In 1994–98, Algeria was successful in restoring macroeconomic stability and implementing structural reforms. The fiscal position deteriorated in the first part of 1999, owing to low oil prices. Executive Directors supported the reform program introduced in early 2000, and welcomed its emphasis on accelerating reform of the banking and public sector companies but stressed the need for detailed implementation plans. The economic environment should be improved to promote private economic activity, including domestic and foreign investment. The authorities are urged to accelerate trade liberalization.

Abstract

In 1994–98, Algeria was successful in restoring macroeconomic stability and implementing structural reforms. The fiscal position deteriorated in the first part of 1999, owing to low oil prices. Executive Directors supported the reform program introduced in early 2000, and welcomed its emphasis on accelerating reform of the banking and public sector companies but stressed the need for detailed implementation plans. The economic environment should be improved to promote private economic activity, including domestic and foreign investment. The authorities are urged to accelerate trade liberalization.

July 7, 2000

Since SM/00/122 was issued, the staff has received the following information:

  • The supplementary budget law for 2000 was passed by parliament. The few amendments voted do not appear to have any significant impact on the figures quoted in the staff report.

  • The council of ministers approved a draft law liberalizing the telecommunications sector.

  • Oil prices remained high during the first semester of 2000. The average price for the Algerian crude (Saharan blend) stood at about US$26.5 per barrel over January-April 2000. Effective July 1, 2000, Algeria’s OPEC quota was brought from 788,000 barrels a day to 811,000 barrels a day (+2.9 percent).

  • Reflecting strong hydrocarbon export revenues, gross foreign exchange reserves have steadily increased from US$4.4 billion at end-December 1999 to US$6.5 billion at end-May 2000. Meanwhile, the treasury has accumulated substantial deposits on its central bank account (DA 147 billion at end-May 2000).

  • The dinar remained fairly stable against the Euro since the fall of 1999, while it depreciated continuously against the US dollar until last April (down to 76 dinars per US dollar from 69.3 dinars per US dollar in December 1999) before recovering slightly in May (to 75.2 dinars per US dollar). In real effective terms, the exchange rate depreciated by 2.7 percent over the first four months of the year.

  • After having picked up in January and February, the inflation rate (measured by the 12-month change in the consumer price index for the Algiers area) fell sharply in the following months. It was even negative in May (-0.5 percent, down from 2.4 percent in February). As in 1999, the contribution of food prices to the disinflation process has been substantial.

Algeria: Staff Report for the 2000 Article IV Consultation
Author: International Monetary Fund