IMF warns Algeria of high deficit risks

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The International Monetary Fund (IMF) on Monday said Algeria risks unprecedented financing needs in the medium term if it continues to run high fiscal deficits, and urged big policy changes.

“The mission recommends a comprehensive and coherent package of fiscal, monetary and exchange rate policies to reduce Algeria’s vulnerability,” it said after conducting the first Article IV consultations with Algeria since 2018.

A major oil and gas producer, Algeria has suffered years of shrinking energy revenue with both prices and output sliding since 2014, and it has made little progress diversifying its state-centered economy.

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Algeria has burned through most of its foreign currency reserves over the past seven years, though it has little public debt.

It should stop monetary financing and instead turn to external borrowing to curb inflation and slow the reserves drawdown, the IMF said.

The government this year proposed a series of reforms aimed at confronting the challenge of falling energy revenue and a weak private sector.

“Algeria’s transition to a new growth model also requires fundamental reforms to strengthen the transparency and the governance of legal, fiscal, and monetary institutions across the public sector,” the IMF said.

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