The banking liquidity of Algeria recorded a hike of 37.31% at the end of August 2019 compared to the end of December 2018, said Finance Minister Mohamed Loukal on Sunday.
Banking liquidity thus increased to 1,705.5 billion (billions of DA at the end of August last year compared to 1,557 billions of DA at the end of December 2018, an increase of 37.31%, he told the APS official news agency.
Asked about a possible drop in liquidity in recent months, as reported by some media sources, Mr. Loukal formally denied this “unfounded information”.
“We cannot suffer from a lack of banking liquidity when the mandatory reserve ratio is set at 12% by the Bank of Algeria (BA),” he explained.
In addition, “local banks have collateral sovereign securities that enable them to refinance themselves with the Central Bank as part of the open market”, Mr Loukal argued.
Last February, he said, the Bank of Algeria (BA) raised the reserve requirement ratio from 8% to 12% in relation to the banks’ overall reserve base. By January 2018, it had already increased the rate of these reserves from 4% to 8%.
Thus, banks are required to keep 12% of their customers’ deposits without using them. This reduces banks’ free reserves and limits bank liquidity, Mr Loukal added.
In the event of a lack of liquidity, the BA systematically uses the reduction of the mandatory reserve ratio to inject more liquidity into the national market.
“After the declines recorded in 2015 and 2016, banking liquidity stabilized relatively steadily after the launch of open market liquidity injection operations in March 2017, and then increased sharply in November 2017 after the implementation of non-conventional financing”, he underlined.
“Banking liquidity had reached DA 1,380.6 billion at the end of 2017, an increase of 68.2% compared to its level at the end of 2016, which was DA 821 billion”, Mr Loukal further stated.
In anticipation of the accumulation of banking liquidity, and to ward off any inflationary pressures, the BA raised the reserve requirement ratio from 4% to 8% in 2018, the Minister finally underscored.