The European Bank for Reconstruction and Development has approved a request by Algeria to become a member of the multilateral financial institution, the Bank announced on Tuesday.
The membership opens the way for Algeria to potentially receive funding to support private sector competitiveness, promote sustainable supplies of energy and enhance the quality and efficiency of public services in the country.
“Our goal will be to unleash the potential of Algeria, particularly in the private sector, to create jobs and support sustainable development,” said EBRD’s Acting President Jurgen Rigterink.
“Similar to our support to Algeria’s neighboring countries, the EBRD can mobilize significant financial resources as well as technical expertise and advisory services.”
The EBRD was set up in 1991 to help ex-communist countries of Eastern Europe shift to market economies.
Majority owned by G7 top economic powers, it has widened its geographic scope in recent years to include Egypt, Tunisia and Morocco in Africa.
The Bank has invested over 12 billion euros in 260 projects across the southern and eastern Mediterranean region in natural resources, financial institutions, agribusiness, manufacturing and services, as well as infrastructure projects such as power, municipal water and wastewater, and transport services.
EBRD’s interest in investing in Algeria comes in light of the government’s announcement on Monday of its aim to save $20 billion this year through reforms and by lowering its imports bill.
The OPEC member has been under pressure to ease the impact of a drop in oil and gas earnings on its public finances.
It already cut public spending and postponed planned investment projects for 2020 in several sectors, including energy, which accounts for 60 percent of the state budget and 93 percent of total export revenues.
Failure to implement reforms aimed at diversifying the economy away from oil and gas means the North African country’s non-energy sector is still underdeveloped.
The government said in a statement that a cabinet meeting chaired by President Abdelmadjid Tebboune discussed the need for urgent steps to reform the banking system and attract money from the informal market.
Ministers also discussed reducing the cost of imports through measures including using the national fleet to ship imported goods.
Algeria spends an estimated $45 billion annually on imports of goods including food because domestic output is insufficient to meet growing demand from the country’s 44 million people.
The meeting also discussed speeding up a long-delayed plan to launch an Islamic finance sector to provide a new funding source for the economy.
The government hopes Sharia-compliant financial services would attract local savers who distrust state banks and often opt to keep large sums of money at home.
“All these measures would enable Algeria to save about $20 billion before the end of this year,” the statement quoted Tebboune as saying at the meeting.
It described the steps discussed as part of a government “economic and social revival plan,” aimed at reducing reliance on the energy sector and opening up the economy to investors who have stayed away due to bureaucracy and a lack of incentives.