Oil price decline affect Algeria's financial capacity

December 16, 2014 6:25 am 

ALGIERS, Dec. 16 — Oil price decline may have an adverse effect on Algeria's financial capacities to withstand potential shocks on its foreign balance of payments, Algeria's central bank chief said on Monday.

Governor of the Bank of Algeria Mohamed Laksaci made the remarks while presenting the bank's report on the financial and economic trends in the country before lower house members of the parliament.

"The current foreign exchange reserves allow Algeria to deal with potential shocks on external balance of payments in short-term, but this ability to withstand shocks would dissipate quickly in case the current low levels of oil prices last for long time," he said.

The overall balance of payments endured a deficit of 1.32 billion U.S. dollars in the first half of 2014, compared to a surplus of 880 million in the same period of 2013.

The official foreign reserves of the oil-rich nation shrank to 193.269 billion dollars at the end of June 2014, after hitting 194 billion at end of 2013.

"While Algeria has preserved its monetary and financial stability despite the poor performance of its external balance of payments and the persistence of the budget deficit, the issue of the fragility of the Algerian economy and its dependence on hydrocarbons and oil prices should be solved," Laksaci suggested.

Hydrocarbon production stalled since 2006 despite investment efforts in recent years, he said, adding that the national economy was hampered by this situation.

Algeria is still relying on oil exports as the main driver of its economy. According to official figures, oil and gas exports represent 97 percent of the North African nation's export revenues, and 40 percent of its gross domestic product.

Mustapha Mekideche, an economist, said "If the oil price decline continues over the long term, there will be a deficit in the balance of payments and there will be a problem in terms of projects financing."

But the government keeps reassuring the public. In a statement to the state run TV channel, Finance Minister Mohamed Djelab said: "Algeria has some useful mechanisms that would help it resist to financial shocks."

The minister further added that the oil rich country "has been adopting a preventive policy for more than ten years, including the Oil Revenue Regulation Fund, which helps the nations compensating repercussions of oil prices plunge." (PNA/Xinhua)

FPV/JSD

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