Algerian Commercial Banks Face Chocking Liquidity Crisis

Experts in economy agree on the need to address the liquidity crisis in the banks, which witnessed a sharp escalation in recent weeks and forced the Bank of Algeria, two days ago, to reduce minimum mandatory financial reserves to 4% instead of 8%. Otherwise, it is unable even to grant loans and keep savers’ deposits, and within two years it will be unable to guarantee liquidity to pay employees, in a crisis scenario that is similar to that in Greece, Venezuela and Portugal.

In this context, the former Statistics and Prospective Minister, Bachir Messaitfa, said in a statement to Echorouk that the commercial banks are financed by savings of families other than current accounts, the profits of public companies such as Sonatrach and Saidal and public treasury bonds, similar to the debenture loan, and since the Algerians are currently facing the crisis of low purchasing power, the savings of families is weak, in addition to freezing the major projects, and the lack of recording surpluses in the treasury, which contributed to the creation of liquidity crisis in banks.

“Lack of funds and the decline in treasury funding also affected the activity of money in banks, as many people are afraid to put their money in banks, and in contrast there is a growing mass of funds on the black market, despite the government’s efforts to recover them since 2015, through the imposition of a number of procedures”.

“This scenario happens in Greece, Portugal and Venezuela where the financial crisis was exacerbated starting by the central bank’s inability to finance commercial banks and the growing liquidity crisis that made commercial banks unable to finance not only loans but also enabling customers from withdrawing financial savings”.

“The central bank usually works to finance commercial banks by injecting new funds, and by using the method of discounting and rebate, for a specific interest or the price of re-discount, but the high level of inflation, which exceeds 7% in Algeria makes is unable to pump new funds and resorts to reducing the minimum reserves of banks, such as last year when the reserves were reduced from 12% to 8%, and today to 4%, which one of the indicators of the crisis and lack of liquidity in the current situation”.

“Today’s solution is not only taking action to solve the situation superficially and subtly, but by changing policies as a whole, moving away from the painkillers and adopting new approaches to the national economy based on the principles of correction and control of what already exists and the actual recovery of parallel market funds”.

“Stage of financial difficulties is the same stage preceding the economic difficulties or the economic crisis, and is typified by a certain situation of indicators of a total nature, most notably that inflation and unemployment, which is the general situation that Algeria is living today”.