Would the option of an Algerian sovereign wealth fund allow Algeria to better manage its foreign exchanges reserves

Abstract

Like a number of countries exporting raw materials, Algeria has cumulated an important amount of foreign currency reserves when oil prices were high from 2000. According to public authorities, these reserves are conservatively managed by Bank of Algeria. They are invested on the sovereign debt of developed countries, in order to protect them from risks of international markets’ instabilities. However, this option has demonstrated its limits as soon as oil prices have fallen from summer 2014. Since, over the half of the reserves have been fastly spent. Having noted the fast falling rate of this saving and the current financial situation, we have made this paper to study the potential consequences of an active management strategy of these reserves, if the government chose the creation of sovereign wealth fund with strategic direction. The results of our research demonstrated that a sovereign wealth fund (even small size) would have provided interesting financial benefits to our economy