At the end of their two-week mission in Algeria, the experts IMF We welcome the Government’s efforts for projects implemented against the effects of the Covid 19 crisis. But in a diplomatic tone, he suggests removing the last barriers to foreign investment and fighting bureaucracy.
The epidemic and the continued decline in oil production and prices had a severe impact on the economy last year, causing real GDP to shrink sharply to 4.9% by 2020. Authorities implemented a comprehensive set of measures to reduce the impact on the economy, including tax deferrals. , Increased health care costs, unemployment benefits, one-time transfer to low-income households, policy rate cuts Central Bank And easing the balance requirement ratio and prudent rules for banks.
The expansionary monetary policy pursued in recent years has contributed to a high external current account deficit, despite import-crushing policies, and has led to significant financial needs largely met by the economy. Central Bank. The fiscal and external deficits widened further in 2020, with adequate international reserves set to fall from $ 62.8 billion in 2019 to $ 48.2 billion by the end of 2020.
“Gradual recovery is underway, with economic growth expected to exceed 3% this year, supported by rising prices and production of hydrocarbons. Average annual inflation rose to 4.1% in June 2021, partly due to international food prices and part of the drought in Algeria. Growth is likely to be moderate due to production restrictions, a reduction in investment decided in 2020 and current policies restricting debt to the private sector.
In fact, despite the resurgence in economic activity and the significant improvement in external balance in 2021, while it will protect the most vulnerable and support recovery, there is an urgent need to restore greater economic stability and space for maneuver.
According to the Mission Group, persistent high budget deficits in the medium term will lead to unprecedented financial needs, reduce foreign exchange reserves and pose risks to inflation, financial stability and the country’s balance sheet. Central Bank. Overall, the growth of banks’ lending to other parts of the economy will be severely affected with negative effects.
“This work recommends a comprehensive and consistent set of monetary, monetary and exchange policies to mitigate the vulnerabilities of Algeria. Is expected to continue.Cash financing should be banned to curb inflation and the rapid decline of international reserves, while diversifying budgetary financial resources, including external borrowing.Exchange exchange rate flexibility will help support the recession of the economy to external shocks, and tightening monetary policy will help control inflationary pressures.