The CB fears high inflation, experts propose consumer credits as remedy

The Governor of the Central Bank, Mohamed Lakcasi expressed on Thursday fears that the inflation to hit record level this year, due to many factors, including the considerable wage hikes in several non-profit sectors, the big public investment program and the soar of foodstuff prices in international markets.

Mr Lakcasi told due a conference on inflation held in Algiers that controlling inflation is set to be the main goal of the Central Bank’s monetary policy henceforth.

Mr Lakscaci said: “The recent world financial crisis has taught us to scrupulously following up the pace of inflation, and pursue deep reforms to our monetary policy as stipulated by the amended monetary law of 2010.”

The official further specified that the Central Bank works on improving prevision methods which enabled us constantly shrinking the difference between predicted inflation rates and the real ones.

He further mentioned that the monetary and credit council predicts that the inflation rate would be maintained at 4 percent in 2011.

In this regard, Mr Laksaci said inflation in last February hit 3.87 percent, while our predictions were set at 3.88, adding “our predictions are getting accurate more and more.”

Algeria Minister of Finance, Karim Djoudi, has already declared to MPs last March that the inflation rate has increased in 2011, following the government’s wage hikes decision.

To recall, Algeria’s inflation rate hit 3.9 % in 2010, comparing to 5.7% in 2009, noting that the government expects an overall rate of 3.5% in 2011.

Experts at the Central Banks said the inflation in Algeria is generated by the high import bill, the increase of production costs, and the perturbation of raw materials’ prices in the international markets. 

A recent CB report mentioned that the “imported inflation” represents 22 percent of the index of consumption prices, the price of fresh fruits and legumes standing (7%), the exchange rate (9%) and the overall credit allocated to boost economy as well as the expansion of wages which represent 62%. 

Consequently, experts have proposed re launching consumer credits to enable the Central Bank investing the $70.4 billion frozen deposit since 2010, of which only $28.16 billion had been used so far.