- High oil prices, relative political stability and a prudent economic policy has put Algeria in a favourable position. Unemployment has dropped considerably, economic growth remains at over 5 percent annually and the external debt is repaid faster than foreseen. ""Algeria is now in a good position to take decisive steps to determine its economic future," analysts hold.
In Algiers today, a mission by the International Monetary Fund (IMF) presented its latest analysis about the economic situation in Algeria. The IMF mission led by Erik de Vrijer has visited Algiers since 6 October, where it held consultations with the government and other stakeholders.
Mr de Vrijer at the Algiers press conference, called to inform "the Algerian people", presented a very positive medium-term economic outlook. "The pick-up in growth in the last few years has led to a considerable drop in the unemployment rate. Boosted by the impact of the fiscal impulse on demand, as well as by the growth of hydrocarbon output, real GDP is expected to increase by approximately 5½ percent in 2004," Mr de Vrijer said.
In addition, the rise in the oil price on international markets had further strengthened Algeria's financial position in relation to the rest of the world. Early repayment of part of the foreign debt had already "substantially reduced" the amount outstanding, Mr de Vrijer said. At the same time, the prudent monetary policy was expected to limit inflation to 4 percent in 2004.
- Algeria is now in a good position to take decisive steps to determine its economic future, emphasised the IMF official. "The favourable external environment and its strong financial position represent a confluence of factors that should be fully utilised to consolidate macroeconomic stability and to complete the economy's transition toward a market economy," he added.
The hydrocarbon wealth was now generating the means to strengthen the physical, institutional, and human capital needed for social and economic development, Mr de Vrijer explained. However, he said, managing the hydrocarbon wealth "must also take into account the need to reduce the vulnerability of government finances to oil price fluctuations; to ensure that hydrocarbon revenues are used transparently and efficiently; and to preserve part of the hydrocarbon wealth for future generations."
Mr de Vrijer further praised Algerian authorities for the new fiscal policy proposed in the draft 2005 budget law. This policy, he said "represents a turning point in the direction of government finances," with the control of public expenditure being outlined in this draft law. The IMF official said he expected the law to lead to a better distribution of responsibilities between monetary and fiscal policies in controlling inflation.
- A larger role of the private sector in economic growth and the transition toward a market economy require the acceleration of structural and institutional reforms, emphasised Mr de Vrijer. "In this regard, the mission is pleased with the government's five-year economic programme," he added. The reforms provided for in this programme were said to be essential to bring about sustainable growth and reduce the rate of unemployment, which remains high.
The IMF mission further had underscored the urgency of undertaking banking sector reform. Mr de Vrijer urged Algerian authorities to intensify their efforts to rehabilitate financial relations among public banks and public enterprises, and to strengthen banking supervision considerably. In its view, the transfer of control of several public banks to reputable foreign banks was said to be "essential to inject fresh know-how into the Algerian marketplace."
Finally, the trade liberalisation undertaken by the Algiers government was said to be "key for Algeria's integration into the world economy." Mr de Vrijer however concluded that it was "essential to reduce tax exemptions substantially and to strengthen tax administration to mitigate the impact of the tariff reduction on budgetary revenues and to ensure tax equality."
During its one-month visit in Algeria, the IMF mission was received by the Minister of Finance, Mr Benachenhou, the Governor of the Bank of Algeria, Mr Laksaci, and other members of the government and the National People's Assembly. The mission had also met with representatives from the banking and business communities.
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