Bank of Algeria Cuts Interest Rate and Reserves to Boost Investment

On Thursday, August 28, the Bank of Algeria announced two key monetary policy decisions to support the national economy amid falling inflation and record non-hydrocarbon growth.

The Monetary and Credit Council, chaired by Governor Salah Eddine Taleb, approved two measures: a 25 basis point cut in the key interest rate, lowering it from 3% to 2.75%, and a reduction in the reserve requirement ratio from 3% to 2%. According to the Bank of Algeria, this monetary easing will expand banks’ ability to finance productive sectors and stimulate investment.

Historic non-hydrocarbon growth in Algeria

Algeria’s economic momentum continues to strengthen. In the first quarter of 2025, GDP grew by 4.5% compared to 4.2% a year earlier. The non-hydrocarbon sector recorded a historic 5.7% growth rate, underlining the country’s diversification efforts.

Meanwhile, the money supply rose moderately by 3.81% by the end of June 2025, mainly driven by lending to the economy. Loans grew by 5.36% in six months, already surpassing the full-year pace of 2024.

Falling inflation creates favorable conditions

Another decisive factor behind the Bank of Algeria’s easing is the sharp decline in inflation. The year-on-year inflation rate fell to -0.35% in July 2025, six points lower than the previous year. Average annual inflation also dropped to 3.14%, down from 6.12% in July 2024.

Core inflation decreased as well, from 3.92% to 2.58%. The Monetary and Credit Council stated that these trends confirm price stability, creating favorable conditions for investment growth without inflationary risks.

With declining inflation and strong non-hydrocarbon growth, Algeria’s latest monetary policy shift highlights a clear priority: supporting economic diversification and attracting more investment into productive sectors.