Bank of Algeria Will Lend Public Treasury 2,965 Billion Dinars Up To 2019

Finance Minister Abderrahmane Raouya revealed that the financial package to be loaned by the Bank of Algeria to the Public Treasury is estimated at 2,965 billion dinars until 2019, under a review of the credit and currency law, which officially authorized the Government to resort to unconventional financing to counter the sharp decline in the Public Treasury revenues.

The finance minister reported on Sunday signs of upgraded data from the national economy, including hydrocarbon exports, in addition to the decline in the inflation rate and improved management expense coverage thanks to the increase in the collection of ordinary taxation, highlighting the main lines of the national financial policy for the period 2018-2020.

Finance Minister Abderahmane Raouia on Tuesday presented a detailed statement of the country’s financial and economic situation following the collapse of oil prices in international markets, which led to a sharp drop in the country’s state external revenues and thus had to resort to unconventional financing as a solution to achieve the balance of the State budget.

Speaking during his presentation of the bill supplementing and amending the Ordinance on Money and Credit before the Finance and Budget Commission of the National People’s Assembly (NPA), in the presence of the Minister of Relations with Parliament, Tahar Khaoua, Mr. Raouya asserted that since 2014 the State faced financial constraints that have exerted “strong pressure” on the treasury and are due to “decline in our financial income and a complete depletion of our savings”.

Foreign exchange resources, heavily dependent on hydrocarbon export earnings, have been steadily declining since the second half of 2014 as a result of the continuing slump in oil prices, which dropped by $ 58 per barrel between late May 2014 and the end of July 2017, indicated Mr. Raouya.

The minister explained that due to the downward trend in crude oil prices, Algerian exports of hydrocarbons increased from $ 60.3 billion in 2014 to $ 32.7 billion in 2015, to 27.1 billion dollars in 2016 and 18.7 billion dollars in the first seven months of 2017. 

The Minister also said that the petroleum taxation recovered until June 2017 was set at 1,100 billion dinars, or 60% of that recovered in the same period in 2014.

Foreign exchange reserves, which reached $ 105.8 billion at the end of last July, could fall to $ 97 billion by the end of 2017, he said. 

Despite these pressures, the national economy has so far shown “some flexibility that has allowed it to avert an acute financial crisis”, noting that this situation tends to “weaken due to constraints related to imbalance between state revenues and expenditures and a reduction in public savings”.

In a bid to meet these needs, the Government applied a series of monetary and financial measures in 2016 and 2017 to mobilize additional resources.

With regard to non-conventional financing, Mr. Raouya said that this bill was drafted in “a particular economic and financial situation”. 

The Minister assured that the risk of hyped inflation, as a result of the use of non-conventional financing, will be subject to a “rigorous” control, stating that the use of unconventional financing will be regulated and that each money withdrawal will be subject to a “careful control”.

He added that the needs will be set annually on the basis of the financial deficit following a program drawn up by the Government, noting that an ad-hoc  commission linked to the Ministry of Finance will monitor closely the implementation of the non-conventional funding process.

The use of non-conventional financing will also be accompanied by a program of structural economic and budgetary reforms with a view to restoring the balance of the State budget and the balance of payments at the end of the five years as foressen by the draft budget law, stressed the Minister of Finance.

He added that the State will continue to implement the new model of economic growth in addition to domestic resource mobilization, rationalization of expenditures, improved budget programming and tax collection, expansion of tax base, the generalization of E-payment, the introduction of new banking products called Islamic products and the development of insurance products.

Algeria’s foreign exchange reserves are expected to fall to $ 85.2 billion at the end of December 2018 and to $ 76.2 billion by the end of 2020, Finance Minister Abderrahmane Raouya also underlined.