Economic crisis to deepen in Algeria, warns IMF

The International Monetary Fund (IMF) has said that Algeria’s economy remains severely threatened, as it faces a dependency on oil and has an unviable fiscal system, according to the government-friendly North Africa Post on July 7th.

Algeria’s budget deficit increased to 13.9% of the GDP last year, among the highest in North Africa, according to the IMF. The notable decline is attributed to the declining hydrocarbon revenues, accompanied by increasing public expenditures, especially on wages and infrastructure.

The IMF reported that Algeria’s economy remains crucially dependent on oil and gas, which accounts for more than 90% of its export earnings. Furthermore, the OPEC+ production cuts and falling global gas prices have further pushed the current account into deficit. The IMF stated that this heavy reliance leaves the country severely susceptible to external shocks and cost fluctuations.

Algeria’s limited exchange rate restricts the economy’s ability to adapt to external pressures, according to the IMF. It also highlighted the country’s weak private sector, constrained by regulatory obstacles, restricted credit access, and the dominating presence of state-owned enterprises.

The IMF stated that without significant structural changes to improve the business climate, employment opportunities and economic diversification are unlikely to materialise.

While there was a fall in inflation from 9.3% in 2023 to 4% last year, the IMF said this was down to short-term obstacles like decreasing food costs. It cautioned that inflationary pressures could resurface if the fiscal imbalances are prolonged.

The IMF’s assessment strongly criticises Algeria’s economic system. Without swift reforms to cut fiscal deficits, broaden the economy, and strengthen the private sector, the country faces rising instability and indefinite stagnation.

The North Africa Post, Maghrebi.org