“I would rather borrow from Algerians than from the IMF” says President
According to President Abdelmadjid Tebboune, Algeria has ruled out approaching the IMF and international financial institutions for loans despite the looming financial crisis in the country after a fall in oil prices.
“Accumulating debt harms national sovereignty”, Abdelmadjid Tebboune said during a meeting with Algerian media broadcast on Friday night.
Algeria is heavily dependent on oil production, which generates over 90% of the country’s export receipts, and its foreign exchange reserves have fallen drastically from €162.4bn in 2014 to close to €57bn at the end of 2019.
Confronted with falling oil prices and the economic shutdown brought on by the COVID-19 pandemic, Tebboune said that Algeria would prefer “to borrow from its own citizens, rather than the IMF or the World Bank”, recalling the negative experience the country had when it took out loans from the IMF in the early 1990s.
Tebboune also pointed out that the informal sector, which encompasses players outside the traditional financial system, represents “between 6trn and 10trn Tunisian dinars (between €42.57bn and around €71bn)”, guaranteeing that the owners of the funds would have “every assurance and incentive […] to contribute to the national economy”.
Recession in view
“I would rather borrow from Algerians than from the IMF or other foreign banks” because “when we borrow from foreign banks, we can’t discuss Palestine or the Western Sahara”, two very important causes for Algiers, said Tebboune.
“In dealing with the coronavirus crisis, our strength was that we weren’t in debt”, he added.
According to IMF projections, Algeria is expected to go into recession in 2020, with its economy contracting 5.2%, and to have one of the largest budget deficits in the region due to the collapse in oil prices and the novel coronavirus.
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In 2018, the country’s foreign national debt was very low (less than 2% of GDP), but according to Prime Minister Abdelaziz Djerad, domestic national debt in relation to GDP rose from 26% in 2017 to 45% in 2019.
Tebboune emphasised that certain “friendly” nations – without specifying which – had offered Algeria “loans”, but that he had declined them for the time being.
Algeria’s president also confirmed that the country would not resort to printing currency, as he thinks doing so could ultimately lead to skyrocketing inflation.