Country Report Algeria January 2011

Outlook for 2011-15: Monetary policy

The official policy aim of Banque d'Algérie (BdA, the central bank) is to control money supply expansion in order to contain inflation, although it does not publish its monetary growth target. High deposits from Sonatrach will keep liquidity in Algerian banks elevated and cause broad money (M2) to expand relatively modestly in the forecast period. The BdA will also need to use sterilisation policies to dampen the inflationary effects of rapid money supply growth. Much of the government's investment programme is likely to be financed through government-controlled banks, increasing the overall supply of credit to the economy but crowding out private borrowers and inhibiting some asset sales or retail purchasing. The BdA is expected to keep interest rates low, to encourage the development of the banking sector, preferring price controls to counteract inflationary pressures stemming from robust domestic demand.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
IMPRINT