Algeria abandons controversial measure of money printing
ALGIERS, June 23 (Xinhua) -- After a year and a half of printing money to finance the national economy amid continuing drop in the country's foreign reserves, Algeria announced on Sunday giving up the funding option.
Hassan Rabhi, minister of communication and spokesman for the government, told reporters in Algiers that "the era of unconventional financing has gone for good."
The minister did not provide details of the strategy that the cabinet is supposed to adopt to face the fallout of the continuing melting of the country's foreign exchange reserves.
However, Rabhi said that "the government has taken steps to avoid potential risks that could harm the national economy."
He added that "the preservation of the country's economy and its national institutions is the responsibility of everyone."
Amid political crisis hitting the North African nation, the central bank announced in a statement on April 20 its objection to the economic and monetary policy adopted by the government of former President Abdelaziz Bouteflika.
The central bank has clearly abandoned the option of printing money ordered by former Algerian Prime Minister Ahmed Ouyahia to stem the economic crisis triggered by the plunge of the oil prices amid the existence of other secured options.
Printing money has been widely criticized by the opposition parties and economic experts in Algeria, while Ouyahia justified it by assuring that it was an urgent and temporary measure to finance public debts and avoid cessation in the payment of retired and civil servants' salary.
Experts and political parties warned at that time this option would only delay the onset of the crisis effects, since it would only bring inflation at record levels, reduce the purchasing power of citizens, and provoke further depreciation in the value of the national currency.
According to the Central Bank of Algeria, out of 55 billion U.S. dollars generated from the unconventional financing, some 20 billion dollars were destined to finance the treasury deficit for 2017, 2018 and part of 2019.
An amount of 15 billion dollars was spent on redemption of public debts to state-run companies and redemption of bonds for economic growth.
The foreign exchange reserves melted as oil prices started to fall by the second half of 2014. The reforms initiated by the former government aiming at stabilizing the trade balance did not reach the desired results.
In its monthly report for the second half of 2018 published on June 3, the central bank announced that foreign exchange reserves were around 79.88 billion dollars by the end of 2018 compared with 97.33 billion dollars a year earlier.