Algeria: 2006 Article IV Consultation—Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Algeria.
Author: International Monetary Fund
Publication Date:
22 Feb 2007
eISBN:
9781451811537
Language:
English
Keywords:
ISCR; CR; government; monetary policy; policy; high-quality fund policy dialogue; authorities' reform priority; capital expenditure; authorities' decision; credit to government; government of rescheduled debt to the Paris; government of rescheduled debt
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Algeria’s key challenges are to achieve sustained growth and reduce unemployment, while maintaining macroeconomic stability. This 2006 Article IV Consultation highlights that real GDP growth of Algeria temporarily declined to about 3 percent in 2006, largely because of a drop in hydrocarbon output for technical reasons. Inflation remained low through mid-year but is picking up. Monetary policy remained prudent, in line with the authorities’ objective of containing inflation. The Bank of Algeria continued to absorb most of the excess liquidity of the banking system through deposit auctions in 2006.

Abstract

Algeria’s key challenges are to achieve sustained growth and reduce unemployment, while maintaining macroeconomic stability. This 2006 Article IV Consultation highlights that real GDP growth of Algeria temporarily declined to about 3 percent in 2006, largely because of a drop in hydrocarbon output for technical reasons. Inflation remained low through mid-year but is picking up. Monetary policy remained prudent, in line with the authorities’ objective of containing inflation. The Bank of Algeria continued to absorb most of the excess liquidity of the banking system through deposit auctions in 2006.

I. Background and Key Challenges

1. A favorable external environment and appropriate macroeconomic policies have contributed to Algeria’s encouraging economic performance over the past five years. Economic growth has been sustained at an average annual rate of 5½ percent in 2001–05, and inflation has remained low. The unemployment rate has declined steadily, although it was still high at 15.3 percent in 2005.1 Algeria’s position as an important hydrocarbon exporter has resulted in marked improvements to the country’s fiscal and external positions.2

2. Algeria’s political situation is fairly stable. In May 2006, Prime Minister Ahmed Ouyahia was replaced by Mr. Abdelaziz Belkhadem, general secretary of the main party in the ruling coalition. The new prime minister has indicated that he would support a constitutional amendment that would allow the president to run for a third term. Parliamentary elections are scheduled to take place in 2007 and presidential elections in 2009.

3. Algeria’s key challenges are to achieve sustained growth and reduce unemployment, while maintaining macroeconomic stability. The government’s economic program for 2005–09 addresses these challenges by (a) using part of the hydrocarbon revenues for public investment in key sectors such as infrastructure, housing, education, and healthcare, while continuing appropriate macroeconomic policies; and (b) undertaking structural reforms, particularly in the financial sector, to achieve the transition to an open, market-oriented economy. Fund surveillance in recent years has focused on these areas. The authorities have indicated their appreciation of Fund policy advice and technical assistance, and have drawn on it in their policy making.

Priorities of Fund Surveillance

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II. Recent Economic Developments and Outlook

A. Recent Economic Developments

4. Economic growth is expected to slow temporarily in 2006. Reflecting a drop in hydrocarbon output because of maintenance work, real GDP growth is projected to decline to about 3 percent in 2006 from about 5½ percent in 2005. Nonhydrocarbon GDP (NHGDP) growth would continue at 4½ percent, underpinned by sustained activity in the construction sector, resulting from the significant fiscal impulse, and in the agricultural sector.

Figure 1.
Figure 1.

Real GDP Growth, 2001–06

(In percent)

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Sources: Algerian authorities; and Fund staff estimates and projections.

5. Inflation is picking up. Consumer price inflation remained low through mid-2006 but increased to almost 5 percent (year-on-year) in September, reflecting mainly a rebound in food prices, which had declined with the good 2005 crop.

Figure 2.
Figure 2.

CPI, September 2001–September 2006

(Annual change in percent)

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Source: Algerian authorities.

6. Algeria’s external position continued to improve in 2006. With high world oil prices, the external current account surplus is projected to increase further to 24½ percent of GDP from almost 21 percent in 2005. Gross external reserves reached $70 billion at end-September 2006 (two years of next years’ import cover). After early debt repayment of $10½ billion, including to Paris and London Club creditors, the external debt-to-GDP ratio is expected to decline from 17 percent in 2005 to below 4½ percent in 2006.

Figure 3.
Figure 3.

External Developments, 2001–06

External debt (In percent of GDP - RHS)

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Sources: Algerian authorities; and Fund staff estimates and projections.

7. The real effective exchange rate (REER) depreciated by about 5 percent during the first eight months of 2006, mainly reflecting the appreciation of the euro against the dollar. Algeria’s full surrender requirement on hydrocarbon export proceeds makes Bank of Algeria (BA) the dominant seller of foreign exchange to the banks. This position has helped BA to keep the REER broadly in line with its end-2003 level that the authorities considered close to equilibrium. This policy has also resulted in a reduced variability of the dinar/dollar exchange rate since early 2004, given the low inflation differential with Algeria’s main trading partners. The spread between the illegal parallel market and the official exchange rates reportedly disappeared in early 2006, following measures to reduce the size of the informal economy (including an increase in the required minimum capital for importers).

Figure 4.
Figure 4.

Real and Nominal Effective Exchange Rates, August 1998–August 2006

(1995=100)

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Source: INS.
Figure 5.
Figure 5.

Nominal Exchange Rates, January 2001–October 2006

(Monthly averages)

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Source: Algerian authorities.

8. Buoyant hydrocarbon revenues have financed a strong increase in public spending. In the 2006 supplementary budget, the 2005–09 public investment program was increased from $73 billion to $90 billion. Civil service wages were raised by about 15–16 percent on average as of July 1, 2006, largely in compensation for past inflation.3 As a result, the nonhydrocarbon primary deficit is expected to widen from about 33½ percent of NHGDP in 2005 to almost 37½ percent in 2006. Nevertheless, the overall budget surplus would remain high at about 12 percent of GDP in 2006.

Figure 6.
Figure 6.

Overall and Nonhydrocarbon Fiscal Balances, 2001–06

Hydrocarbon revenue (In percent of GDP - LHS)

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Sources: Algerian authorities; and Fund staff estimates and projections.

Prepayment of External Debt, 2004–06

In light of large hydrocarbon export receipts, the authorities decided in 2004 to prepay official external debt, and limit nonconcessional borrowing. Since 2004, Algeria has repaid about $14 billion official external debt ahead of schedule.

At end-2003, Algeria’s external debt of $23.4 billion (excluding Soviet-era debt owed to Russia) included $12.2 billion of rescheduled debt to Paris and London Club creditors and $5 billion to multilateral creditors.

In 2004–05, Algeria prepaid $3.3 billion, particularly to multilateral creditors, including the Fund. In March 2006, Russia cancelled $4.7 billion Soviet-era claims in exchange for Algeria agreeing to import an equivalent amount of Russian goods and services over an unspecified time period. This paved the way for Paris Club approval in May 2006 of Algeria’s request to prepay its outstanding debt at par. Following bilateral negotiations, Paris and London Club debt worth $8.5 billion had been prepaid by end-2006. A further $2 billion was also prepaid to multilateral creditors in 2006.

Algeria’s external debt-to-GDP ratio has declined from about 34 percent of GDP at end-2003 to less than 4½ percent at end-2006; it is projected to fall to 3 percent by 2011. At the same time, the reserve cover ratio has increased from 18 months in 2003 to almost 25 months in 2006, and is projected to reach 38 months by 2011. Under the circumstances, Algeria’s external debt would remain sustainable over the medium term. Building on this, the authorities intend to obtain a sovereign rating.

Algeria’s participation as a creditor in the Enhanced HIPC Initiative awaits approval by the authorities.

A01ufig01

External Debt, 2003–11

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Sources: Algerian authorities; and Fund staff estimates and projections.

9. Monetary policy has remained prudent, in line with the authorities’ objective of containing inflation. BA continued to absorb most of the excess liquidity of the banking system through deposit auctions in 2006, in reaction to the fiscal stimulus and the rapidly growing bank deposits of the national oil company (Sonatrach). The expansion of credit to the economy slowed.

Figure 7.
Figure 7.

Monetary Policy Stance, 2001–06

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Sources: Algerian authorities; and Fund staff estimates and projections.

10. Some progress was made in structural reforms in 2006. In the financial sector, the process of privatizing a first public bank and the modernization of the payments system are underway. The governance of the remaining public banks is being strengthened and supervision has become more active, mainly through on-site inspections. However, nonperforming loans of public banks remained high. The corporate profit tax rate was reduced from 30 percent to 25 percent. In addition, the government decided to streamline the taxation of small enterprises by introducing a single presumptive tax.4 A new hydrocarbon law was adopted in 2005 that, inter alia, further liberalizes investment in this sector; in 2006, the authorities amended the new law to restore Sonatrach’s majority stake in all contracts with international hydrocarbon companies. Privatization of public enterprises is proceeding and an anticorruption law was adopted in January 2006.

Figure 8.
Figure 8.

Ratio of Nonperforming Loans to Total Loans, 2004–05

(In percent)

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Source: Algerian authorities.

B. Medium-Term Outlook

11. Algeria’s external position is expected to remain strong over the medium term. With oil prices projected to remain relatively high and given the authorities’ decision to limit the expansion of hydrocarbon output, annual hydrocarbon exports are expected to average $55½ billion through 2011. Imports would increase significantly, driven by large investments by the government and Sonatrach. The external current account surplus, while gradually declining, would remain sizable and gross external reserves would exceed three years of import cover by 2011. Gross external debt would remain low and sustainable.

12. Algeria’s economic outlook for the medium term is favorable. The authorities agreed with staff that medium-term growth prospects depend importantly on the country’s ability to address key constraints to growth. Assuming steady implementation of the public investment program and of ongoing structural reforms, real NHGDP growth is projected at 5½ percent in 2007 and about 5 percent thereafter. Achieving a higher growth trend would require more ambitious structural reforms.5 The planned increase in public investment and the spread of the public sector wage hike to the rest of the economy would contribute to some inflationary pressures in the coming years.

Algeria: Medium-Term Projections 2006–11

(In percent of GDP, unless otherwise indicated)

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Sources: Algerian authorities; and Fund staff estimates and projections.

13. The draft 2007 budget includes a sizeable increase in public spending over the medium term. The 2005–09 public investment program would be increased to some $113 billion (equal to 2006 GDP). Taking account of the full-year effect of the civil service wage increase and of current expenditure needs over the medium term, the nonhydrocarbon primary deficit would increase to about 39 percent of NHGDP in 2007; thereafter it would gradually decline to 31 percent of NHGDP by 2011, in line with long-term fiscal sustainability. The overall budget surplus would remain above 7 percent of GDP through 2011.

Long-Term Fiscal Sustainability

Staff’s long-term fiscal framework for assessing the management of hydrocarbon wealth aims at preserving the permanent per capita income from hydrocarbon wealth (see IMF Country Report No. 04/33; IMF Country Report No. 06/93). This is expressed as a sustainable path for the nonhydrocarbon primary deficit/NHGDP ratio. In this framework, the sustainable nonhydrocarbon primary deficit would decrease from about 37½ percent of NHGDP in 2006 to 32½ percent in 2010 (compared to 26 percent estimated at the time of the 2005 Article IV consultation). Income from financial wealth would entirely finance the deficit that prevails after 2050 when hydrocarbon reserves are assumed to run out. Given the volatility of world oil prices, it is important that the authorities continue to maintain fiscal sustainability over the long term.

Sustainable Nonhydrocarbon Primary Deficit, 2006–11

(In percent of NHGDP)

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Sources: Algerian authorities; and Fund staff estimates and projections.

III. Policy Discussions

14. The discussions were characterized by broad agreement between authorities and staff on the key economic challenges facing Algeria and policies needed to address them. The authorities concurred that Algeria’s strong financial position creates an ideal window of opportunity for accelerating reforms and tackling key impediments to private sector-led growth. The discussions centered on (a) the management of hydrocarbon resources and macroeconomic policies; and (b) key structural reforms, notably in the banking sector.

A. Management of Hydrocarbon Revenue and Macroeconomic Policies

15. The authorities have enhanced the transparency in the use of hydrocarbon revenue in the budget. In the 2006 supplementary budget, the rules of the hydrocarbon stabilization fund—Fonds de Régulation des Recettes (FRR)—were amended to allow for the direct financing of the nonhydrocarbon deficit (unless the balance of the FRR drops below 10 billion), broadly in line with staff advice (see IMF Country Report No. 06/93).6 Moreover, the draft 2007 budget informs parliament of the implicit price of a barrel of oil equivalent to the hydrocarbon revenue needed to finance the nonhydrocarbon deficit (2007: $49 per barrel). However, the budget reference price has been kept at $19 per barrel for budget presentation purposes.

Fiscal Policy

16. Discussions focused on the 2006–09 public investment program, wage policy, and structural fiscal issues.

• The authorities were keenly aware of the challenge of ensuring the high quality of public investment in light of the limited absorption capacity. They indicated that they have already begun to reevaluate the projects included in the public investment program, in order to focus on projects with a high rate of return, and have strengthened the monitoring and evaluation mechanisms for large investment projects. The authorities were also committed to taking into account the recommendations of the public expenditure review conducted in cooperation with the World Bank in 2005–06.

• The National Economic and Social Pact—concluded in 2006 between the government, employers’ organizations, and trade unions—supports, for the first time, linking real wage increases to productivity and economic performance in the nonhydrocarbon sector, in line with past staff advice. In addition, the Pact supports efforts to improve the business climate for private enterprise, enhance the productivity of the economy, and privatize public enterprises. Decentralized wage negotiations are underway and will likely result in wage increases broadly in line with that granted to the civil service. The Pact provides that future wage demands will not be based on hydrocarbon revenues and the unions indicated that they have agreed to hold off demands for another general wage increase until 2009–10.

• The government intends to take advantage of buoyant hydrocarbon revenues to simplify the tax and incentive system for business activity. The authorities concurred that the development of Algeria’s nonhydrocarbon economy requires a significant improvement in the business climate. However, structural reforms will take time to mature. Therefore, the authorities believed that progress can be accelerated by focusing on measures with a more rapid payoff, and have requested FAD technical assistance to streamline further the tax system and assist them in the ongoing modernization of the tax administration.

• The government is poised to modernize budget management and strengthen fiscal governance. It intends to submit the draft organic law on public finances to parliament before end-2006 and has prepared a new budget classification system, in line with Government Finance Statistics guidelines. The authorities indicated that they envisage implementing other recommendations of the 2004 fiscal ROSC in the period ahead.

Figure 9.
Figure 9.

Algeria and Competitors: Overall Ease of Doing Business, 2006

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Source: http:\\www.doingbusiness.org. Country ranking from 1 (best) to 175 (worst).

The 2005–06 Public Expenditure Review

The public expenditure review (PER) was conducted between October 2005 and June 2006. It covered four sectors: health, education, water, and transport/public works. The PER also assessed the performance of budgetary management.

Diagnosis

The PER found that Algeria has made important progress in education and public healthcare. However, it found severe shortcomings in the planning and execution of public investment. General, cross-sector concerns included:

  • the technical readiness of personnel in charge of executing projects is generally low and unlikely to be improved by large upfront spending authorizations;

  • existing weaknesses in absorption capacity entail substantial risks that costs could be excessive;

  • project quality is uneven and would only partially achieve the objectives of sectoral strategies;

  • several projects fail to meet minimum standards and should not proceed.

Main recommendations

  • The pace of implementation of the public investment program should reflect a more realistic assessment of the absorption capacity of line ministries.

  • A more even implementation of the investment program than currently planned is proposed starting with the 2007 budget.

  • Project selection should be more closely guided by sectoral strategies in the context of a medium-term expenditure framework.

  • Management and control systems for public investment and the budget should be urgently modernized.

Monetary and Exchange Rate Policies

17. Keeping inflation under control will be the key challenge for BA. The monetary authorities considered that the fiscal expansion and wage increases will require tightening monetary policy to forestall inflationary pressures. They indicated that they intend to increase BA’s policy interest rate to keep it at a positive level in real terms and to continue absorbing excess liquidity in the banking system.7

18. The authorities intend to continue managing the exchange rate in a flexible manner, taking account of the inflation objective. Staff found no evidence of misalignment of the real exchange rate.8 In the short term, the REER would be subject to offsetting influences. The expansionary fiscal stance and the wage increases imply a real exchange rate appreciation, while the ongoing trade liberalization points in the opposite direction. With the sizable demand stimulus, the authorities believed that an appreciation of the REER is likely in 2007. In this context, they intend to continue their flexible management of the exchange rate. To achieve lasting gains in competitiveness, given prevailing wage levels in Algeria, it is essential to implement structural reforms aimed at increasing the productivity of the economy.

Figure 10.
Figure 10.

Real Effective Exchange Rate (REER) and Equilibrium REER,1970–2005

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Sources: INS; and Fund staff estimates.

B. Structural Reforms

Reform of the Financial Sector

19. The authorities considered that further progress on financial sector reform aimed at improving the soundness of the banking system and strengthening financial intermediation is a priority to sustain growth in the nonhydrocarbon sector. They have requested a Financial Sector Assessment Program (FSAP) update, which is scheduled for early 2007. Discussions focused on the ongoing banking sector reform and the financial relationship between public banks and public enterprises.

• The privatization of the first public bank is proceeding as planned. The sale of a majority share in Crédit Populaire d’Algérie is expected to be completed in early 2007. Subsequently, other public banks may also be privatized. The objective of the government is to select banks with an internationally established reputation as majority shareholders, in order to inject modern know-how into the sector.

• Steps are also being taken to strengthen the governance of the remaining public banks. Performance contracts for public banks have been strengthened and the authorities are focusing their efforts in particular on improving risk management and internal controls.

• The authorities agreed that greater competition in the banking sector and further improving the operational framework will strengthen financial intermediation. Steadfast progress is being made through the ongoing modernization of the payment system, sustained political support of the banking commission in enforcing prudential regulations, and improving banking supervision, with Fund technical assistance. However, the directive prohibiting public entities from dealing with private banks remains an obstacle to better promoting a level playing field.

• There is a need to establish a more sound and transparent relationship between public banks and public enterprises. The government is in the process of taking over nonperforming loans of public banks to public enterprises in an amount equivalent to 4 percent of GDP. It is determined to avoid new nonperforming loans from arising by strictly limiting bank financing of nonviable public enterprises, but has not yet decided on the measures needed to achieve this.

Other Structural Reforms

20. The authorities intend to continue liberalizing external trade and to remain engaged in regional integration efforts. Following the coming into effect of the Association Agreement with the European Union in 2005, the authorities are now focusing on Algeria’s accession to the World Trade Organization (WTO). The government has also decided to modernize and streamline the customs administration, with Fund technical assistance. Gradually enhancing regional cooperation and eventually establishing a large regional market will help Algeria to better harness the benefits of multilateral liberalization. In this context, the authorities intend to implement the action plan resulting from the 2005 Maghreb trade facilitation conference to: (a) set up a website with comprehensive information on trade regulations and taxation; (b) work toward mutual recognition of norms and controls; (c) reduce trade distortions and informal trade; (d) develop a one-stop document-processing system; and (e) establish a private sector-led monitoring unit on Maghreb foreign trade. The forthcoming conference on financial sector reform and prospects for financial integration in the Maghreb will also help to intensify regional cooperation.

21. Although the authorities acknowledged that improving the legal framework for foreign exchange transactions would help Algeria benefit from its opening up to the rest of the world, they have not yet followed through on their intention to promulgate a new draft foreign exchange regulation that implements the recommendations of Fund technical assistance in this regard (IMF Country Report No. 06/93). The authorities have indicated that this regulation, that will clearly establish the current convertibility of the dinar, will be promulgated shortly.

22. Rigidities in domestic energy pricing are giving rise to inefficiencies and large implicit subsidies.9 The authorities agreed that these subsidies favor energy-intensive activities at the expense of labor-intensive ones, discourage energy conservation, and give rise to smuggling to neighboring countries. They indicated that the subsidies would be reduced gradually by raising domestic energy prices after 2007. However, the authorities were concerned about the social impact of such increases and asked staff to advise in the coming months on the modalities of such price increases and on targeted measures to protect the most vulnerable groups.

Figure 11.
Figure 11.

Fuel Prices, end-June 2006

(in $/liter)

Citation: IMF Staff Country Reports 2007, 072; 10.5089/9781451811537.002.A001

Source: Authorities.

IV. Staff Appraisal

23. In recent years, Algeria has succeeded in using its ample hydrocarbon revenues to sustain economic growth and bring down the still high unemployment, while keeping inflation low. The external position has improved significantly with the build-up of international reserves and prepayment of most of the external debt. Progress continued to be made in structural reforms.

24. Algeria’s external position is expected to remain strong and growth prospects are favorable. However, as the temporary slowdown in 2006 has shown, growth remains fragile and mainly driven by government investment. Also, the envisaged fiscal expansion and the impact of wage increases would result in some inflationary pressures.

25. The country’s increased political stability and favorable financial situation present an excellent opportunity for achieving high, sustainable growth and reducing unemployment, while maintaining macroeconomic stability. This requires: (a) ensuring sound management of hydrocarbon resources, notably the high quality of the large public investment program; and (b) pressing ahead with the modernization of financial intermediation and other structural reforms to increase productivity and improve the business climate.

26. The ambitious public investment program requires sustained efforts to ensure its quality. In addition to the steps being taken by the government, staff recommends that the authorities focus on the execution and monitoring of existing projects. It is also important to prepare comprehensive medium-term budget projections, taking into account the implication of public investment on current expenditures, to accelerate budget modernization, and to strengthen fiscal governance by implementing the recommendations of the 2004 fiscal ROSC.

27. Staff welcomes the new rules governing the hydrocarbon stabilization fund and, in view of the expected large increase in its balance, recommends aiming at a higher investment return.

28. The National Economic and Social Pact is an important milestone. Staff recommends that real wages be adjusted more gradually than in the past, in line with productivity growth and economic performance in the nonhydrocarbon sector.

29. Given the need to tighten monetary policy, staff welcomes the authorities’ intention to bring BA’s policy interest rate to a positive level in real terms. It reiterates that handling Sonatrach’s large deposits outside the banking system would strengthen BA’s control over base money. It is important that BA continue its flexible management of the exchange rate.

30. Pushing ahead decisively with the privatization of public banks, strengthening the governance of remaining public banks, and promoting competition in the sector are paramount. Staff also emphasizes the need to strictly limit bank lending to nonviable public enterprises and, if necessary, provide assistance through direct government subsidies accompanied by enterprise restructuring and acceleration of privatization.

31. Following the coming into effect of the Association Agreement with the European Union, it is important to pursue the negotiations for Algeria’s accession to the WTO. Staff welcomes the authorities’ decision to modernize the customs administration. Enhanced regional integration will also help Algeria realize its full economic potential and enhance its attractiveness to foreign investors. As a first step, staff welcomes the authorities’ intention to implement the action plan to reduce obstacles to regional trade that resulted from the 2005 conference on trade facilitation in the Maghreb.

32. Staff urges the authorities to promulgate as soon as possible the new draft exchange regulation, which should remove remaining ambiguities regarding the current convertibility of the dinar.

33. It is important to continue to improve the business climate, including by simplifying the tax system for business activity. Staff also welcomes the intention of the government to gradually increase the pass-through of world oil prices to domestic energy prices.

34. Staff strongly encourages the authorities to intensify their efforts to upgrade the production and dissemination of economic and financial statistics, including by benefiting from the needed technical assistance under the GDDS.

35. Staff encourages Algeria to participate as a creditor in the Enhanced HIPC Initiative, and to obtain a sovereign rating.

36. It is recommended that the next Article IV consultation take place on the standard 12-month cycle.

Table 1.

Algeria: Selected Economic and Financial Indicators, 2003–11

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Sources: Algerian authorities; and Fund staff estimates and projections.

Starting in 2004, in constant 2001 prices.

In U.S. dollars terms.

Annual average changes in trade-weighted INS index. A decrease implies a depreciation. For 2006, as of August.

In percent of beginning money stock.

Including the impact of the financial restructuring in 2001–02 and end-2006 involving the swap of government bonds for bank claims on public enterprises.

Including dividends of Sonatrach.

Including special accounts related to capital spending.

Including special accounts (not related to capital spending) and net lending.

Derived from a survey conducted once a year in September. In 2004, reflects a sharp increase in work at home and temporary employment.

For 2006, as of October.

Table 2.

Algeria: Balance of Payments, 2003–11

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Sources: Algerian authorities; and Fund staff estimates and projections.

Weighted average of quarterly data through the third quarter of 2006; projections based on the August 2006 WEO oil price projections.

Table 3.

Algeria: Summary of Central Government Operations, 2003–11 1/

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Sources: Algerian authorities; and Fund staff estimates and projections.

Cash basis.

Including dividends of Sonatrach.

Starting in 2002, includes the savings/housing bank CNEP.

Including privatization receipts.

Including special accounts related to capital spending.

Including special accounts (not related to capital spending) and net lending.

Table 4.

Algeria: Monetary Survey, 2003–07

(In billions of Algerian dinars; at end of period)

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Sources: Bank of Algeria; and Fund staff estimates and projections.

Includes impact of public banks' restructuring packages. The conversion of public banks’ claims on public enterprises into claims on the government results in a decrease in credit to the economy and an equal increase in credit to government. The adjustment amounted to DA 213 billion in 2006. The flow of new credits to the economy in 2003 (17.5 percent annual growth) exceeded the stock difference between 2002 and 2003, because of the liquidation of two private banks. The flow of new credits to the economy in 2006 (6.5 percent annual growth) exceeded the stock difference between 2005 and 2006.

Net credit to government excludes postal accounts (CCP) at the treasury deposited at the BA.

The advance of BA to the treasury is in respect of early payments by the government of rescheduled debt to the Paris and London Clubs in 2006. The external payment is reflected in NFA in 2006; the additional claim of BA on the government (the treasury advance) will be drawn down in accordance with the original Paris/ London Club rescheduling terms over 2007’11.

Includes the debt rescheduling proceeds blocked in special accounts at the Bank of Algeria.

Includes postal accounts (CCP) and deposits of non-bank financial institutions (DA 3.4 billion in 2003; DA 4.6 billion in 2004; DA 0.8 billion in 2005).