The strong hydrocarbon export performance has allowed Algeria to strengthen its external position and record a budget surplus. Executive Directors commend the government for the broad improvement in macroeconomic indicators. The government has eased the fiscal stance, and this strategy has succeeded in boosting short-term growth. The surge in credit to the economy is a concern. Algeria should reinvigorate its structural and institutional reform efforts to put the economy on a sustainable path of higher growth, lower unemployment, improved social conditions, and reduced poverty.

Abstract

The strong hydrocarbon export performance has allowed Algeria to strengthen its external position and record a budget surplus. Executive Directors commend the government for the broad improvement in macroeconomic indicators. The government has eased the fiscal stance, and this strategy has succeeded in boosting short-term growth. The surge in credit to the economy is a concern. Algeria should reinvigorate its structural and institutional reform efforts to put the economy on a sustainable path of higher growth, lower unemployment, improved social conditions, and reduced poverty.

January 14, 2004

The following information has become available since the issuance of the staff report for the 2003 Article IV consultation with Algeria. This additional information does not change the thrust of the staff appraisal:

  • Gross foreign exchange reserves increased to $32.9 billion at end-December 2003 (23,6 months of the projected imports of goods and services). The difference with the amount projected in the staff report ($31.5 billion) is mainly due to the valuation effect arising from the appreciation of the euro at the end of 2003.

  • The 12-month average inflation rate (as measured by the consumer price index) was 2.1 percent at end-November 2003. Staff projection for 2003 is 2.3 percent.

  • The DA/US dollar exchange rate closed at 72.6 at end-December 2003 (against 79.7 at end-December 2002). The DA/euro exchange rate reached 91.3 at end-December 2003 (from 83.5 at end-December 2002).

  • Treasury deposits at the Bank of Algeria rose to DA 602 billion at end-December 2003 (11.8 percent of the projected 2003 GDP) from DA 430.6 billion at end-December 2002 (9.7 percent of the 2002 GDP). The staff projection in SM/03/397 is DA 600 billion.

  • A third cellular telephone license has been issued to Kuwait National Mobiles Telecommunications, known as Wataniya, which offered the highest bid ($421 million).

  • 19 small enterprises have been privatized in the latter part of the year. These transactions have been either completed or are in the process of being finalized after an agreement has been found with investors. They are distributed as follows: 1 hotel, 7 brickyards, 1 cement factory, and 10 other small enterprises transferred to employees.

Algeria: Staff Report for the 2002 Article IV Consultation
Author: International Monetary Fund