IMF: “Algeria Needs Foreign Borrowing”

Although the International Monetary Fund praised the content of the new economic model, which the Algerian government begun to implement for months, it warned of a rapid erosion of the reserves that reach $ 100 billion cash and reopened the foreign borrowing as an option for the Algerian authorities.

IMF experts said: “Algeria does not suffer from the problem of high external debt, so why does not it borrow money from abroad to cover the budget deficit?”

International Monetary Fund (IMF) completed its report on the comments  that are made to Algeria after a preview visit that led a number of experts a few weeks ago, on the consequences of the collapse of oil prices and economic diversification reforms, and concluded that the economic activity in Algeria was able to withstand the shock, but the growth rate decreased in hydrocarbons due to the decline of expenditures, as Algeria recorded a growth rate of 2.9% in GDP in 2016, and inflation rose from 4.8 to 6.4% between 2015 and 2016 to an annual rate of 7.7% in February. The fund called on Algerian officials to work on reducing its proportion.

As stated in the preliminary report of April, on the global economic challenges, Algeria’s unemployment rate was set at 10.5% last September, 26.7% among young people and 20% among women. 

Although IMF praised the policy of rationalizing expenditures in Algeria, but it warned of a high budget deficit due to rising public debt as a result of the repayment of loan guarantees that are granted by the government,

IMF report also mentioned a rapid decline in the reserves of more than $ 100 billion last April, and the IMF experts opened the door to external borrowing, considering it an appropriate option if it is carefully used to cover the budget deficit, especially as the external debt of Algeria is very weak.

With regard to the major challenges of the Algerian economy, the International Monetary Fund (IMF) praised the efforts that were made by the Algerian authorities to confront the oil shock, but called on the managers to adopt stricter policies and adopt ambitious sector reforms by cutting costs, and going out of oil repercussions, and raising the growth rate, confirming that these reforms would allow the development of the private sector. 

IMF also praised the measures to improve the investment climate and long-term thinking within the framework of the economic growth plan, calling for the reduction of bureaucracy, improving mechanisms for obtaining loans, promoting transparency, reviving the labor market, and opening the investments abroad.

At the end of the assessment task for the Algerian economy, IMF spoke about increasing the exchange rate flexibility along with the fiscal controls and structural reforms that could help address that external imbalances and support private sector development, calling for the encouragement of the loans market and facing the parallel market of hard currency.