IMF Urges Algerian Government To Hike Fuel And Electricity Prices

date 2017/03/20 views 397 comments 0

icon-writer By: Hassan Houicha /*/ English Version: Med.B.

An International Monetary Fund (IMF) mission, has urged the Algerian Government to further lessen current subsidies on energy and to be more diligent in bringing the informal market’s funds towards the banks and official channels and to expand the tax base through a greater rationalization of provided tax exemptions.

The head of the IMF mission to Algeria, Mr Jean-Francois Dauphin, said Monday during a press conference at the El Aurassi hotel in upper Algiers, culminating in the end of the IMF mission, advocated that the Algerian public authorities must consider curtailing  support for the country’s energy sector by notably increasing fuel and electricity prices as a remedial rationalization measure.

To this effect, he pointed out that current state subsidies for electricity and fuel ought to be abolished gradually.

This subsidized support geared to energy is now benefiting the rich more than the poor, Mr Jean-François Dauphin emphasized.

According to the IMF official, “the support for the energy sector (with on focus electricity and fuel) should be directed directly to the most needy segments of the Algerian population”, as he put it.

 “Wide-ranging structural reforms are needed to help support economic activity during fiscal consolidation and to diversify the economy to achieve high and inclusive growth over the medium term”, he said. 

“Key reforms include improving the business climate, opening up the economy to more trade and investment, improving access to finance and developing capital markets, and strengthening governance, competition and transparency”, the IMF representative  further underlined. 

The IMF official also noted that Algeria’s recently-introduced import restrictions, while perhaps providing a temporary relief, could bring about adverse distortions and cannot substitute for reforms aimed at boosting exports.

“Exchange rate, monetary, and financial policies should support these efforts. Further efforts to bring the dinar in line with fundamentals, including through fiscal consolidation and structural reforms, would help restore external balances. As the decline in oil prices contributes to drying up excess liquidity in the banking system, the Bank of Algeria is appropriately reintroducing its refinancing instruments. Going forward, it should carefully calibrate monetary policy to guard against potential inflationary pressures”, Mr Jean-François Dauphin further asserted. 

He added: “The Algerian banking sector as a whole is well capitalized and profitable, but protracted low oil prices increase risks. The Bank of Algeria should continue to transition to a risk-based supervisory framework, enhance the role of macro-prudential policy, and strengthen the governance of public banks”.

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