HSBC Treasury Management Profiles 2018 -

Current section, Introduction

Introduction

Algeria’s economy relies heavily on its oil and gas exports (accounting for 60 per cent of budget revenue and 95 per cent of export revenue). As such, the country has been economically stricken by the fall of crude oil prices since 2014. In 2017, the economy grew by 2.2 per cent, down from 3.3 per cent in 2016 and 3.8 per cent in 2015, due to a decline in the performance of the energy sector. The fiscal and current account deficits remain large, although a rebound in oil prices in 2017, saw a fiscal deficit of 3.2 per cent of GDP against 13.5 per cent in 2016, while the current account deficit dropped to 9.8 per cent of GDP, from 16.4 per cent in 2016. This recovery in the price of oil saw GDP increase 4 per cent in Q1 2018 compared to 2 per cent for Q1 2017. Growth of 4 per cent is forecast for 2018. In response to the country’s declining economic health, in 2016/17 the government implemented a programme of fiscal consolidation; it imposed tight import restrictions, for example, and adopted a number of austerity measures. However, since the end of 2017, in order to boost growth and job creation (unemployment was estimated at 11.7 per cent in September 2017), the government has adopted an expansionary 2018 budget, the deficit of which will be mainly financed by the central bank, and stiffer import barriers (in January 2018, Algeria banned the import of 900 products including vegetables and mobile phones). According to the IMF, this new short-term policy may adversely affect the economic environment and make it more difficult to implement the necessary structural reforms required to promote a private-sector led, diversified economy and to address the country’s over-dependence on oil and gas.

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Legal and regulatory

  • Foreign exchange transactions performed by residents are limited to what is allowed in terms of transaction types by the Banque d’Algérie FX regulation
  • Resident domestic currency (DZD) accounts cannot be held abroad
  • Residents are not allowed to hold assets abroad using their incomes obtained locally in Algeria
  • Non-resident bank accounts are permitted in both foreign and domestic currency. Outward transfers from non-resident DZD accounts (INR accounts) are allowed but only for domestic payments. Non‑resident CEDAC accounts (foreign accounts in convertible DZD) are freely convertible into foreign currency
  • All fund transfers (in and out) performed abroad must be reported to the Banque d’Algérie on a daily basis
  • All export proceeds, with the exception of hydrocarbons and mineral products, are required to be repatriated within 360 days of the shipment date for goods or completion date for services. Proceeds from the export of hydrocarbons and mineral products must be surrendered to the Banque d’Algérie, 50 per cent of these proceeds are credited into customer DZD account, 30 per cent into current foreign currency account and 20 per cent into customer export account in FCY for free use in the promotion of its exports

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Taxation

  • Residents and non-residents are taxed on Algerian-sourced income only
  • The corporate income tax rates for FY 2017 are: 19 per cent for manufacturing activities; 23 per cent for construction activities, public works and hydraulic activities, as well as for tourism activities (except travel agencies); and 26 per cent for all other activities
  • The minimum corporate tax is at least DZD10,000 annually

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Payment instruments and systems

  • Cash is the most important payment medium in Algeria, particularly for low-value retail and commercial transactions. Credit transfers are used but the cheque is the dominant cashless payment instrument. Payment card use is low. As part of the government’s drive to increase the number of electronic payments, an interbank electronic banking subsidiary has been established. Its aim is to increase electronic payments through the installation of electronic payment terminals
  • Algeria operates two national payment systems: ARTS, an RTGS system, and ATCI for low-value credits and debits and cheque payments

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Cash management

  • Notional pooling is not available. Cash concentration is permitted between resident and non-resident companies with the same beneficial ownership

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Electronic banking

  • Electronic banking is available in Algeria although its use is not widespread. There is no bank-independent electronic banking standard in Algeria
  • Internet and mobile banking services are provided by the country’s larger banks for both corporate and retail purposes, but are not commonplace
  • Eleven banks have launched e-payment (online) services for utility bills and government and insurance payments

To read the detailed report, please click on the Download PDF option.

 

 


To read the full report on Algeria and to discover more on these and other topics, including banking and trade, please click on the Download PDF option.

Sources:

  • International Monetary Fund
  • Organisation for Economic Co-operation and Development
  • World Bank
  • Ministry of Finance
  • Organization of the Petroleum Exporting Countries

The materials contained on this page were assembled in May 2017 (unless otherwise dated).


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