In addition, additional cleaning of past nonperforming loans (NPLs) to public enterprises is being completed by the Treasury. Increased capital of the banks in 2009, in the context of abundant liquidity and sustained efforts to improve credit evaluation and risk management, should stimulate further improvement in banks’ credit allocation to productive investment in support of sustained growth. In particular, domestic financing available for companies established in partnership, as encouraged through measures introduced in the Supplementary Budget Law, should provide further opportunities to banks operating in Algeria. Finally, banks’ financial soundness, as reflected in their global capital adequacy ratio (16.54% in 2008), which is key to ensuring adequate financing of productive investment, should contribute to achieving growth potential in the non-oil sectors over the period 2010–14. 3. Exchange rate regime stability and foreign investment  In the context of the liberalization of the exchange rate regime, as part of the 1994–98 structural adjustments, the process of convertibility of the dinar for international current transactions was completed in September 1997 when Algeria accepted the terms of Article VIII of the International Monetary Fund’s (IMF) Articles. In parallel, the monetary authority promulgated in 1995 the regulation on interbank exchange market and related exchange rate hedging mechanisms. The operational framework was put in place by the Bank of Algeria and exchange market operations effectively started in 1996. The current convertibility of the dinar relates to all current transactions of the balance of payments (goods, services and transfers).

With limited exposure to international financial markets, Algeria has not been directly affected by the global financial turmoil. However, the sharp decline in oil prices over the second half of 2008 significantly impacted export and budget revenues. Despite this external shock, macroeconomic performance remained robust in 2009 with: –  strong external financial position with comfortable international reserves $ billion146, end September 2009 ) equivalent to 3 years imports of goods and services, and low external debt;  –  the real effective exchange rate around its equilibrium level;  –  continued high growth in the non-oil sector, expected to exceed 9% in 2009 against 6.1% in 2008;  –  sizeable savings in the stabilization fund despite the expected first budget deficit for several years;  –  contained inflation, notably on account of continued absorption by the Bank of Algeria of the excess liquidity. The strong economic performance in 2009, in line with the performance of the past several years, reflects continued prudent financial policies, sustained efforts to anchor monetary stability, and progress in strengthening the resilience of the banking sector, which have supported macroeconomic stability since 2000. 2. Savings and investment financing structure  Following a period of external financial imbalances and related adjustment programs during the nineties, Algeria has entered, since 2000, a period of sustained increase in savings, leading to a situation of excess savings over investment.