IMF: “Algeria Needs To Focus On Avoiding Economic Instability During Its Political Transition”

The International Monetary Fund (IMF) warned Algeria of economic instability during the country’s 10-week political transition which is expected to continue for months.

Reuters quoted Jihad Azour, IMF’s Middle East and Central Asia director as saying; “The OPEC member should carry out reforms to help cut the deficit and reduce reliance on oil and gas”.

“Structural reforms will allow Algeria to diversify outside oil and to use its strengths, both in terms of a young population, geographical location and wealth it has in different sectors,” Azour said.

“What is important economically for Algeria is to preserve economic stability during this political transition,” Azour said.

“There will also be a need to “anchor stability in the medium term by reducing gradually the level of the budget deficit and avoiding any monetizing of the deficit,” he added.

“Algeria has been under financial pressure due to a fall in global oil prices since mid-2014. It has failed to diversify the economy away from crude and gas which account for 60 percent of the budget and 94 percent of total exports”, IMF asserted.

“Algeria’s economy grew 2.3 percent in 2018 due to higher oil prices, up from 1.4 percent the previous year, but below a 4 percent government forecast, according to the finance ministry, and the non-energy sector grew 4 percent last year, against 2.2 percent in 2017”.

IMF recalled that the government last year started implementing changes that allow the central bank to lend directly to the treasury to fund internal public debt. The budget deficit is projected at 9.2 percent of gross domestic product for this year, up from 9 percent in 2018.