english issue
Ahmed Lateb
The state must change its economic paradigm
By Zahra Khidim
OGB : A decision has recently been taken by the government , under the leadership of the Head of State , to issue national bonds to secure funding , especially of large projects . How do you evaluate this option ? A . Lateb : This is a positive decision , which demonstrates political and economic maturity . Politically , this is a test for the confidence and support of Algerians to their country ’ s economic policy . Economically , it can help finance some projects and benefit the citizens of future income on funded projects . This decision also reflects a change in doctrine , because so far the state was reluctant to use the means of financing offered by the economy and had systematic recourse to government budget to finance its investments . Bonds debt is used by many countries throughout the world . This is the case of Egypt , which has recently issued government bonds to finance infrastructure projects such as the doubling of the Suez Canal . This dogma change is rather a sign of maturity on the part of the government and paves the way for modern financing of the economy instead of the use of external borrowing from international financial institutions . However , the recourse to such borrowing must be clear and devoted to investment projects and not to operating expenses . Therefore , it requires
good management of the funds and public information .
The recourse to foreign debt to finance Sonatrach and Sonelgaz projects has been met with criticism , despite the low level of foreign debt . As an economist , how do you perceived such negative reaction to foreign borrowing . Aren ’ t perceived risks overstated in your opinion ? Indeed , Algeria ’ s external debt has been negatively perceived by Algerian and policymakers . Undoubtedly , this view is based on our past experience with the IMF , when this institution dictated its terms on our country following the oil crisis of the 1980 ’ s and the serious consequences that we suffered . Unconsciously , we link the 1990 ’ s hardships to the debt and funding crisis that we experienced . At the time , our foreign debt was sizable and our foreign exchange earnings dropped dramatically . The ensuing situation traumatized an entire generation . Debt is like cholesterol , there is good debt and bad debt . The good one is used to fund investment projects that are profitable in the medium and long terms . These are projects like highways , which require heavy funding in the beginning , but thereafter they generate revenue when they are operated through semi privatepublic entities . Bad debt is the one used to fund budget deficits and government operating expenses . This latter debt is dangerous for the balance of finances and the country ’ s future . Given that money is borrowed at very low interest rates , many countries borrowed heavily to finance their operating costs , which makes them vulnerable and some day they find themselves under the yoke of creditors with the excesses that we know . Another safeguard when resorting to debt is the external debt ratio in terms of GDP , which must be kept below 60 % of GDP . This ratio is used by the European Community to monitor the performance of member countries of the Eurozone . This ratio must be observed to prevent a situation where the debt becomes an unbearable burden for the government budget . In the
48 / OIL & GAS business / NUMÉRO 14 / Avril 2016