Algeria’s Foreign Exchange reserves: USD 146 billion to provide three years of imports?!!!

Foreign exchange reserves of Algeria have reached USD 146 billion in late September 2009, announced Thursday, Finance Minister Karim Djoudi at the National People’s Council. It is excellent news for the minister, who was quick to assert that it allowed Algeria to “provide three years of imports”.

• Statments by Karim Djoudi seem reassuring; Algerians will not suffer from shortages in the next three years. The message is mainly political. But it also summarizes the economic logic of the government in recent years: sell oil and use the revenue to import everything that Algerians eat. In other words, the government does not really know what to do with this colossal sum.
• Certainly, the government announced a plan of 150 billion dinars for expenditure a year ago, but it is mainly for infrastructure projects, often poorly managed. Meanwhile, economists point to the shortcomings of the country in terms of support for business creation, monitoring SMEs and the establishment of a real industrial base capable of creating employment and domestic supply to effectively reduce imports.
• For example, in its 2009 report, the IMF noted that Algeria is facing major challenges. Falling oil prices highlight the urgent need to accelerate structural reforms to diversify the economy while ensuring a sustained non-oil growth.
• To work in this way, we always come back to the same preliminary requirements. Cleaning up the business climate, and support the emergence of domestic investors able to produce locally. The Finance Act 2009 is also gone in this direction, but the results remain timid in light of the country’s needs. And Karim Djoudi has once again confirmed that the government has only one economic strategy; sell oil and import products consumed by the Algerians.