Borrowing by the IMF: Algeria to lend $5 billion to the Fund (Official)

Algérie Presse Service (APS) - October 11, 2012
ALGIERS - Algeria has decided to take part in the loan floated by the International Monetary Fund (IMF) and will participate with five billion dollars, a joint statement released today by the Ministry of Finance and the Bank of Algeria said.

Algeria's participation will take the form of Special Drawing Rights (SDR) bond purchase, the same source indicated.
IMF member countries wishing to subscribe to the lending can do so through a bilateral lending agreement or a bond purchasing agreement.

Algeria has opted for the second formula with a participation of five billion dollars, considered an "intermediary level" in comparison to subscriptions made by other countries.

Technically speaking, participating in the lending is an operation "which is part of a rational management of currency exchange reserves," the statement indicated. According to the requirements set by the Fund, the amounts subscribed toward the loan are an integral part of the participating country's reserves.

The operation is "a good opportunity" for Algeria to diversify its investment portfolio under two requirements." The first consideration is the quality of the borrower, and, therefore, the financial instrument, with the IMF being a multilateral financial institution of the first order, thus providing "a high level of security for investments."

The second consideration is currency denomination, since the bonds considered for this loan are SDR-denominated (IMF accounting unit determined on the basis of a basket of currencies widely used on financial markets,) thus expanding the foreign currency array of exchange reserves, "which will further alleviate underlying exchange risks," the same source noted.

It should be noted that the IMF, seeking to increase its resources, sought to borrow from member countries with strong external financial viability, including Algeria, whose viability derives from a sound macroeconomic management.