By Mouna Sadek
By Mouna Sadek
Algiers, May 5, 2012
The International Monetary Fund (IMF) is asking for financial support from Algeria.
In January, IMF Managing Director Christine Lagarde requested $500 billion to fund loans to emerging markets and developing countries. In an April 19th meeting with the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (G-24), of which Algeria is a member, the IMF called on “advanced economies” to help “restore stability and to implement credible and sustainable fiscal adjustment programs”.
“The request was made by the IMF to Algeria as a country with a financial surplus, to increase the Bretton Woods institution’s resources so that it will be in a position to offer loans to countries needing them,” said Algerian Finance Minister Karim Djoudi in a recent statement.
Algeria will declare its position regarding the request before the next annual general assembly of the IMF and the World Bank, planned for Tokyo in October, Djoudi said.
The IMF request is evidence of a positive turn-around in Algeria’s situation, said Algerian Minister of Industry and Investment Promotion Hamid Temmar on April 26th. At the launch of his book on Algeria’s transition from an emerging economy, Temmar explained that the country had gone from being an IMF borrower in the 1990s to a net lender.
Last week, the G-20 committed itself to handing over more than $430 billion in additional resources to the IMF. The IMF is relying on G-24 nations to supply the additional funds.
For now, Algeria is looking into the possibility of acting on the IMF proposal.
To this end, Djoudi explained that his country would have to “make a careful evaluation of the detailed conditions of the offer”.
“We need to know if the IMF is envisaging carrying out this operation to strengthen its financial capabilities through requests for loans or through deposits being made in return for payment, along with the returns they intend offering,” added the Algerian minister.
The IMF request is driven by the comfortable financial position of the Algerian government in recent years, with currency reserves of around $205.2 billion, according to the latest IMF report.
Algeria has gone from being a bankrupt country, with less than a month’s emergency reserves in hand, as was the case between 1984 and 1994, to having enough in reserve to cover its operating costs for five years, economist Abdelmalek Serrai, recalled in the columns of Algérie News.
“This positive change is due to the economic measures implemented by Algeria, with early repayment of the country’s debts,” he explained.
The proposal, if accepted by Algiers, he said, could be beneficial to the country both diplomatically
“The fact that the IMF has sought help from Algeria gives the country more influence, particularly in international negotiations. This is also an economic and financial opportunity to turn a profit from Algeria’s reserves,” he stressed.
Some feel that the Algerian surplus should be invested elsewhere.
Economist Abderrahmane Mebtoul provided a much more measured response. He explained to Magharebia that, insofar as Algeria has invested nearly 90 per cent of its reserves abroad – in American and European banks, to be precise – that it would be difficult for it to help the IMF. He said it might be wiser to invest locally.