Algeria plans bank privatizations as oil money dries up

ALGIERS: 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.

The 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, said the official.

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.

OPEC 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 sources.

“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 media.

“Reforms will move slowly, but there will be no step backwards.”

With more than $130 billion in foreign

Algeria’s 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.

The 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.

The 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.