ALGIERS- The Algerian Parliament is preparing to ratify the draft monetary and banking law, which is reliable in encouraging foreign investment and facilitating the movement of capital transfers. The draft law falls within the 54 commitments of President Abdelmadjid Tebboune, with regard to major reforms of financial governance in Algeria.
This step comes after the entry into force of the new investment law in Algeria, which is expected to end obstacles to foreign investment.
Finance Minister Aziz Fayed said, when presenting the draft monetary and banking law to Parliament, that it "will allow moving forward towards the modernization of the banking system, to keep pace with current and future developments, especially in its technological aspect, and help provide an appropriate climate for the use of all modern banking tools."
Fayed considered that "despite all the reforms that the Algerian banking system has known, it still faces great challenges and suffers from negative aspects that require the continuation of reforms to keep pace with international banking developments."
The financial reforms come within Algeria's efforts to get rid of excessive dependence on gas and oil, as the country seeks to diversify its economy through a recovery plan announced by President Tebboune in 2020.
The government's plan includes 3 major axes and 20 items to reform and revive the country's economy, which was severely affected by the consequences of the Corona virus and the drop in oil prices.
This is the first time that the Monetary and Loan Law has undergone a comprehensive amendment since its issuance on April 14, 1990, while it witnessed several limited technical amendments by presidential orders, in the years 2001, 2003, 2010, and finally in 2017, to approve non-traditional financing, in order to cover the budget deficit and revive the economy. Affected at the time by the decline in fuel revenues.
The problem of pervasive bureaucracy
Bureaucratic procedures in bank transactions are one of the factors behind the reluctance of foreign investors to invest in Algeria over the past years, as the World Bank recently criticized Algeria for the delay and heaviness of banking procedures, the bureaucratic control over them, and the difficulties in transferring the profits of foreign companies abroad.
The economist, Mahfouz Kawbi, believes that public banks, which represent 85% of the banking market, inherited an administrative rather than a commercial organization, considering that the banking system is a bureaucratic system that is far from the modern rules of competition.
He pointed out that the banking sector is dependent on its relationship with the public sector, which takes into account the requirements of maintaining social peace, and is not subject to commercial and economic rules.
Facilities that allow the flow of investments
For his part, economist Abu Bakr Salami said that the prevailing mentality in the banking sector in Algeria hinders domestic and foreign investment due to failure to keep pace with global developments.
Salami believes that the new procedures in the monetary and banking law would eliminate the negatives that hinder investment, and contribute to the flow of capital and investments to Algeria.
On the other hand, Kawbe considered that the new amendments in the law fall under supervision and control of the banking system, diversification of banking products, and the adoption of modern electronic payment methods, in addition to the adoption of Islamic banking and electronic dinars, "but there are still deeper problems in the banking sector that need many solutions."
Kawbi believes that despite the importance of the new amendments, "they remain insufficient to address the problems of the Algerian banking system due to its strong connection to the political system."