Executive Directors of the IMF have noted the significant challenges facing the Algerian economy and commended the authorities’ ongoing efforts to adjust to the oil price shock.
Algeria is rich in natural resources; an OPEC member, and has the tenth-largest proven reserves of natural gas in the world and is the sixth-largest gas exporter. It also ranks 16th in proven oil reserves. Algeria also has a large hydrocarbon stabilization fund.
The IMF Executive Board emphasized that a balanced policy mix along with ambitious structural reforms will be important to ensure fiscal sustainability, narrow external imbalances, reduce reliance on hydrocarbons, and raise potential growth.
Welcoming the authorities’ commitment to pursue sustained fiscal consolidation, within a clear medium-term budget framework, the Board supported the steps being taken to reduce the fiscal deficit, to raise more nonhydrocarbon revenue, control current spending, expand the subsidy reform while protecting the poor, and increase the efficiency of public investment and reduce its cost.
The Directors were generally of the view that tapping a broader range of financing options, including prudent external borrowing and the sale of state assets, combined with greater exchange rate flexibility, could provide room for a more gradual and growth-friendly fiscal consolidation than currently envisaged and reduce potential adverse impact on economic activity.
The Directors noted that net international reserves remain comfortable, but that the current account balance is significantly weaker than warranted by medium-term fundamentals, emphasizing that greater exchange rate flexibility, along with fiscal consolidation and structural reforms, would help address external imbalances and support private sector development. Directors also called for measures to deepen the official foreign exchange market and curtail parallel market activity.