Algerian Government Fears: Exchange Reserve Shrunk To $70 B

Government of Noureddine Badoui decided to extend the payment of Algerian imports for up to one year after being approved for a period of no more than 59 days, less than two months, due to fears and difficulties that it is facing because of the erosion of the exchange reserve, which fell to the limit of $ 70 billion at the end of last May last.

It seems that the executive branch has been late to wake up and has embarked on a process to try to counter irrational waste and looting the country’s hard currency revenues, as Bedoui’s government, which faces a large popular rejection and demand to leave, has found itself in a race to stop the bleeding of hard currency.

A correspondence that the Prime Minister, Noureddine Badoui, sent to the Finance, Trade and Communication Ministries revealed on the guidance that was provided by Badoui to the members of his government to assess the impact of resorting to a procedure to extend the time of payment of imports for up to one year at the latest after it was adopted for a period of not more than 59 days. He also asked the government to promote and support measures that are adopted to rationalize imports and protect the exchange reserve, which recorded a terrible decline and abnormal erosion in previous years.

The correspondence which was delivered to members of the government last Wednesday, n°80/PM is dated May 29, 2018, confirmed the necessity of promoting the measures that are adopted at the last government meeting held on May 15, with the aim of rationalizing imports and maintaining the exchange reserves.

Imports during the first four months of the current year were estimated at $14 billion, while the level of exchange reserves was less than $70 billion, which is a terrible situation for a country which annual imports are estimated at about $40 billion, which means that the current exchange reserves cover only 18 months of the country’s need.

The correspondent, which copy is available to Echorouk, shows that “the decision to extend the date of payment of imports, according to the decision that is approved at the meeting of the government”, shows “the extension of the order to pay the value of imports for a longer period of not more than one year that is taken in the framework of procedures to rationalize imports and maintain the reserves and in a coordinated framework to deepen the study of the potential impact of this resolution, and propose complementary measures to ensure any possible side effect, with the same principle that was adopted for each future action in this area.”

Badoui also called for “the development and implementation of an appropriate communication plan to promote this action and to participate effectively and by all means that are possible in stimulating the discussion that may raise it.”

Badouis correspondence came after a hearing at May 15 meeting, when the Finance Minister, Mohamed Loukal, presented a proposal on measures to reduce the balance of payments of deficit in order to maintain exchange reserves, in light of the relevant work of the Commission, which includes representatives of the Ministries of Finance, Trade, and Industry.

Previously, the Government has approved the decision to extend the current import reimbursement period for some sectors of activity to a longer period, which in any case does not exceed one year, as is the case for international trade.

The new procedure was accompanied by other measures such as increasing the value of imports of car parts and reducing the size of the country’s wheat imports, which is a useless step, besides it is a late measure, it comes at a time when Algeria is facing the decline in business risk assessment, and the weak institutional capacity to pay due to the lack of liquidity, as it is known that the authorities expect the trade deficit of this year to reach about $10.4 billion compared to $8.2 billion in 2020, and expects the reserves to reach $ 62 billion by the end of 2019 and $ 47.8 billion in 2020 and $ 33.8 billion in 2021.

Exchange reserve reached $ 79.80 billion at the end of 2018, while reserves were estimated at less than $ 70 billion at the end of May 2019.