Algeria to Issue Local Debt to Offset Global Oil Price Drop

Algeria to Issue Local Debt to Offset Global Oil Price Drop

Algeria plans to issue local-currency debt as a source of financing to offset the collapse in world oil prices, which halved government’s energy revenues last year, Prime Minister, Abdelmalek Sellal said according to Reuters.

Sellal added that the government had no plans to issue foreign-currency bonds. The local-currency debt is to be issued in April with an interest rate of 5%, The Africa Report informed. However Sellal did not give details of the size of the issue or its maturity, and it was not clear whether it would be open only to local Algerian businesses and banks.

Economy expert, Chérif Belmihoub, said that issuing state bonds “is a good idea since it is the only way to mobilize the national savings and cope with the country’s budgetary commitments. It will avoid a rapid recourse to external debt,” according to All Africa. The 5% rate for this loan will guarantee enthusiasm of savers, according to the expert, and such a rate is interesting as it is the same rate as inflation. It is also better than the bank deposits which rate currently between 1.75% and 2%.

In mid 2015, the North African OPEC member, which relies on oil and gas for 60% of its budget, had already started trimming back some state-subsidized energy services, reducing the 2015 and 2016 public spending, and freezing some infrastructure projects.



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