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Bank Privatizations as oil money dries up:Algeria


Algeria plans to
allow its dominant state banks to list on the local stock exchange to
help develop its financial markets and diversify sources of funding
after the oil price slide, a senior financial official said.

plan will open the door for foreign investors to acquire controlling
stakes in banks, reversing a rule requiring Algerian firms to keep a
majority shareholding in any partnership with foreigners, the official
told Reuters.

Algeria’s six
government-run banks account for most of the sector’s assets. French
companies such as Societe Generale and BNP Paribas have the strongest
presence among foreign-owned banks already working in the country.

member Algeria’s economy has been largely based on a state-run and
centralized system since its independence from France in 1962 and it
remains reliant on an energy sector that still provides 60 percent of
its budget.

But the oil price drop
since 2014 has put Algeria under financial pressure, forcing the
government to trim spending and search for alternative financing

“The era of $100 a barrel
is over. We have no choice but to change our policy,” the official said,
asking not to be named because they were not authorized to speak to the

“Reforms will move slowly, but there will be no step backwards.”
more than $130 billion in foreign exchange reserves and little foreign
debt, Algeria is in better shape than other oil producers such as

it has been forced to push up taxes and increase subsidized gasoline
and diesel prices, scaling back a vast welfare system that has in the
past helped ease social tensions.

of the 51/49 ownership rule and tight foreign exchange controls say
they helps protect Algeria’s strategic sectors after an experimentation
with privatization in the 1990s. But critics say such curbs stifle
growth and investment.


Algeria is now far safer following the end of a war it fought with armed Islamists in the 1990s that killed 200,000 people.

government has been keen to promote the expansion of its agriculture,
health, manufacturing and tourist sectors but cumbersome bureaucracy has
put off investors.

It is also not
the first attempt at selling off the banks. The government scrapped
previous plans for a bank privatization in 2007, just two days before
the deadline for the submission of bids, citing an international banking
crisis at the time.

That plan was
to sell a majority state in Credit Populaire d’Algerie (CPA) — two
years before the introduction of the new rule limiting ownership for
foreign firms to 49 percent in any partnership deal.

International Monetary Fund (IMF) and World Bank have since repeatedly
urged Algeria to reform the underdeveloped banking sector and modernize
its stock exchange to help attract investment.

However, it is not clear how much appetite
there will be for the banks. Plans to float cement producer Societe des
Ciments de Ain El Kebira were dropped in June because of a lack of
demand for the shares on offer.

new bank proposal is included in the 2017 budget law draft currently in
parliament for debate and must be approved by lawmakers and by
President Abdelaziz Bouteflika.

the new plan, state banks that want to list on the Algiers bourse will
still have to get “prior green light” from the central bank before any
step to sell a stake in excess of r 49 percent, the official said.

other state banks consist of Banque Nationale d’Algerie, Banque
Exterieure d’Algerie, Banque de Developpement Local, Banque de l’
Agriculture et du Developpement Rural, the largest in terms of its
network, and the Caisse Nationale d’Epargne et de Prevoyance.

have previously said Algeria is preparing to allow foreign investors to
buy shares on its stock exchange, where authorities hope the number of
listed companies will rise from five to 50 in the near future.
the Algiers stock market, smaller than those in neighboring Morocco and
Tunisia, struggles with very low levels of liquidity. 

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