so the benefits should be visible across supermarket shelves and household budgets.
They are not.
Food and nonalcoholic beverage prices in Albania reached the European Union average in 2024, according to a study cited by economists, even though Albanian household incomes remain far below those in most EU countries. The study found that food prices had increased earlier, faster and more frequently than elsewhere in the region, despite the lek’s appreciation.
Exporters face the opposite problem. They earn euros abroad but pay salaries, electricity, rent and taxes in lek. Every fall in the euro reduces the value of their revenues when converted into the national currency. Tourism operators who sell packages in euros face similar pressure. To preserve their income, they must raise euro prices, potentially making Albania less competitive against Greece, Montenegro, Croatia or Turkey.
This paradox has opened a more troubling question. Do tourism, remittances and foreign investment fully explain the amount of foreign currency entering Albania?
Irena Beqiraj, a former deputy finance minister, argues that the government counts the money entering the country without adequately subtracting the money leaving it. From the 5.7 billion euros attributed to foreign tourism, she says, about 3.06 billion euros spent by Albanians travelling abroad should be deducted.
She also notes that part of what is classified as foreign investment consists of profits earned in Albania and reinvested by foreign owned companies, rather than new capital physically entering the country. Her estimate is that between 25% and 40% of the lek’s appreciation cannot be fully explained by tourism, investment and remittances.
Economist Pano Soko points to Albania’s persistent trade deficit. If the lek’s rise were being powered primarily by a stronger productive economy, he argues, Albania should be exporting significantly more in relation to its imports. Yet the basic trade imbalance has not changed sufficiently to explain the currency’s extraordinary movement.
The conclusion drawn by several independent economists is not that tourism is fictitious or that all investment is criminal. Tourism has expanded rapidly and unquestionably brings billions of euros into Albania. The question is whether the legal and statistically recorded flows are large enough to explain the full scale and duration of the appreciation.
There is no publicly established proof that criminal money is the main cause of the exchange rate. An exchange rate cannot reveal whether a euro came from a hotel payment, an emigrant’s savings, a legitimate property investment, corruption or international drug trafficking. Once the currency reaches the market, its effect on supply is the same.
But there are reasons for scrutiny.
Albania’s Special Prosecution Office, known as SPAK, reported the seizure and confiscation of about 45.4 million euros in assets during 2025. Construction and real estate are regularly identified as sectors with high exposure to money laundering. Those seizures do not establish how much illegal money may be circulating in the wider economy, and they do not prove a direct connection with the exchange rate. They do, however, demonstrate that substantial criminal proceeds exist and seek routes into apparently legitimate assets.
The IMF itself presents a more complicated picture than the government’s celebratory interpretation might suggest. While attributing most currency appreciation to economic fundamentals, it has urged Albania to continue implementing its national strategy against money laundering and to strengthen the use of financial controls against tax crimes.
The fund has also warned of rapidly increasing exposure to property. Since 2019, construction activity, property prices and bank lending connected to real estate have risen sharply. By the third quarter of 2025, about two thirds of household borrowing and 41% of lending to nonfinancial companies were being used for real estate purposes. Real estate loans represented about 20% of banking system assets.
Across Tirana, towers continue to rise while advertised apartment prices reach levels increasingly detached from average local salaries. Similar development is spreading along Albania’s coast, where luxury resorts, residences and tourism complexes have become one of the principal destinations for domestic and foreign capital.
Critics describe some of the new buildings as “ghost towers,” suggesting that apartments are purchased as stores of value or instruments for moving capital rather than as homes. The claim is difficult to measure conclusively because transparent information on final transaction prices, occupancy, beneficial ownership and the ultimate sources of investment remains limited.
That is where comparisons with Albania’s pyramid scheme disaster become politically powerful, even if they are not economically exact.
A tower is not a Ponzi scheme. It is a physical asset, not a company promising impossible monthly returns. Albania’s banking system today is also far stronger, better capitalized and more closely supervised than the primitive financial system of the mid 1990s.
But the analogy concerns something deeper. Both models can create an appearance of prosperity while depending on a continuous arrival of new money. Both can push asset values beyond what ordinary incomes or productive activity would seem to justify. And both can conceal risk when institutions focus on headline growth rather than asking where the money originates and whether the boom is sustainable.
Between 1993 and 1995, Albania’s economy grew by an average of about 9% annually. Inflation fell from triple digits to around 6%, and the country was widely regarded as one of the most successful early transition economies. The positive macroeconomic indicators were real, but beneath them pyramid companies were accumulating liabilities that eventually reached nearly half the country’s gross domestic product.
The historical record is more nuanced than the claim that the IMF and World Bank saw nothing. Both institutions issued warnings about the pyramid companies. The IMF was also unable to reach agreement on the final stage of its lending program because of loose fiscal policies and the government’s refusal to take sufficient corrective measures.
Yet the warnings failed to produce action, and international institutions initially underestimated both the scale of the schemes and their capacity to destroy the state. Macroeconomic growth continued to be recorded even as the pyramid system reached its peak in 1996. The numbers were not necessarily false. They were simply incapable of revealing the danger building underneath them.
When the schemes collapsed in early 1997, savings disappeared, weapons depots were looted, state institutions ceased functioning across much of the country and Albania descended into anarchy and near civil war. The United Nations authorized an Italian led multinational protection force, Operation Alba, to help create a secure environment and support the delivery of humanitarian assistance.
Albania in 2026 is not Albania in 1997. There is no evidence of an imminent financial collapse, and it would be irresponsible to predict one merely because the lek has appreciated or construction is booming.
Foreign currency reserves are at record levels. The banking system is liquid and well capitalized. Public debt has declined, inflation is contained and the country’s European Union accession process provides external monitoring that did not exist three decades ago.
The Bank of Albania is nevertheless absorbing extraordinary amounts of foreign currency. It bought 95.5 million euros during the first quarter of 2026, almost three times the amount purchased during the same period a year earlier. In 2025, it bought more than 1 billion euros, including about 729 million euros in interventions aimed at limiting exchange rate pressure. Foreign currency reserves reached 7.67 billion euros in May 2026.
The fact that the euro continues to weaken despite such purchases illustrates the scale of the supply entering Albania.
That supply may largely be the result of tourism, investment and remittances, as the government and IMF argue. But the unprecedented exchange rate, the pressure on exporters, the failure of consumers to receive lower prices, the growth of property lending and the acknowledged exposure of construction to money laundering justify more than political reassurance.
They require data.
Authorities should publish more detailed figures on net tourism revenue, reinvested foreign earnings, cash entering outside the banking system, property occupancy, actual transaction prices, beneficial ownership and the sources of financing for major construction projects. Law enforcement data on money laundering investigations should be examined alongside balance of payments statistics rather than treated as an unrelated criminal justice issue.
The real test of Albania’s economy is not whether the euro falls to 92 or 90 lek. It is whether the country can explain the money, trace it, tax it and direct it toward productive development.
In 1996, Albania had impressive growth figures and a hidden financial disaster. The lesson is not that every boom is a pyramid. It is that prosperity which cannot be fully explained should never be celebrated before it is properly audited.
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