IMF urges more structural reform

21 March 2003
Algeria should take advantage of its strong macroeconomic position to pursue policies aimed at increasing gross domestic product (GDP) growth and job creation, according to the IMF, which has recently published its Article IV consultations.

Recent reform efforts are commended, particularly in the areas of privatisation and trade liberalisation, though the IMF encourages further progress on both. It recommends that steps towards the privatisation of the banking sector should be taken, along with the sale of some 40 companies earmarked for privatisation.

In the area of trade, the authorities were encouraged to bring down multilateral tariffs further and to continue moves towards regional integration. Algiers' hopes of WTO membership were boosted on 8 March by Carlos Perez Castillo, chairman of the WTO general council, saying that he expected Algeria to join in the first half of 2004.

While generally approving of macroeconomic policies, the IMF warned that the fiscal relaxation witnessed since 2001 would only temporarily increase growth and that the government should concentrate on structural reform. The expansionary fiscal policy, enacted in the face of difficult economic conditions and rising unemployment, risks entrenching new expenditures and creating inflationary pressures, the IMF adds. According to the government's own statistics, inflation climbed to 4.2 per cent in 2001 from only 0.3 per cent in 2000 (MEED 14:6:02). On the other hand, the IMF credited Algiers with focusing monetary policy on controlling inflation. In order to reduce vulnerability to external shocks - principally fluctuations in hydrocarbon prices - the fund advised further liberalisation of the exchange rate regime.

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