The Algerian Central Bank Resorts to Reducing Banks’ Reserves

  • Algiers, People's Democratic Republic of Algeria
  • 21 September 2020
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The Algerian Central Bank resorted to intervening to save the banking sector from the liquidity crisis that has plagued it, since nearly a year, and its intensity has increased since the beginning of the outbreak of the "Coronavirus" in last March, when the Central Bank allowed accredited banks in the country to resort to reducing their reserves one more time. This comes at a time when the government insists that the liquidity crisis that Algeria is going through is circumstantial and transient, and that it is caused by the high demand for funds and savings due to fears of the collapse of the Algerian economy due to the recession caused by "Covid-19".

According to instructions sent by the Algerian Central Bank to the banks operating in Algeria on September 15th, starting from next October, the size of the mandatory reserves of banks will decrease from 6 percent of the total base of reserves of all banks to 3 percent, which means that banks will pump half of their hard currency and dinar reserves into the banking market.

The Algerian central bank attributed this step to the decline in oil revenues due to the price collapse, which has led the banking sector to a "drought in bank liquidity" since 2015. All these measures aim to free up additional margins of liquidity for banks in order to finance the ailing economy, according to the instructions sent from Central bank to all banks.

Source (Al-Araby Al-Jadeed Newspaper, Edited)