MPs toll the alarm bell at the doubtful future of Algeria's huge funds invested in US Treasury bonds
The burning and nagging issue of Algeria's major foreign reserves invested in the United States in the form of Treasury bonds has sparked off a bitter outcry among numerous members of the national popular assembly or lower house of Parliament.
- Parliamentarians of the Al Nahda movement joined the frontline by leveling scathing criticism of the Bank of Algeria and the public authorities over the risks entailed by the placing of such important funds in the form of treasury bonds in the United States as the latter’s economy is far from being healthy in view of the latest economic indicators embodied by the stern rating issued this week by Standard and Poor’s.
- The MPs stressed that between 2010 and early 2011, Algeria had lost about 10 billion dollars on account of world monetary fluctuations and the steep hike in food imports adding that the Algerian government should deal seriously with the bonds issue before untold damage is inflicted on the national economy with the loss of more of our country’s foreign reserves.
- They argued to this effect that this very large financial package lost over the past year, could have been used for the building of over 4 hundred thousand new housing units in various parts of Algeria.
- This vexed issue has triggered off several adverse reactions on the Algerian economic scene.
- Earlier this week, several Economists called upon the Algerian government to search quickly for safer alternatives for their reserves of foreign currency that are invested in U.S. Treasury Bonds, after USA was subject to the biggest hit in its economic history.
- Economic expert Bashir Mesetfa told Echorouk that the reduction in credit rating of the USA, in the long term by one degree to (AA+) due to concerns about the deficit in the state budget and high debt burdens means an increase of credits costs for the U.S. government, companies and consumers, which could cause a major deficit in the trust money and terraces of the American sovereign debts.
- “The decision will prompt USA to issue new bonds to finance its soaring deficit, but the demand for these bonds will be few after the loss of capacity of high rating which it enjoyed for more than 40 years. The world will witness a new fever before getting rid of the U.S bonds, which would reduce its value in the financial markets in the same way that the value of shares witnessed during the sub-prime crisis three years ago. The world will witness strong offerings this time for getting rid of the U.S. bonds which lost their excellent value following the latest downgrading rating by Standard & Poor’s”, he added.
- “It is necessary to get rid of the U.S. treasury bonds. Every minute lost by Algeria Bank to take this action is a loss to Algeria because the price of these bonds will fall in global markets significantly. The direct impact on Algeria is to display all the existing Algerian investments in dollars, including the exchange reserves to corrosion” (lower purchasing power of the currency), he explained.
- “The best solution to the Algerian government is resorting to safer alternatives such as gold and Euro. The problem facing Algeria is the decline of the dollar against the euro, which is a major import currency for Algeria, which will reflect negatively on the import bill which will exceed $50 billion this year and for the first time ever”, he pointed out.