Country Report Algeria April 2011

Outlook for 2011-15: Monetary policy

The official policy aim of Banque d'Algérie (BdA, the central bank) is to control the money supply 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 modestly in the forecast period. The BdA will use sterilisation policies to dampen the inflationary effects of rapid money supply growth. Much of the state investment programme is likely to be financed through government-controlled banks, increasing the overall supply of credit. Private credit growth will be limited by a prohibition on retail credit aside from mortgages.

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