Algeria Turns to Islamic Banking to Resolve its Financial Crisis

On Thursday, Algeria’s Prime Minister, Ahmed Ouyahia, announced that Islamic banking and financial services are to be approved in two public government banks before the end of this year and will be approved in four other banks in 2018.

Algeria will introduce Islamic financial services before 2018 as a way to cope with its financial crisis, announced Prime Minister Ahmed Ouyahia on Thursday.

The services will be available at two state banks before the end of the year. Four others will adopt the measures in 2018. he added.

The first sukuk, or Islamic bond, will also be adopted in 2018 as Algeria seeks new funding sources after a fall in energy earnings hit state finances, Ouyahia told parliament.

The steps are part of wider reforms planned by the government after the OPEC member’s finances were hit by the more-than-50-percent drop in crude oil prices since mid-2014.

The North African country had rejected sharia-based financing options in the 1990s.

But financial difficulties have prompted the government to speed up implementation of long-delayed reforms aimed at weaning the economy off its reliance on oil.

“This will help us cope with the situation,” Ouyahia told parliament, referring to the plan to sell sukuk, which he said would be in the finance law for 2018. He gave no details.

Algerian firms rely heavily on state spending, which in turn depends on the hydrocarbons sector, with oil and gas exports accounting for 60 percent of the state budget and 95 percent of total sales abroad.

source:aawsat