Algeria: government bond investments

Algeria’s finance Minister, Karim Djoudi, has precised that the country will not be buying shares in foreign companies overseas to increase its foreign exchange reserves. He firmly said that “this choice is not part of our policy of foreign exchange reserve management,” reiterating its strategic choice to invest in government bonds, although with modest yield but with minimal risk.
The government is now focusing more on bonds rather than shares because it deems it to be more secure because of the unpredictable financial situation and activities of companies. The finance minister said that “at present, we have chosen to invest in government bonds, which is safer than in shares of (foreign) companies that seem to be in good financial situation but suddenly declare bankruptcy.” The minister added that priority is being given to sovereign wealth funds and investigating in foreign company stakes in not part of their plans; which he considered to be characterized with heavy risks.
Algeria’s foreign exchange reserves reached US$186.32 billion by end of the first half of 2012, with an increment of US$4 billion compared to end 2011. The country manages its foreign reserve on risk mitigation, ensuring liquidity with a minimum performance and the governor of the Bank of Algeria has emphasized that they have to “pursue prudent management of reserves and strictly follow their management.”
Algeria has been investing its foreign reserves overseas and was able to gain a profit of $4.45 billion in 2011. Most of these investments were done either in the United Sates or in Europe under the form of sovereign debts that was purchased between the years of 2004 and 2007, when the rate of global interest were relatively high.