Abstract
This 2005 Article IV Consultation highlights that the Algerian economy continues to benefit from abundant and increasing hydrocarbon revenues. Real GDP growth is expected to continue at about 5 percent in 2005, led by increased output in the hydrocarbon sector and sustained activity in the construction and services sectors. Executive Directors have welcomed the authorities’ resolve to maintain fiscal sustainability over the medium term. They have stressed the importance of preparing comprehensive medium-term budget projections, and limiting increases in real wages to increases in productivity in the nonhydrocarbon sector.
Since the issuance of the staff report, the following information has become available. This information does not alter the thrust of the staff appraisal.
Inflation in 2005 was lower than projected. The consumer price index rose on average by 1.6 percent in 2005 as compared with the projected 2.7 percent, mainly reflecting a stronger-than-foreseen decline in food prices.
International reserves at end-2005 were slightly higher than expected. Gross official reserves reached US$ 56.2 billion at end-2005 as compared to the projected level of US$55.6 billion.
Free current convertibility of the dinar. Staff has assessed the jurisdictional implications under Article VIII of certain limits on the making of payments for current international invisible transactions and has concluded that such limits do not give rise to an exchange restriction subject to Fund jurisdiction. However, staff urges the authorities to make the public more aware of the indicative nature of those limits. The authorities have sent staff for comments a new draft regulation on payments and transfers relating to current international transactions, in response to the recommendations of the Fund technical assistance. This draft is currently being reviewed by staff.
Progress continued on the structural reform front with the parliamentary approval of the anti-corruption law on January 24, 2006. The law contains a broad definition of corruption, institutes a code of conduct for public servants, and provides for international cooperation.
Participation in GDDS. In a letter to the Director of the Statistics Department dated February 6, 2006, the authorities announced Algeria’s participation in the General Data Dissemination System (GDDS).