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Algerian PM: Financial Situation is Fragile

Algerian PM: Financial Situation is Fragile

Wednesday, 12 February, 2020 - 10:15
People shop at a supermarket in Algiers, Algeria November 13, 2017. REUTERS/Zohra Bensemra
Algiers - Asharq Al-Awsat

Algeria’s public debt was equivalent to 45 percent of its Gross Domestic Product (GDP) by the end of last year, Prime Minister Abdelaziz Djerad said, warning that the country’s economic situation is “fragile.”

As he briefed the People's National Assembly (lower house of the parliament) on his plan of action, Djerad said: "The current financial situation is still fragile as it depends on the volatility of the oil market."

Foreign exchange reserves relapsed to USD62 billion at the end of 2019 compared to USD79,88 billion in 2018 and USD97,33 billion in 2017.

The PM stressed that "restoring and strengthening confidence between the people and their leaders requires a democracy based on the principles of rotation of power, respect for individual and collective freedoms, justice and the consolidation of the rule of law."

"Our country has experienced catastrophic mismanagement in recent years which led to the squandering of its wealth," Djerad added.

Speaker Slimane Chenine urged opposition deputies to return to the People's National Assembly, after they suspended their actions earlier in support for the popular movement that erupted on Feb. 22, 2019.

Chenine commended the army’s role in shaping a new Algeria, saying the presidential elections were the best way to deal with the political crisis.

Meanwhile, Algeria plans to issue sukuk, or Islamic bonds, and develop its small stock exchange as the oil-reliant economy seeks to diversify funding sources, according to a government document reviewed by Reuters.

The planned steps are part of wider reforms aimed at coping with financial pressure caused by a fall in energy earnings and foreign exchange reserves, deepening the country’s budget and trade deficits.

Elected in December, Algerian President Abdelmadjid Tebboune has pledged economic and political reforms to try to appease protests demanding the departure of the entire ruling elite.

Economic reforms include “encouraging banks to diversify funding sources by developing the bond market and attracting money from the informal market,” the government said in the document.

The plan will also focus on “alternative funding such as sukuk and developing the stock market to allow it to play a greater role in financing firms,” the government said in the document.

Despite previous attempts to boost its activity, the Algiers bourse is still one of the world’s smallest with low capitalization compared with neighboring Morocco and Tunisia.

Algeria has also failed so far to attract to the banking system billions of dollars in the informal market.

Official figures showed oil and gas revenue reached USD30.25 billion in the first 11 months of 2019, a 14.65 percent drop from the same period a year earlier, while foreign exchange reserves fell by USD10.6 billion in the last nine months.

The government has already approved spending cuts for this year but kept unchanged sensitive subsidies for products including basic foodstuffs, fuel, and medicine to avoid social unrest.

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