Algeria turns to Islamic finance to recover from problematic economy

  • Algeria’s new government will introduce Islamic finance and develop its stock market to draw more investment into the economy as it struggles to cope with a sharp fall in energy earnings, according to an official document.
  • The North African OPEC member’s finances have been hit by a more than 50 percent drop in crude oil prices since mid-2014, prompting authorities to announce changes to the largely state-controlled economy.
  • In a bid to ease financial pressure for the coming years, the government plans to “strengthen the supply of banking products, including leasing and products of the so-called Islamic finance”.
  • The government also plans to continue spending cuts, including to subsidies, which currently apply to almost everything from food and medicine to housing, education and energy.
  • Analysts say spending cuts alone may not be enough to tackle the crisis. Foreign exchange reserves fell to $105 billion in July this year from $193 billion in May 2014 – mainly due to high imports, on which the government has spent $561 billion since 2000.

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