Algeria

Years

Targets and attainment

Classification

1974-86

2-tier state-owned banking system heavily controlled along with central bank within context of development plan; Treasury acts as important financial intermediary; various monetary instruments available (open market operations, discount rate changes, liquidity ratios, rediscount ceilings) but only latter in regular use; monetary and credit growth affected by fiscal deficits; exchange rate managed (fixed) on basis of basket (weights not published, but large weight on USD) to limit effect of exchange rate variations on domestic prices (also special rate for remittances of emigrants); sustained appreciation in line with USD 1980-85 leads to overvaluation

multiple direct controls MDC

1987-89

more active exchange rate management from late 1986 leads to sustained depreciation; start of wide ranging but cautious reforms to public enterprises, banks and central bank, but Treasury remains major financial intermediary

unstructured discretion UD

1990-2023

reforms started in mid-1980s now amount to decisive move away from central planning towards market mechanisms, including flexible interest rate structure and new interbank money market, and plans for further moves to indirect monetary instruments; central bank given de jure independence 1990; major depreciation followed by forex and trade liberalisation 1991; implementation of reforms delayed, even partially reversed, by widening fiscal deficit related to civil strife following cancellation of end-1991 elections, but resumed 1994 with stabilisation programme; further major depreciation 1994 followed by managed float; (remunerated) reserve requirement for banks 1994; bank refinancing via central bank auctions of deposit facilities from 1995; interbank forex market from 1996; secondary market for Treasury bills from 1998; 2001 some weakening of central bank autonomy; increasing focus on price stability (with central bank inflation target of 4% from 2014) but monetary policy framework remains unclear (and monetary control imprecise), with weak monetary transmission mechanism and weak credit growth; difficulties in handling large oil revenues (which make for continuous structural liquidity surplus in banking system) and from high level of non-performing loans of public sector banks; very slow development of government bond market; persistence of parallel currency market with sizable premium; oil price fall 2015 means end to liquidity surplus, opportunity to restructure growth model and monetary arrangements, but outcome unclear; 2016-17 some depreciation, some fiscal consolidation, late 2017 banking law change allows shift to monetarily financed fiscal expansion (with efforts to mop up part of resulting liquidity, and fiscal consolidation planned for 2019); 2021 liquidity management (and hence monetary transmission) remain weak; political tensions lead to variable fiscal consolidation from 2019, Covid-19 has adverse impact despite strong policy response 2020-21; 2022 oil price rise eases fiscal and external position, but also raises inflation; 2023 new law includes some limited improvements to central bank governance and autonomy, but monetary transmission remains weak, there is no interest rate corridor, liquidity absorption relies heavily on reserve requirements, and exchange rate is still actively managed

loosely structured discretion LSD