Rapport Du FMi Sur L'algérie

IMF Country Report No.
24/88
ALGERIA
2023 ARTICLE IV CONSULTATION—PRESS RELEASE;
April 2024 STAFF REPORT; AND STATEMENT BY THE EXECUTIVE
DIRECTOR FOR ALGERIA
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions
with members, usually every year. In the context of the 2023 Article IV consultation with
Algeria, the following documents have been released and are included in this package:
• A Press Release summarizing the views of the Executive Board as expressed during its
March 27, 2024 consideration of the staff report that concluded the Article IV
consultation with Algeria.
• The Staff Report prepared by a staff team of the IMF for the Executive Board’s
consideration on March 27, 2024 following discussions that ended on December 14,
2023, with the officials of Algeria on economic developments and policies. Based on
information available at the time of these discussions, the staff report was completed
on March 8, 2024.
• An Informational Annex prepared by the IMF staff.
• A Statement by the Executive Director for Algeria.
The document listed below has been or will be released.
Selected Issues
The IMF’s transparency policy allows for the deletion of market-sensitive information and
premature disclosure of the authorities’ policy intentions in published staff reports and
other documents.
Copies of this report are available to the public from
International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090
Telephone: (202) 623-7430 • Fax: (202) 623-7201
E-mail: [email protected] Web: http://www.imf.org
International Monetary Fund

Washington, D.C.
© 2024 International Monetary Fund

PR24/100
IMF Executive Board Concludes 2023 Article IV Consultation with

Algeria
FOR IMMEDIATE RELEASE
Washington, DC – March 29, 2024: The Executive Board of the International Monetary Fund (IMF)
concluded the Article IV consultation 1 with Algeria on March 27, 2024.
The Algerian economy was still emerging from the Covid pandemic when spillovers from
Russia’s war in Ukraine and recurrent droughts pushed up inflation, while high international
hydrocarbon prices boosted government revenue and exports. The Algerian economy is estimated
to have grown by 4.2 percent in 2023, a robust performance owing to a rebound in hydrocarbon
production and strong performance in the industry, construction, and service sectors. The external
position remained solid with a current account surplus for the second year in a row. However, inflation
pressures persisted (primarily due to high food prices) and monetary policy remained accommodative.
The fiscal deficit is estimated to have widened, albeit less than foreseen in the 2023 revised budget
because of relatively slow execution rates.
The near-term outlook is broadly positive, but inflation remains a concern. Real growth is forecast
to remain strong in 2024, at 3.8 percent, supported in part by large fiscal spending. Inflation would start
to decelerate, particularly thanks to easing fresh food prices, although entrenchment at a relatively
elevated level is a concern. The current account surplus is projected to narrow further in 2024 as
hydrocarbon prices decline.
Medium-term economic prospects hinge on efforts to diversify the economy and the ability to
attract private investment, and are subject to several risks. Risks on the downside include stubborn
inflation, volatility in international hydrocarbon prices, fiscal risks from contingent liabilities, large
budgetary financial needs, and rising public debt. Extreme climate events would affect the economy and
the budget while a disorderly energy transition is a longer-term risk. On the upside, sustained, bold, and
deep structural reforms and resolute efforts to diversify the economy, improve the business climate,
attract investment, and tap new export markets could spur growth and job creation further.
Executive Board Assessment 2
In concluding the Article IV consultation with Algeria, Executive Directors endorsed staff’s appraisal as
follows:
Executive Directors agreed with the thrust of the staff appraisal. They welcomed Algeria’s sustained solid
growth and external position, despite multiple economic headwinds. While the near-term outlook is
1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually
every year. A staff team visits the country, collects economic and financial information, and discusses with officials
the country's economic developments and policies. On return to headquarters, the staff prepares a report, which
forms the basis for discussion by the Executive Board.
2At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of
Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers
used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
2
broadly positive, inflation remains high and downside risks, including from volatile commodity prices and
climate hazards, require continued vigilance. In this context, Directors emphasized that a sound policy
mix, accompanied by sustained implementation of reforms to diversify the economy and reduce climate
related risks, will be necessary to ensure macroeconomic stability and promote inclusive and sustainable
growth.
Directors welcomed the authorities’ commitment to medium-term fiscal sustainability. Noting the
importance of maintaining social equity, they indicated that the large projected near-term fiscal deficit and
financing needs could increase financial, fiscal, and inflationary vulnerabilities. In this vein, they
encouraged the authorities to gradually rebalance fiscal policy to help preserve buffers and improve fiscal
and debt sustainability, while ensuring targeted support for the most vulnerable. Directors underscored
the role of fiscal policy in addressing climate mitigation and adaptation, including through reforming the
energy subsidies and undertaking a C-PIMA. They also noted that improving public financial
management and establishing a rules-based medium-term fiscal framework would help support the
authorities’ medium term fiscal plans.
Directors emphasized that proactive tightening of monetary policy, through raising the policy rate and
reserve ratio, combined with continued liquidity absorption, will help support disinflationary efforts.
Strengthening the monetary transmission mechanism and specifying price stability as the primary
objective of monetary policy will also be critical. Directors welcomed the adoption of the Monetary and
Banking Law aimed at modernizing financial markets and central bank operations and governance. They
also underscored that greater exchange rate flexibility would enhance its role as shock absorber.
Directors welcomed the resilience of the banking system. They encouraged the authorities to reinforce
bank supervision, monitor NPLs, and strengthen governance of state-owned banks and other SOEs.
These will help reduce the systemic risks posed by the intertwined economic and financial links between
the government, public enterprises and state-owned banks. Further improvements in financial inclusion
will also be critical.
Directors welcomed the authorities’ commitment to reforms, including efforts to boost investment,
improve fiscal transparency, strengthen the AML/CFT framework, and address governance and
corruption risks. They underscored the importance of continued structural reforms to improve the
business environment, support youth and women labor force participation, and promote diversified,
green, and private sector led growth. Directors also urged the authorities to improve the coverage and
timeliness of statistics, supported by Fund capacity development, to better inform policy making.
It is expected that the next Article IV consultation with Algeria will be held on the standard 12-month
cycle
3
Algeria: Selected Macroeconomic Indicators, 2019–29

Projections
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Output and prices (Annual percentage change)

Real GDP 0.9 -5.0 3.8 3.6 4.2 3.8 3.1 2.5 2.1 2.1 2.1
Hydrocarbon sector -4.9 -10.2 10.5 -0.6 4.5 2.7 1.5 1.0 0.5 0.5 0.5
Nonhydrocarbon sector 1.8 -4.3 2.9 4.2 4.1 4.0 3.3 2.7 2.3 2.3 2.3
Per capita -1.0 -5.9 2.1 2.0 2.6 2.4 1.7 1.2 0.9 0.9 0.9
Consumer price index (period average) 2.0 2.4 7.2 9.3 9.3 7.6 6.4 6.1 5.5 5.2 5.0
Investment and savings (In percent of GDP)

Savings-investment balance -8.7 -11.3 -2.4 8.4 2.2 0.1 -1.5 -2.5 -2.9 -3.4 -3.8
National savings 38.3 33.2 38.5 44.4 40.8 38.7 36.6 35.3 34.7 34.3 33.9
Central government 3.8 -1.5 1.5 4.0 4.2 -1.5 -1.4 -0.7 -0.9 -0.8 -0.8
Nongovernment 1/ 34.5 34.6 37.0 40.4 36.6 40.3 38.0 36.0 35.6 35.1 34.7
Investment 47.0 44.5 40.9 36.0 38.6 38.6 38.1 37.9 37.6 37.7 37.7
Central government 12.3 9.1 7.8 6.5 7.2 7.0 6.5 6.1 5.9 5.9 5.9
Nongovernment 1/ 34.7 35.5 33.1 29.5 31.4 31.6 31.7 31.8 31.7 31.8 31.8
o/w Nongovernment nonhydrocarbon 28.9 32.1 30.5 27.3 29.7 29.9 29.9 30.0 30.1 30.2 30.2
Central government finances (In percent of GDP)

Revenue 28.6 27.0 26.2 29.6 31.1 27.8 26.8 26.4 25.7 25.4 25.2
Expenditure (incl. net lending) 37.1 37.5 32.5 32.0 34.1 36.3 34.7 33.2 32.4 32.1 31.9
Overall budget balance -8.5 -10.5 -6.3 -2.5 -3.0 -8.5 -7.8 -6.7 -6.7 -6.7 -6.7
Central bank financing (flow) 4.3 0.0 2.1 -0.1 -0.7 -1.1 -1.5 -0.5 -0.7 -1.3 -1.2
Gross government debt (excluding guarantees) 40.9 46.0 55.1 48.1 49.5 46.4 49.7 51.9 54.5 57.0 59.5
(In percent of nonhydrocarbon GDP)

Nonhydrocarbon primary balance excluding central bank dividends -27.7 -25.8 -24.3 -27.8 -26.6 -26.6 -23.9 -21.5 -20.1 -19.3 -18.7
Nonhydrocarbon balance -24.1 -22.4 -20.6 -27.4 -26.4 -27.0 -24.6 -22.5 -21.4 -20.8 -20.3
Revenue 34.4 30.7 32.4 40.2 38.6 33.7 32.2 31.5 30.4 30.0 29.5
Hydrocarbon 13.9 10.4 12.8 24.0 22.7 16.7 15.2 14.5 13.4 12.9 12.4
Nonhydrocarbon 20.5 20.2 19.5 16.2 15.9 17.0 17.0 17.0 17.0 17.1 17.1
Expenditure (including net lending) 44.6 42.6 40.2 43.5 42.3 44.0 41.6 39.5 38.4 37.9 37.4
Current expenditure 25.5 27.2 26.9 32.1 31.2 33.3 31.8 30.5 29.8 29.3 29.0
Capital expenditure 14.8 10.3 9.6 8.9 9.0 8.4 7.8 7.2 7.0 7.0 7.0
Net lending 4.3 5.1 3.7 2.5 2.1 2.2 2.0 1.8 1.7 1.6 1.4
External sector 2/
Current account balance (percent of GDP) -8.7 -11.3 -2.4 8.4 2.2 0.1 -1.5 -2.5 -2.9 -3.4 -3.8
Exports, f.o.b. (percent change) -14.3 -37.9 76.2 69.6 -16.4 -0.6 1.0 1.5 0.8 0.8 0.6
Hydrocarbons -14.5 -39.8 70.2 74.8 -16.7 -2.7 -0.9 -0.2 -1.0 -1.2 -1.4
Nonhydrocarbons -7.6 -7.8 138.9 30.6 -13.9 19.5 16.3 12.7 11.4 11.7 9.9
Imports, f.o.b. (percent change) -8.1 -20.4 5.4 3.7 12.7 11.2 8.9 6.0 3.2 2.8 2.3
Crude oil export unit value (US$/bbl) 64.5 41.9 72.3 103.9 84.0 81.2 77.1 74.2 72.4 71.4 70.9
Gross official reserves
In US$ billions 62.8 48.2 45.3 61.0 68.9 71.3 69.3 64.2 57.7 49.8 40.5
In months of next year's imports of goods and services 17.6 13.0 11.6 13.9 14.1 13.5 12.4 11.1 9.7 8.2 6.6
Gross external debt (percent of GDP) 2.0 2.1 1.7 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2
Money and credit (Annual percentage change unless otherwise indicated)

Net foreign assets -20.3 -14.9 -5.2 35.5 6.7 9.5 2.2 -3.0 -5.9 -10.2 -15.8
Credit to the economy 9.0 3.0 -12.1 3.2 5.8 5.4 4.5 5.0 5.6 5.9 6.0
Money and quasi-money -0.8 7.4 13.2 14.3 5.9 14.1 9.5 7.2 7.3 7.0 6.8
Memorandum items:
GDP (in billions of dinars at current prices) 23,090 20,902 25,158 32,028 33,225 36,764 40,152 43,634 46,947 50,347 53,855
Nominal GDP Growth 1.8 -9.5 20.4 27.3 3.7 10.7 9.2 8.7 7.6 7.2 7.0
NHGDP (in billions of dinars at current prices) 19,216 18,396 20,383 23,561 26,773 30,357 33,463 36,600 39,615 42,721 45,937
GDP capita per (in US$) 4,453 3,758 4,170 4,982 … … … … … … …
Exchange rate (DA per US$) 119.4 126.9 135.3 142.0 … … … … … … …
REER (percent change) 2.1 -4.4 -4.8 6.2 … … … … … … …
Sources: Algerian authorities; and IMF staff estimates and projections.

1/ Including public enterprises.
2/ In U.S. dollars unless otherwise indicated.
ALGERIA
STAFF REPORT FOR THE 2023 ARTICLE IV CONSULTATION
March 8, 2024
KEY ISSUES
Context. The Algerian economy was still emerging from the Covid pandemic when it
was hit by spillovers from Russia’s war in Ukraine and by recurrent droughts. These
shocks fueled inflation while high international hydrocarbon prices also boosted
government revenue and exports. Algeria’s economy likely recorded a robust growth in
2023 and the external position remained solid, with a current account surplus for the
second year in a row and further accumulation of international reserves. Inflation
remains elevated and could become entrenched. The 2023–24 budgets aim at
supporting the purchasing power of households but risk depleting the buffers that
protect the budget from revenue volatility. Structural reforms are advancing with the
enactment of the Monetary and Banking law and the implementation of program
budgeting and the 2022 Investment Law. Investment in digitalization would strengthen
governance and transparency, reduce corruption risks, and improve service delivery.
Outlook and Risks. The near-term outlook is broadly positive, but inflation remains a
concern. Economic growth would slow but remain robust, partly supported by high
government spending, and the current account surplus would narrow, reflecting a
decline in international hydrocarbon prices. Medium-term economic prospects depend
on efforts to diversify the economy and attract private investment. Staff’s baseline
scenario projects real GDP growth slowing as hydrocarbon production moderates,
financing constraints cap budget spending, and structural bottlenecks inhibit private
sector growth. Volatility in international hydrocarbons prices and stubborn inflation are
near-term risks. Other downside risks include climate hazards, an abrupt slowdown in
Europe, materialization of contingent liabilities (including from state-owned enterprises,
SOEs), and large fiscal financing needs together with rising public debt (particularly in
the event of reform inertia). A disorderly global energy transition poses a long-term risk.
On the upside, resolute efforts to diversify the economy, attract investment, and
improve the business climate could spur growth and job creation, and economic
prospects could further improve if bold and deep structural reforms took root.
ALGERIA
Key Policy Recommendations
 Fiscal Policy. Gradual fiscal rebalancing is needed to rebuild financial buffers, reduce the
vulnerability of the budget to hydrocarbon price volatility, and limit risks to
macroeconomic and financial stability (including from large borrowing needs). This
gradual rebalancing could be anchored on stabilizing the public debt ratio over the
medium term, which itself would be a stepping stone to developing a rules-based
medium-term fiscal framework. Fiscal policy can also support the authorities’
comprehensive mitigation and adaptation strategy to respond to the challenges from
climate change. A gradual reform of energy subsidies, accompanied by targeted support
to vulnerable populations, would create space for investments in climate adaption and
help build a financial buffer.
 Monetary and Exchange Rate Policies. Monetary policy tightening is needed to reduce
inflation and signal the central bank’s determination to address inflation risks. Monetary
policy transmission would improve with reforms aiming at deepening financial markets
and making them more competitive and market-based. More flexibility in the dinar rate
would enhance its role as shock absorber and help develop the FX market.
 Financial sector. The reforms embodied in the Monetary and Banking Law could be an
impetus to strengthen the credit market infrastructure, develop long-term savings
products, and advance financial inclusion. Intertwined economic and financial links
among the central government, state-owned banks (SOBs), and SOEs could amplify
macro-financial risks from shocks. These call for closely monitoring the liquidity and
solvency of the banking sector, ensuring that prudential rules are followed, and risks are
being assessed regularly, as recommended by the 2019 FSAP. The authorities should
also closely follow the financial risks of all public enterprises, strengthen their
governance, and reconsider their role in the economy.
 Structural reforms. Sustained and bold reforms would tap the potential of the private
sector as driver of sustained growth and job creation. The implementation of the
Investment Law and the enactment of a new Land Law aim at fostering private sector
initiative and investment and should be complemented with reforming the SOE sector
(including by shedding non-strategic and loss-making ones) and making product and
labor market more flexible. The authorities should continue to pursue their efforts to
reduce corruption risks and improve transparency (leveraging digitalization) and to
correct AML/CFT identified gaps. Improving the coverage and timeliness of statistics
would help inform policy making.
2 INTERNATIONAL MONETARY FUND

ALGERIA
Approved By Discussions were held in Algiers during December 3–14, 2023. The
Taline Koranchelian mission team comprised Chris Geiregat (head), William Gbohoui,
and S. Jay Peiris Véronique Salins (all MCD), and Thierry Tressel (MCM). Mr. Kamel
Badsi (OED) joined most meetings. The mission met with Governor
of the Bank of Algeria, Mr. Taleb; Finance Minister, Mr. Faid; Energy
and Mines Minister, Mr. Arkab; Agriculture and Rural Development
Minister, Mr. Cherfa; Commerce and Exports Promotion Minister, Mr.
Zitouni; and Hydraulic Resources Minister, Mr. Derbal. The team also
held discussions with other senior government and central bank
officials and with representatives of the economic and financial
sectors and civil society. Dalia Kadissi and Jarin Nashin provided
excellent research support, and Rodrigo Huguet and Abigail Korman
contributed to the production of the report.
CONTENTS
ACRONYMS ______________________________________________________________________________________ 5
CONTEXT _________________________________________________________________________________________ 6
RECENT MACROECONOMIC DEVELOPMENTS _________________________________________________ 6
OUTLOOK AND RISKS ___________________________________________________________________________ 7
POLICY DISCUSSIONS ___________________________________________________________________________ 9

A. Fiscal Policy ______________________________________________________________________________________9
B. Monetary and Exchange Rate Policies _________________________________________________________ 15
C. Financial Sector Policies _______________________________________________________________________ 19
D. Structural Reforms: Diversifying the Economy by Enabling Private Sector Initiative,
Strengthening Governance and Transparency, and Reducing Corruption Risks__________________ 23
STAFF APPRAISAL ______________________________________________________________________________ 26

A. Why is Financial Inclusion Important? _________________________________________________________ 68
B. What is the State of Financial Inclusion in Algeria? ____________________________________________ 68
C. What Policies Would Help Increase Financial Inclusion in Algeria? ____________________________ 69
FIGURES
1. Selected Macroeconomic Indicators ___________________________________________________________ 29
2. External Sector Developments _________________________________________________________________ 30
3. Fiscal Indicators ________________________________________________________________________________ 31
INTERNATIONAL MONETARY FUND 3

ALGERIA
4. Monetary and Financial Sector Indicators _____________________________________________________ 32
TABLES
1. Selected Economic and Financial Indicators, 2019–29 _________________________________________ 33
2a. Balance of Payments, 2019–29 (billions of US dollars) ________________________________________ 34
2b. Balance of Payments, 2019–29 (percent of GDP) _____________________________________________ 35
3a. Summary of Central Government Operations, 2019–29 (billions of Algerian dinars) _________ 36
3b. Summary of Central Government Operations, 2019–29 (percent of GDP)____________________ 37
4. Monetary Survey, 2019–29 ____________________________________________________________________ 38
5. Financial Soundness Indicators, 2012–23H1 ___________________________________________________ 39
ANNEXES
I. Risk Assessment Matrix_________________________________________________________________________ 40
II. Implementation of Past IMF Recommendations _______________________________________________ 44
III. Sovereign Risk and Debt Sustainability Assessment __________________________________________ 48
IV. External Debt Sustainability Analysis __________________________________________________________ 57
V. Alternative Fiscal Scenario _____________________________________________________________________ 60
VI. External Sector Assessment ___________________________________________________________________ 63
VII. Improving Financial Inclusion in Algeria ______________________________________________________ 68
VIII. Rebasing of National Accounts ______________________________________________________________ 77

ALGERIA
Acronyms
AAPI Agence algérienne de promotion des investissements (Algerian
Investment Promotion Agency)
ABEF l’Association des banques et établissements financiers (Association of
Banks and Financial Institutions)
BA Banque d’Algérie (Bank of Algeria)
BDH Banque de l’Habitat (Housing Bank)
CD Capacity Development (technical assistance and training)
CPAT Climate Policy Assessment Tool
C-PIMA Climate-resilient Public Investment Management Assessment
Cour des Comptes Audit Court
CTRF Cellule de Traitement du Renseignement Financier (Financial
Intelligence Unit)
EBA External Balance Assessment
FRR Fonds de Régulation des Recettes (Revenue Regulation Fund)
FSAP Financial Sector Assessment Program
Haut Comité Haut Comité d'Évaluation et d'Alerte des Risques Budgétaires (High-
level Budget Risk Committee of the Ministry of Finance)
LF2024 Loi de finances pour 2024 (2024 budget law)
MOF Ministry of Finance
NDC Nationally Determined Contribution
MENA Middle East and North Africa
NEER Nominal Effective Exchange Rate
NHGDP Nonhydrocarbon GDP
NHPD Nonhydrocarbon Primary Deficit (excl. Bank of Algeria’s dividends)
NPL Non-Performing Loan
ONS Office National des Statistiques (National Statistics Office)
PPPs Public-Private Partnerships
PSR Programme Spécial de Refinancement (Special Refinancing Program)
RAM Risk Assessment Matrix
REER Real Effective Exchange Rate
R&D Research and Development
SIP Selected Issues Paper
SMEs Small and Medium-sized Enterprises
SOEs State-Owned Enterprises
SOBs State-Owned Banks
SR-DSA Sovereign Risk and Debt Sustainability Assessment
TAP Taxe sur les Activités Professionnelles (Tax on Professional Activities)
VAT Value-Added Tax

ALGERIA
CONTEXT
The Algerian economy was still emerging from the Covid pandemic when it was hit by spillovers
from Russia’s war in Ukraine, which impacted international commodity prices, and by recurrent
droughts. While these shocks pushed inflation up, high international hydrocarbon prices also
boosted government revenue and exports. The budgets for 2023 and 2024 (the latter a Presidential
election year) aim to support the purchasing power of households but risk depleting the Revenue
Regulation Fund, a key financial buffer to protect budget expenditure from revenue volatility.
Containing inflationary pressures and maintaining fiscal sustainability and financial stability are
key priorities for monetary and fiscal policy. The authorities seek to reduce Algeria’s dependence on
the hydrocarbon sector by diversifying the economy, attracting private investment, and tapping
new export markets. Unleashing the economy’s full potential to create high and sustained economic
growth and job creation will require deep and bold structural reforms.
RECENT MACROECONOMIC DEVELOPMENTS

1. Real growth was robust in 2023 but inflation remained high. Real GDP is likely to
have grown by 4.2 percent in 2023, supported by strong activity in industry, construction, and
services, along with a rebound in hydrocarbon production. Average annual inflation has
exceeded nine percent since mid–2022. Core inflation (excluding fresh food and administered
prices) decelerated somewhat (to 7.8 percent at end-December 2023) but potential second-
round effects pose risks of entrenchment.
2. The current account has been in surplus for two consecutive years. The surplus
dropped by more than half in the first nine months of 2023 (to US$5.7 billion) mainly because of
lower (but still high) hydrocarbon prices. Staff estimates that the current account surplus likely
reached US$5.3 billion for the year. Algeria’s financial account is largely closed and net FDI flows
were below US$0.5 billion through 2023Q3. The nominal effective exchange rate appreciated
by five percent y-o-y through end–December, 2023 and international reserves reached
14.1 months of imports at end–October, 2023.
3. The budget deficit likely widened in 2023, albeit less than foreseen in the 2023
revised budget. Staff estimates that it reached three percent of GDP (from 2.5 percent in 2022),
although the nonhydrocarbon deficit was likely lower than in 2022 (26.4 percent of non-
hydrocarbon GDP, down from 27.4 percent in 2022). The 2023 revised budget sought to support
the purchasing power of households, including through salary increases, a new unemployment
allowance for first-time job seekers, and food subsidies. However, a low execution rate and late
adoption of the supplementary budget mitigated the increase in spending. The authorities

ALGERIA
planned to finance the 2023 deficit in part by drawing from the Revenue Regulation Fund (FRR).
Staff estimates that public debt rose to nearly 49.5 percent of GDP.1
4. The banking sector is liquid, solvent, and profitable but non-performing loans
(NPL) weigh on balance sheets. Aggregate solvency and liquidity ratios exceed regulatory
minima. The sector-wide NPL ratio has exceeded 19.5 percent since 2021 and NPLs of public
banks (21.4 percent at end–June 2023) are more than double those of private banks. Credit to
the private sector started to pick up in the second half of 2023, growing at 5.9 percent for the
year compared with 2.5 percent in 2022.
OUTLOOK AND RISKS

5. The near-term outlook is broadly positive, but inflation remains a concern
(Text Table 1). Staff projects real GDP growth of 3.8 percent in 2024, supported in part by large
fiscal spending. Inflation would decelerate thanks to easing fresh food prices, thanks in part to
the efforts to expand agricultural production and building a food security stock. The current
account surplus would narrow further, assuming a gradual decline in oil prices.
Text Table 1. Algeria: Macroeconomic and Financial Indicators, 2019–29
Sources: Algerian authorities and IMF staff estimates and projections.
6. Medium-term economic prospects depend on efforts to diversify the economy and

attract private investment. Staff’s baseline scenario projects real GDP growth slowing to a little
over two percent by 2029, as hydrocarbon production moderates, financing constraints cap
budget spending, and structural bottlenecks inhibit private sector growth. Inflation would
converge towards five percent. Current account deficits would return in 2025 but international
reserves would remain relatively comfortable (around 6.6 months of imports by 2029). Budget
1
This staff report incorporates the new national account data for 2001–22 (with base year 2001) published at
end–2023, and which increase annual nominal GDP by around ten percent on average (Annex VIII).

ALGERIA
execution would be constrained from lower hydrocarbon revenues and the policy to rely solely
on domestic financing sources (mainly public banks). The nonhydrocarbon budget deficit would
fall gradually, from an estimated 26.4 percent of NGDP in 2023 to about 20.3 percent of NHGDP
over the medium term, while the public debt ratio would continue to increase.
7. Risks.2
 Downside. Volatile international hydrocarbon prices and stubborn inflation are near-term
risks. Extreme climate events (droughts and floods) would affect agriculture and carry large
fiscal costs, while a disorderly global energy transition is a longer-term risk. Algeria would be
impacted in the event of an abrupt slowdown in Europe, its main export market. Domestic
risks stem from contingent liabilities (including from SOEs), high fiscal financing needs and
rising public debt, particularly in the event of reform inertia. Intertwined financial links
between the central government, state-owned banks, and SOEs are a source of systemic risk
to the economy and to financial stability, as these could potentially amplify the impact of
shocks (such as to commodity prices). The systemic risk has remained about the same
relative to the 2022 Article IV consultation.
 Upside. These are significant and depend on the implementation pace and impact of the
government’s action plan (investing in digitalization, improving governance), as well as the
authorities’ work towards attracting private investment, deepening domestic financial
markets, and tapping new export markets. Economic prospects would further improve if bold
and deep structural reforms took root (¶38 has details).
Authorities’ Views
8. The authorities are optimistic about medium-term growth while acknowledging the
risks to the economic outlook. They noted that their structural reform agenda would spur
private sector investment and growth in the medium term, highlighting the expected impact of
the 2022 Investment Law, the Land Law, and efforts to streamline administrative red tape for
investors. They considered that the increase in non-hydrocarbon exports reflects the
government’ strategy to diversify the economy and strengthen its resilience to hydrocarbon price
volatility. The authorities broadly agreed with staff’s assessment of the main risks facing the
economy, while noting that the fiscal-financial risks from contingent liabilities and sizable
financing needs are being monitored and, in their view, contained.
2
See Annex I (Risk Assessment Matrix).

ALGERIA
POLICY DISCUSSIONS3
A gradual fiscal rebalancing would help build buffers against macroeconomic shocks and revenue
volatility and contain medium-term risks of sovereign debt distress. Monetary policy tightening
would signal the Banque d’Algérie’s (BA) determination to fight inflation and avoid that it becomes
entrenched. More exchange rate flexibility would help absorb shocks. Vulnerabilities from volatile
international hydrocarbon prices, climate change, and interlinkages among public sector entities
need to be better understood and managed. Creating sustained and inclusive growth and jobs will
require deep and bold reforms that reduce the public sector footprint and address structural
impediments to private sector initiative.
A. Fiscal Policy
Baseline Fiscal Projections
9. The 2024 budget eliminates the turnover tax on professional activities (“TAP”), with the
shortfall in revenues for local government partially compensated by of a new solidarity tax on
hydrocarbon transport. It also introduces new tax advantages to support the private sector (for
example, for start-ups and for the self-employed benefiting from the simplified auto-
entrepreneur regime). On the spending side, the budget envisages a large increase in the wage
bill: (i) a revision of the salary scale for 2.8 million public servants;4 (ii) the full-year impact of
hiring in the education sector in 2023 (about 31,000 positions); and (iii) new positions (about
37,000, mainly in education and health). The budget also increases the minimum pension and
several allowances (for students, handicapped individuals, and the first-time unemployed), as
maintaining the purchasing power of households remains a priority for the authorities. With the
introduction of program budgeting, the authorities expect to improve the efficiency and
execution rate of investment (Text Table 2).
Text Table 2. Algeria: 2022 Outturn and 2023 and 2024 Budgets
1/ Assumes that ”unallocated expenditures" are allocated fifty-fifty to current and capital spending.
Sources: Algerian authorities and IMF staff estimates and projections.
3
See Annex II (Implementation of past IMF recommendations).
4
This revision increases public salaries by about 15 percent in 2024 alone, and cumulatively over 2022–24 by
about 47 percent.

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10. The large projected fiscal deficit for 2024 (coming on top of the likely widened
deficit in 2023) would erode financial buffers and increase vulnerabilities (Text Figure 1).
The overall fiscal deficit would reach 8.5 percent of GDP in 2024 and the nonhydrocarbon deficit
27 percent of NHGDP. The budget deficits in 2023–24 would deplete the financial cushion in the
Revenue Regulation Fund (FRR), exhaust fiscal space, and potentially fuel inflation.5 These deficits
would constrain fiscal policy in later years, as financing large gross financing needs may strain
the domestic banking sector, crowd out private credit, and increase the risk of alternative
financing schemes such as tapping SOE financial resources. Staff projects modestly declining
fiscal deficits over the medium term, mainly reflecting binding financing constraints.
11. The Sovereign Risk–Debt Sustainability Analysis (SR-DSA) results suggest a

“moderate” risk of sovereign stress for Algeria (Annex III). Even though the use of the FRR
would limit the debt buildup in 2024, and fiscal deficits would gradually fall in later years, staff’s
baseline projections suggest continued increases in the public debt ratio, adding to debt
vulnerabilities. Large uncertainty, especially from volatile hydrocarbon revenue, also increases the
medium-term risk of sovereign stress. Mitigating factors to sovereign stress include the initial
balances in the FRR (which reduce near-term risks), the large share of nonmarketable debt, and
the near absence of external public debt (Annex IV).
Text Figure 1. Algeria: Fiscal Policy Developments, 2019–29
The public debt ratio would increase over the … fueled by significant public deficits, despite
medium term because of large gross the gradually tightening fiscal stance.
financing requirements…
Sources: Algerian authorities and IMF Staff estimates.
Policy Focus: Increasing Budget Resilience to Shocks
12. A gradual rebalancing of fiscal policy and anchoring it on stabilizing public debt by
2026 would help improve the budget resilience. Staff analysis suggests that additional
measures of three pps. of GDP over 2024–26 could stabilize the public debt ratio around
47 percent of GDP by 2026 (Text Figure 2 and Annex V). The additional effort over baseline
5
As of end–December 2023, the FRR had a balance of DZD 2,268 billion (6.8 percent of GDP).

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projections could come from revenue and expenditure measures, including: (i) eliminating
inefficient tax expenditures;6 (ii) spreading hiring and salary increases for public servants over
multiple years; and (iii) gradually replacing universal subsidies with targeted transfers, starting
with those on fuel products (see also ¶19). The additional fiscal restraint would help raise FRR
savings and create fiscal space to absorb macroeconomic shocks and manage revenue volatility. 7
It would also reduce gross financing needs and the associated recourse to the domestic banking
sector, thus leaving more space for private sector borrowing.
13. More broadly, staff reiterated its advice from the 2022 Art. IV consultations to
guide medium-term fiscal projections with a rules-based framework to make the budget
more resilient.8 The framework proposed a buffer based on a dual-pillar approach: a public debt
margin and a savings floor (funds held in the FRR), which, together, would suffice to cover
95 percent of simulated medium-term trajectories. Staff’s current recommendation to anchor the
fiscal trajectory on stabilizing the public debt ratio would be a stepping stone to developing a
rules-based medium-term fiscal framework that also includes the financing side and a DSA.
Text Figure 2. Algeria: Impact of Additional Fiscal Measures on Fiscal Balances and
Public Debt, 2021–29 (in percent of GDP)
Additional fiscal adjustment of three pps. of …and stabilize the public debt ratio around
GDP over 2024–26 would lower the fiscal 47 percent of GDP and thus help rebuild a
deficit … buffer against shocks.
Source: IMF staff estimates and projections.
6
A partial list of tax expenditures in the 2024 budget law has an amount of DZD 495 billion (1.3 percent of
projected 2024 GDP).
7
Windfall hydrocarbon revenue would be saved in the FRR.
8
Selected Issues Paper “Designing a Rules-Based Fiscal Framework for Algeria”.

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Reform Agenda
14. Public finance management reforms advance at a steady clip. The authorities are
implementing the new procurement and public accounting laws. Implementation of program
budgeting is advancing as well, with 2023–24 as transition years. The Ministry adopted a code of
conduct and performance contracts. A new data center brings for the first time together the
Ministry’s data platforms (customs, taxation, and property taxation).
15. Preparing a financing plan and strengthening cash and public debt management
would enhance planning, execution, and transparency of the budget. In this regard,
finalizing the “État D” (that is, the financing side) of the budget, as called for by the Organic
Budget Law, and preparing monthly cash-flow forecasts would strengthen budget transparency
and credibility. The Treasury is keen on improving debt management and is preparing reforms to
improve the organization and transparency of the debt markets (new statutes for primary
dealers, launching a website with information on debt auctions, etc.). These initiatives could be
embedded in a medium-term debt management strategy that states the authorities’ objectives
for debt management, analyzes risks, discusses financing costs and tradeoffs, envisages the
development of new debt instruments and of the debt market, and covers transparency
requirements (such as publishing regular reports).
16. Systematic risk analysis and contingency planning would support decision making.
A committee of general directors of the Ministry of Finance (“Haut Comité”) is charged with
identifying and ranking potential risks to the budget and recommending how to manage them. It
prepares an annual report for the Prime Minister. Staff recommended that the Haut Comité
considers budget risks holistically, including by (i) analyzing their potential budgetary impact;
(ii) preparing contingency plans and proposing mitigating actions; and (iii) issuing a risk report to
the Council of Ministers, describing the main risks in the budget law, and eventually publishing a
fiscal risk statement. Staff discussed the IMF’s Risk Assessment Matrix (Annex I) and the
methodology to assessing sovereign risk and debt sustainability (Annex III) as potential
blueprints.
Policy Focus: Addressing Challenges for Fiscal Policy Arising from Climate Change9
17. Climate change is already affecting Algeria’s economy and its risks are expected to
increase over time (Text Figure 3). Climate change may affect Algeria in many ways. Recurrent
drought and extreme temperatures have already strained agriculture and water supply. While
concerns about energy security and lower global economic growth could increase revenue
volatility in the near term, the global energy transition could reduce trend revenue and add to
revenue volatility over the medium term. Affected sectors may need additional financial support
from the budget and higher credit risks may affect the asset quality of state-owned banks (SOBs).
These factors could increase the risk of sovereign debt distress.
9
See Selected Issues Paper “Fiscal Reforms to Support Addressing Climate Change Challenges”.

ALGERIA
18. The Algerian authorities have developed a mitigation and adaptation strategy to
respond to the challenges brought about by climate change. Algeria’s Nationally Determined
Contribution (NDC) pledges to reduce carbon emissions by seven percent by 2030 (from a
business-as-usual scenario). The 2021 National Climate Plan lists 155 mitigation and adaptation
actions. Conserving and creating new water resources (desalination, recycling of wastewater, etc.)
and improving food security (better agriculture methods and increasing arable land) are
priorities.
Text Figure 3. Algeria: Risks from Climate Change for the Economy and Public Finances
Source: IMF.
19. Fiscal policy can be a lever in supporting Algeria’s mitigation and transition efforts.
This includes:
 Energy subsidy reform. Staff analysis suggests that gradual adjustment of energy prices
toward cost-recovery levels (over six years starting in 2024) could generate average annual
fiscal revenue of about 6.4 percent of GDP over the next decade (Text Figure 4). It would
reduce emissions by over one fifth by 2030 relative to a business-as-usual scenario.10 The
savings could be used for priority spending (targeted support, investing in climate
adaptation) and to build a financial buffer. Staff emphasized that such reforms should be
buttressed by a strong communications campaign and by targeted compensatory measures
for vulnerable populations.
10
Estimates are based on the stylized IMF-WB Climate Policy Assessment Tool (CPAT).

ALGERIA
 Feebates and incentives for investing in renewables.11 Feebates could be included in the
car registration system and home appliance sales and be applied to emissions by carbon-
intensive industries and large farms. Incentives for renewable energy generation could
include subsidies (tax credits, accelerated depreciation) or feed-in tariffs (guaranteed prices).
 Integrating climate considerations in public finance management processes. This

includes: (i) strengthening public investment management (the authorities expressed an early
interest in conducting a Public Investment Management Assessment (C-PIMA)) (ii) integrating
“green” considerations into budget documents and processes; and (iii) empowering the Haut
Comité to identify and quantify fiscal risks from climate change and assess policies to
mitigate them.
Text Figure 4. Algeria: Global Gasoline Prices and Impact of Subsidy Reform on Public
Finances
With gasoline prices in Algeria among the … energy subsidy reform would yield average
lowest in the world… annual fiscal revenue of about 6.4 percent of GDP
in the next decade.
Sources: Global Petrol Prices, IMF staff calculations, and IMF/WB Climate Policy Assessment Tool (CPAT).
Authorities‘ Views
20. The authorities noted that the 2023–24 budgets reflect their immediate policy
priorities and that they are committed to preserving sustainability of public finances over
the medium term. Supporting the purchasing power of households in the context of the post-
Covid high inflation is an immediate priority. Social equity and preserving the purchasing power
of citizens will remain a key priority in the future. Program budgeting and enhanced governance
and controls, and prioritizing investment projects, will improve the effectiveness and efficiency of
public finances. The medium-term budgetary framework also envisages enhanced tax revenue
11
See Parry (2021).

ALGERIA
mobilization and diversified sources of financing. The authorities agree that Algeria’s economy,
and the budget, face multiple risks from climate change. They emphasized the comprehensive
climate action plan that is being implemented across ministries and noted their openness to
undertake subsidy reform, as was already envisaged in the 2022 budget law.
B. Monetary and Exchange Rate Policies
Monetary Policy
21. Headline inflation has remained high but there are signs that core inflation may be
starting to decelerate (Text Figure 5). Fresh food inflation alone contributes about half to
headline inflation, while the contribution from administered prices has tapered off, possibly
because of increased controls and measures to boost supply. Core inflation (excluding
administered prices and fresh food) still contributes the other half, although it has shown some
signs of deceleration in recent months. Imported inflation is not a dominant factor; the
appreciation of the dinar may have helped contain it.
22. Ample bank liquidity and negative real short-term interest rates indicate that
monetary policy is accommodative (Text Figure 5). The BA in mid–April 2023 raised the
required reserve ratio by one point, to three percent, and modestly expanded its bilateral
liquidity absorption operation. The BA’s communiqué noted a desire to reduce excess liquidity
(which it considered potentially inflationary) while keeping liquidity sufficiently high to avoid
crowding out or increase the cost of credit. The policy rate has remained at three percent since
December 2020 while inflation exceeded nine percent.
23. Monetary policy tightening is needed to reduce inflation. An increase in the required
reserve ratio, broadening of liquidity absorption operations, and increase in the policy rate would
signal the BA’s determination to fight inflation. Even as fresh food price inflation may decelerate
in the coming months and core inflation shows initial signs of easing, both headline and core
inflation are still elevated and show persistence. Also, the loose fiscal policy in the near term
could impact inflation as increased spending (including the salary raises of public servants) may
stimulate aggregate demand and spill over to private sector salaries. A tightening stance would
demonstrate that the BA proactively seeks to fend off such potential second-round effects.

ALGERIA
Text Figure 5. Algeria: Inflation, Bank Liquidity, and Monetary Policy Instruments
Fresh food prices and core inflation contribute … while the contribution from high-import
about equally to inflation… factors started to diminish in late 2022.
The policy rate has barely moved despite the … and the required reserve ratio is low with
large and sustained increase in inflation… ample bank liquidity.
24. Improving monetary policy transmission will require far-reaching reforms,

including capacity building and financial market development. The BA is receiving IMF CD to
enhance its modeling capacity for monetary policy decision-making. Regular communication by
the BA, in the context of economic developments and prospects, would improve transparency of
the BA’s policy actions. Policy transmission would improve with reforms that deepen financial
markets and make them more competitive and market-based (Text Figure 6). This requires
reducing the dominance of the public sector in domestic financial markets, introducing
competitive price-based public debt auctions, phasing out the quasi-fiscal activities of SOBs (and

ALGERIA
which result in government subsidies at low and fixed interest rates), and limiting the use of
guarantees.
Text Figure 6. Algeria: Selected Short-Term Interest Rates (in percent)
The policy rate does not transmit to other short-term interest rates and T-bill
rates do not appear to be market-based.
25. Implementing the new Monetary and Banking Law (LMB) is a priority. The LMB is
the authorities’ cornerstone of reforms to modernize the central bank function and develop
financial markets, by: (i) encouraging financial innovation (Islamic and digital banks, online
payment services, etc.); (ii) strengthening financial surveillance and crisis management, as was
recommended by the 2019 FSAP (for example, creating a financial stability committee and
emergency liquidity assistance, ELA); and (iii) introducing new instruments of monetary policy,
governance bodies, and control functions (for example, by putting in place requirements for
internal controls and reporting). The BA issued new regulations for FX bureaus in September
2023 and the two vacant vice-Governor positions were filled. The ELA is being developed with
IMF support and milestones for 2024 include regulation on Islamic, digital, and investment
banking, online payment providers, and payment systems.
26. Staff welcomed these reforms and recommended that implementation texts or
future revisions of the LMB:
a. Note price stability as the primary objective of monetary policy (ahead of other
objectives such as creating and maintaining favorable credit conditions), all while
safeguarding monetary and financial stability.
b. Specify the conditions, limits, modalities, and safeguards to extend monetary financing
to the Treasury, which Art. 48 of the LMB limits to be extended only in truly exceptional and
unforeseen crisis situations.

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c. Clarify: (i) how to avoid overlaps between the Banking Commission and the BA on financial
supervision; (ii) the organization, instruments, and resources for the BA’s macroprudential
mandate; (iii) the modalities of crisis management by the BA (in line with international best
principles and separate from macroprudential surveillance).
Exchange Rate Policy
27. More flexibility in the dinar rate would enhance its role as shock absorber and help
develop the FX interbank market.12 The effective exchange rates appreciated in 2023
(Text Figure 7). The BA targets a medium-term equilibrium real effective exchange rate (REER)
based on an empirical model, while day-to-day transactions occur within a narrow buy/sell band
(DZD 0.015 per USD). Widening this band to allow more two-way flexibility would strengthen the
role of the exchange rate in absorbing external shocks. Algeria’s de jure exchange rate
arrangement is “managed floating” and the de facto arrangement is “stabilized”. Staff’s External
Balance Assessment analysis suggests that the external position was moderately stronger than
the level implied by fundamentals and desirable policy settings in 2023, implying a moderate
REER undervaluation of 10.3 percent based on the current account model (Annex VI).
Text Figure 7. Algeria: Effective Exchange Rates (Index, 2015Q1 = 100)
After years of near-steady depreciation, effective exchange rates have been

appreciating since 2022.
28. The authorities are studying a relaxation of foreign currency allocations for
international travel. The premium on the parallel market reached 62 percent in
12
The 2022 AREAER classified de facto exchange rate arrangement as “crawl-like”. The exchange rate stabilized
within a two percent band against the U.S. dollar between February and August 2023, which resulted in the
reclassification to “stabilized”.

ALGERIA
November 2023.13 Its increase may be due in part to the resumption of foreign travel following
the end of the pandemic, possibly also stemming from informal (and illegal) market activity and
over/under-invoicing of imports/exports. The basic allocation of FX for foreign travel is currently
limited to about 100 euros and increasing it could reduce FX demand in the parallel market. Staff
noted that developing the interbank FX market would also help reduce the premium.
29. The BA is carefully following inflationary and financial developments but did not
see a need to tighten monetary policy, beyond the actions taken in April 2023. They
emphasized that monetary tightening at this stage risks harming credit to the economy (whose
growth has been modest) and that the sources of inflation are mainly from supply and external
factors. They also expect bank liquidity to tighten with upcoming repayments of past monetary
financing and the “Special Refinancing Program” (PSR).14 The BA agreed with the risk of inflation
entrenchment and with the limited effectiveness of using the exchange rate to contain inflation.
The BA reiterated their readiness to use all available policy tools to preserve price stability.
C. Financial Sector Policies
30. The implementation of the new LMB is an impetus to increase financial inclusion in
Algeria (Annex VII). The authorities expect that the reforms will increase the use of financial
services beyond basic operations (such as cash withdrawals). Fintech innovations (domestic and
cross-border payment services, mobile money, internet banking, etc.) can also support financial
deepening and inclusion, but their risks need to be managed carefully. Staff suggested that
financial inclusion could also improve by:
a. Preparing a national financial inclusion strategy which would include articulating

objectives, defining reform areas, setting targets and timelines to achieve those, etc.; and
could, for example, aim at expanding digital financial services including to specific sectors
such as SMEs and microfinance.
b. Improving financial literacy and awareness of consumer protection, including to

familiarize the population with digital finance (making online payments, using credit cards,
etc.).
c. Continuing to strengthen the credit market infrastructure, for example, by establishing a

Centrale des bilans and a registry of movable collateral. It would also be beneficial to review
and strengthen the existing platforms at the Bank of Algeria (such as the Centrale des risques
and the Centrale des incidents de paiement).
13
Source: https://devisesquare.com/#EUR.
14
See the 2021 Article IV Consultation Staff Report (CR No. 21/253) on the PSR.

ALGERIA
d. Developing long-term savings products (for example, life insurance, issuance of bonds to
the public).
31. The BA has multiple workstreams to reform the financial sector, in addition to
implementing the LMB. It is working with METAC on developing a risk quotation of banks (to
advance risk-based supervision) and on an in-house credit assessment for non-financial
corporations (to expand the pool of eligible collateral). A new regulation on bank governance
under preparation will require, for example, that financial institutions have audit and risk
committees led by independent administrators. Additional reforms, as recommended by the
2019 FSAP, could usefully include: (i) reinforcing the commercial orientation of public banks,
including by phasing out support schemes with subsidized loans from the public banks (and
setting up a separate entity to manage those subsidies); (ii) updating the legal provisions for NPL
management, including by modifying legal provisions to facilitate the write-off of NPLs and
putting in place an asset management company for NPL recovery; (iii) increasing the BA’s
technical capacity for stress testing; (iv) developing an early warning system for systemic risk; and
(v) preparing a financial stability report.
Text Figure 8. Algeria: Interlinkages Between Central Government and

State-Owned Enterprises ("Nexus”)
Financial links between the central government, state-owned banks, and other
SOEs are a source of risk to the economy and to financial stability.
Policy focus: Interlinkages (“nexus”) between the central government, state-owned banks
(SOB), and non-financial state-owned enterprises (SOE)
32. Economic and financial links among the central government, SOEs, and SOBs are
intertwined and have increased over time (Text Figures 8–10).

ALGERIA
a. The exposure of banks to the public sector is among the largest in the MENA and has grown
from 32 percent of bank assets in 2010 to 54 percent in 2023.
b. The central government has a prominent presence in the banking sector. The six largest
banks in Algeria are publicly owned and account for over 85 percent of bank assets. About
62 percent of loans by public banks benefit from subsidized rates (“taux bonifiés”, including
for housing, youth employment, and SOEs). Government guarantees likely reached about
DZD 2,500 billion in 2023 (7.4 percent of GDP).
c. SOEs and SOBs engage in quasi-fiscal activities for which they are not always compensated
and that could impact their financial situation (for example, the electricity company
purchases domestic gas at a price well below international prices). Subsidized loans extended
by SOBs have contributed to the increase in NPLs of those banks, weighing on their balance
sheets.
Text Figure 9. Banks’ Exposure to the Public Sector (in percent of total assets)
Algerian Banks are among the most exposed … and their exposure has been increasing over
to the public sector compared to peers, … time.

ALGERIA
Text Figure 10. Algeria: Selected Indicators of Banking Sector Performance, 2014–23M6
The banking sector is liquid, solvent, and profitable but non-performing loans (NPL) weigh on
balance sheets and are twice as large for public banks than those in the private sector.

1/ Liquidity and NPL ratios in 2021 are affected by the Special Refinancing Program (PSR).
33. Such intertwined activities could amplify macro-financial risks from shocks such as
a large drop in international hydrocarbon prices and create a feedback loop that would
affect public debt sustainability, for example, if public enterprises needed to be recapitalized
or guarantees were called.15 Also, financial operations such as the monetary financing of the
deficit in 2017 or the PSR in 2021 complicate monetary policy and can increase financial stability
risks, especially if such operations involve non-marketable debt extended at below-market rates.
34. The BA should use all available tools to monitor the solvency and liquidity of the
banking sector, ensure that prudential rules are followed, and assess risks;16 while the
central government could increase monitoring and reduce risks from the “nexus” by:
a. Establishing and coordinating the ownership policy of public enterprises, possibly through
the Conseil des Participations de l’Etat.
15
See Managing the Sovereign-Bank Nexus (imf.org). for a general discussion of such risks and policy advice.
16
Including through stress testing.

ALGERIA
b. Adopting and enforcing performance contracts.
c. Analyzing the financial position of public enterprises (using the evaluation tool developed by
the IMF), publishing financial statements, and reporting on the public enterprise sector as a
whole (for example, as an annex to the budget law or on the website of the Ministry of
Finance).
d. Strengthening the role of the Haut Comité to evaluate risk scenarios (for example, impact of
shocks, materialization of contingent liabilities).17
e. Allowing markets and market prices to function properly to achieve the “true” financial
performance and risk-taking of public enterprises, for example, by minimizing (implicit)
subsidies and phasing out quasi-fiscal activities more generally, applying guarantees
judiciously, and separating subsidies from lending conditions.
35. The authorities are confident in the financial health of the banking system and
noted that the LMB implementation will further strengthen and modernize supervision
and financial stability tools. They agreed that financial inclusion should be enhanced and are
taking measures to achieve this goal, and for which the LMB is an impetus. They emphasized that
SOBs are well capitalized and profitable, and that the high level of NPLs is partially due to the
stringency of the NPL classification rules and judiciary constraints. They also underscored that
most NPLs are provisioned or backed by guarantees and hence present limited risk for the
stability of the financial system. They concurred with staff that the intertwined activities of the
central government-SOEs-SOBs nexus pose risks that need to be closely monitored, but they
consider that these risks are manageable.
D. Structural Reforms: Diversifying the Economy by Enabling Private

Sector Initiative, Strengthening Governance and Transparency, and
Reducing Corruption Risks
36. The Investment Law from mid–2022 is the cornerstone of the strategy to improve
the business climate, promote private investment, and diversify the economy to create
sustained growth and jobs. It created the Algerian Investment Promotion Agency (AAPI), which
has set up a digital platform and “one-stop shop” for administrative processes and will
implement a new Land Law which aims to streamline processes to obtain and own land for
investment. The authorities are preparing to sell minority shares in two public banks and are
investing in transportation infrastructure. Other recent initiatives include a Startup Fund which
17
See also the contingent liability shock in the SR-DSA (Annex III).

ALGERIA
provides seed money to new and innovative companies and the adoption of a new simplified
regime for the “auto-entrepreneur” (to reduce informality).
37. The authorities seek to boost nonhydrocarbon exports and tap new markets. They
prioritize energy-intensive products such as cement, fertilizers, and steel. A consortium of public
banks has recently opened branches in Mauritania and Senegal, and there are plans to expand to
other countries. The authorities also wish to reach markets in Sub-Saharan Africa (SSA) and
leverage their membership in the African Continental Free Trade Agreement (whose full
implementation is pending). Staff also recommended considering a resumption of Algeria’s
accession to the WTO and avoiding import compression policies (including by reducing tariffs).
38. Additional sustained and bold reforms would further increase the potential of the
private sector as the main driver of sustained growth and job creation. SOEs still have a
strong presence in several sectors of the economy, which may deter new entrants and reduce
competition, innovation, and financial soundness. Shedding non-strategic and loss-making
entities, and making product and labor market more flexible, would help reduce distortions, spur
competition, and facilitate hiring (for example, to increase female labor force participation).
Generalized import compression policies should be avoided as these can be counterproductive
and result in shortages, evasion, lower productivity, and higher prices. Similarly, over-reliance on
tax incentives, special regimes, and subsidization may make the tax code more complex (favoring
incumbents) and result in contradictory economic policies (for example, by subsidizing both fuel
and renewables).
39. Digital solutions can help strengthen governance and transparency, reduce the risk
of corruption, and improve service delivery. The Ministry of Digitalization and Statistics is
spearheading digitalization initiatives—for example, by interconnecting databases on
unemployment, social security, taxes, and real estate. A new Procurement Law establishes the
principles of freedom of participation, equal treatment, and transparency in procedures; and its
implementation includes a portal to streamline procedures and access information. A recent
decree established a register on the ultimate business ownership (BO); staff advised the
authorities to operationalize it in line with the FATF standards and to make it broadly accessible
to the public. The government is also pursuing reforms to strengthen SOE governance, with
performance contracts for SOE management and the professionalization of large SOEs’ boards.
40. The recommendations of the May 2023 MENAFATF report spur reforms to
strengthen the AML/CFT framework. The authorities have requested CD support from the
IMF’s Legal Department in several areas, including to help improve risk-based AML/CFT
supervision of financial institutions by the BA, on which the work is ongoing. A national
committee will conduct a national assessment of ML/FT risks and prepare a national strategy to
address those. The February 2023 amendments to the AML/CFT law bring the definition of
“politically exposed persons” largely in line with international standards (a MENAFATF
recommendation) and the authorities adopted various decrees in late 2023, for example, on
procedures for implementing UN targeted financial sanctions (TFS). Staff welcomed this progress

ALGERIA
and recommended fully staffing and equipping the Financial Intelligence Unit (CTRF) and
ensuring its independence.
41. Improving the coverage and timeliness of statistics would better inform policy
making. The recent upgrade of national account data, with 2001 as the new base, is an
important achievement (Annex VIII). Nevertheless, deep macroeconomic data gaps persist and
complicate surveillance, although data remains broadly adequate for this purpose. Key data are
either missing (unemployment rate, intra-year budget execution), outdated (CPI, Text Figure 11),
or transmitted with lengthy delays (budget data for national accounts). Staff stands ready to
support the authorities with technical assistance.
Text Figure 11. Algeria: CPI Base Year, 1998–2020 (191 countries)
The base year for Algeria’s CPI basket is severely outdated, complicating decision-
making for policymakers.
42. The authorities agreed that diversifying the economy through private sector
promotion, strengthening governance and transparency, and reducing corruption risks
would contribute to higher sustained growth and job creation. They highlighted significant
strides in recent years to improve the business environment and attract foreign and domestic
private investment. The authorities noted the initiatives to streamline administrative processes
and improve service delivery to investors. They also highlighted that import regulations help
fight fraud and encourage domestic production. The authorities are also committed to further
improve transparency in the public sector (leveraging digitalization) and consider addressing the
recommendations of the MENAFATF report as a key priority in the coming year. They noted that
efforts are underway to overcome data deficiencies for policy making, and that the rebasing the
national accounts is an important milestone to improve data quality.

ALGERIA
STAFF APPRAISAL
43. The near-term outlook for the Algerian economy is broadly positive, although
inflation remains a concern. Real GDP growth would be supported by large fiscal spending.
Headline inflation would slow thanks to easing food prices, but large budget spending and
potential second-round effects pose entrenchment risks. The current account would remain in
surplus in 2024. Staff’s baseline projects slower growth over the medium term as hydrocarbon
growth moderates, financing constraints cap budget spending, and structural bottlenecks inhibit
private sector growth. Staff assesses that the external position was moderately stronger than the
level implied by fundamentals and desirable policy settings in 2023, implying a moderate REER
undervaluation.
44. Large near-term deficits would erode financial buffers, increase vulnerabilities, and
pose risks to macroeconomic and financial stability. Depleting the balances in the Revenue
Regulation Fund (FFR) would over time strain the domestic financial sector’s financing capacity
and leave public finances exposed to shocks. Although staff projects gradually narrowing fiscal
deficits over the medium term, the large financing needs would increase the public debt ratio.
45. Staff recommends a gradual rebalancing of fiscal policy and anchoring it on

stabilizing the public debt ratio by 2026. Staff analysis suggests that additional measures of
three pps. of GDP over 2024–26 could achieve this objective. The additional fiscal restraint and
gradual rebuilding of the FRR would help create fiscal space to absorb macroeconomic shocks
and manage revenue volatility.
46. Public finance management reforms advance at a steady clip and additional efforts
would further improve planning, execution, and transparency of the fiscal framework. The
introduction of program budgeting is advancing and investment in digitalization will improve
governance, accountability, and service delivery. Staff urges the authorities to include a credible
financing plan in the budget, develop a medium-term debt management strategy, and elevate
the role of the Haut Comité in managing budget risks.
47. Fiscal policy can support the authorities’ comprehensive mitigation and adaptation
strategy to respond to the challenges from climate change. Staff recommends a gradual
reform of energy subsidies, whose savings could target support to vulnerable populations, invest
in climate adaption, and build a financial buffer. Climate considerations should be built in public
finance management processes.
48. Monetary policy tightening is needed to reduce inflation. Ample bank liquidity and
negative real short-term interest rates suggest that monetary policy is accommodative,
warranting an increase in the required reserve ratio, broader liquidity absorption, and an increase
in the policy rate. Such actions would signal the BA’s determination to address inflation risks.
More flexibility in the dinar rate would enhance its role as shock absorber and help develop the
FX market.

ALGERIA
49. The Monetary and Banking Law would encourage financial innovation, strengthen
financial surveillance and crisis management, and introduce new instruments of monetary
policy, governance bodies, and control functions. Staff advises that implementation texts
include price stability as the primary monetary policy objective and specify the modalities of
monetary financing, which the authorities would consider only under truly exceptional
circumstances. Reforms to improve financial inclusion could include preparing a financial
inclusion strategy, improving financial literacy, strengthening the credit market infrastructure,
and developing long-term savings products.
50. Intertwined economic and financial links among the central government, public
enterprises, and public banks are a source of systemic risk, as they could amplify macro-
financial risks from shocks such as a large drop in international oil prices and create a
feedback loop that would affect financial stability and debt sustainability. Systemic risk has
remained about the same relative to the 2022 Article IV consultation. Staff urges the BA to use all
available tools to monitor the solvency and liquidity of the banking sector, ensure that prudential
rules are followed, and assess risks regularly. The central government should monitor and reduce
risks by closely following the financial conditions of all public enterprises, strengthening their
governance; and reconsider the role of public enterprises in the economy.
51. Sustained and bold reforms would tap the potential of the private sector as a driver
of sustained growth and job creation. The Investment Law from mid–2022 is the cornerstone
of the strategy to improve the business climate, promote private investment, and diversify the
economy. Staff recommends further reforms, including of the SOE sector by shedding non-
strategic and loss-making SOEs, and making product and labor market more flexible. Generalized
import compression measures should be avoided as these can be counterproductive and result
in shortages, evasion, lower productivity, and higher prices.
52. Staff welcomes reforms underway to improve transparency and service delivery
through digital solutions, and those that aim at strengthening financial integrity and
addressing governance and corruption risks, including by strengthening the AML/CFT
framework. The February 2023 amendments to the AML/CFT law bring the definition of
“politically exposed persons” largely in line with international standards and recent decrees aim
to further improve in the areas of targeted financial sanctions and transparency of companies’
beneficial ownership (for which a dedicated register is planned). Staff advises the authorities to
pursue these efforts further, including by fully staffing and equipping the Financial Intelligence
Unit (CTRF) and ensuring its independence, and operationalizing the beneficial ownership
register in line with FATF standards and making it broadly accessible to the public.
53. Staff urges the authorities to improve the coverage and timeliness of statistics to
better inform policy making. While recent upgrade of national account data is an important
achievement, macroeconomic data gaps persist and complicate surveillance, although data
remains broadly adequate for this purpose. The IMF stands ready to provide technical support.

ALGERIA
54. Staff recommends that the next Article IV consultation take place on the standard
12-month cycle.

ALGERIA
Figure 1. Algeria: Selected Macroeconomic Indicators
Real GDP growth has been robust in the post-Covid period, Gas production picked up after the Covid slump, pulled in
with a rebound in hydrocarbon production in 2023. part by stronger domestic consumption.
The link between investment and imports has become more Inflation has been stubbornly high, driven by prices of food,
tenuous in recent years, possibly due to import containment and more recently also non-food.
measures.
The BA has allowed the US$/dinar rate to appreciate since mid– Parallel exchange rate premia have widened, reaching
2022. about 62.5 percent in December 2023.
Sources: Algerian Authorities and IMF staff estimates; parallel exchange rate premia: https://devisesquare.com/#EUR.

ALGERIA
Figure 2. Algeria: External Sector Developments
The current account balance likely posted another surplus … thanks mainly to strong hydrocarbon export
in 2023, after years of deficits, … performance (though nonhydrocarbon exports have also
increased in recent years).
… while imports of goods increased relatively modestly... … with receding global price pressures starting to recede.
The current account surpluses boosted international Algeria’s external debt is low, owing to the closed
reserves. financial account and the authorities’ policy to finance
budget deficits domestically.
Sources: Algerian Authorities and IMF staff estimates.

ALGERIA
Figure 3. Algeria: Fiscal Indicators
The high international prices for hydrocarbon products … which has also resulted in higher spending.
recently have been a boon for the budget…
While the 2023 revised budget envisaged a large increase … resulting in a slight decrease of the nonhydrocarbon
in spending, and capital expenditures), its late adoption deficit.
and a low execution rate kept it limited…
The boost in hydrocarbon revenue supported the financial … while (temporarily) stabilizing the public debt ratio.
cushion in the Revenue Regulation Fund (FRR), although
it is expected to finance 2023–24 deficits...
Sources: Algerian Authorities and IMF staff estimates.

ALGERIA
Figure 4. Algeria: Monetary and Financial Sector Indicators
Broad money growth has slowed in recent months due to lower Public sector credit has been the main driver of net domestic
growth in net foreign and domestic assets. assets, while credit to the private sector remains subdued.
The BA increased the reserve requirement ratio by one … but monetary policy remained accommodative, with ample
percentage point in mid–April 2023… liquidity in the banking system.
Banks are well capitalized… … but non-performing loans remain high, especially among the
public banks.
Source: Algerian Authorities.

ALGERIA
Table 1. Algeria: Selected Economic and Financial Indicators, 2019–29

Projections
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Output and prices (Annual percentage change)

Real GDP 0.9 -5.0 3.8 3.6 4.2 3.8 3.1 2.5 2.1 2.1 2.1
Hydrocarbon sector -4.9 -10.2 10.5 -0.6 4.5 2.7 1.5 1.0 0.5 0.5 0.5
Nonhydrocarbon sector 1.8 -4.3 2.9 4.2 4.1 4.0 3.3 2.7 2.3 2.3 2.3
Per capita -1.0 -5.9 2.1 2.0 2.6 2.4 1.7 1.2 0.9 0.9 0.9
Consumer price index (period average) 2.0 2.4 7.2 9.3 9.3 7.6 6.4 6.1 5.5 5.2 5.0
Investment and savings (In percent of GDP)

Savings-investment balance -8.7 -11.3 -2.4 8.4 2.2 0.1 -1.5 -2.5 -2.9 -3.4 -3.8
National savings 38.3 33.2 38.5 44.4 40.8 38.7 36.6 35.3 34.7 34.3 33.9
Central government 3.8 -1.5 1.5 4.0 4.2 -1.5 -1.4 -0.7 -0.9 -0.8 -0.8
Nongovernment 1/ 34.5 34.6 37.0 40.4 36.6 40.3 38.0 36.0 35.6 35.1 34.7
Investment 47.0 44.5 40.9 36.0 38.6 38.6 38.1 37.9 37.6 37.7 37.7
Central government 12.3 9.1 7.8 6.5 7.2 7.0 6.5 6.1 5.9 5.9 5.9
Nongovernment 1/ 34.7 35.5 33.1 29.5 31.4 31.6 31.7 31.8 31.7 31.8 31.8
o/w Nongovernment nonhydrocarbon 28.9 32.1 30.5 27.3 29.7 29.9 29.9 30.0 30.1 30.2 30.2
Central government finances (In percent of GDP)

Revenue 28.6 27.0 26.2 29.6 31.1 27.8 26.8 26.4 25.7 25.4 25.2
Expenditure (incl. net lending) 37.1 37.5 32.5 32.0 34.1 36.3 34.7 33.2 32.4 32.1 31.9
Overall budget balance -8.5 -10.5 -6.3 -2.5 -3.0 -8.5 -7.8 -6.7 -6.7 -6.7 -6.7
Central bank financing (flow) 4.3 0.0 2.1 -0.1 -0.7 -1.1 -1.5 -0.5 -0.7 -1.3 -1.2
Gross government debt (excluding guarantees) 40.9 46.0 55.1 48.1 49.5 46.4 49.7 51.9 54.5 57.0 59.5
(In percent of nonhydrocarbon GDP)

Nonhydrocarbon primary balance excluding central bank dividends -27.7 -25.8 -24.3 -27.8 -26.6 -26.6 -23.9 -21.5 -20.1 -19.3 -18.7
Nonhydrocarbon balance -24.1 -22.4 -20.6 -27.4 -26.4 -27.0 -24.6 -22.5 -21.4 -20.8 -20.3
Revenue 34.4 30.7 32.4 40.2 38.6 33.7 32.2 31.5 30.4 30.0 29.5
Hydrocarbon 13.9 10.4 12.8 24.0 22.7 16.7 15.2 14.5 13.4 12.9 12.4
Nonhydrocarbon 20.5 20.2 19.5 16.2 15.9 17.0 17.0 17.0 17.0 17.1 17.1
Expenditure (including net lending) 44.6 42.6 40.2 43.5 42.3 44.0 41.6 39.5 38.4 37.9 37.4
Current expenditure 25.5 27.2 26.9 32.1 31.2 33.3 31.8 30.5 29.8 29.3 29.0
Capital expenditure 14.8 10.3 9.6 8.9 9.0 8.4 7.8 7.2 7.0 7.0 7.0
Net lending 4.3 5.1 3.7 2.5 2.1 2.2 2.0 1.8 1.7 1.6 1.4
External sector 2/
Current account balance (percent of GDP) -8.7 -11.3 -2.4 8.4 2.2 0.1 -1.5 -2.5 -2.9 -3.4 -3.8
Exports, f.o.b. (percent change) -14.3 -37.9 76.2 69.6 -16.4 -0.6 1.0 1.5 0.8 0.8 0.6
Hydrocarbons -14.5 -39.8 70.2 74.8 -16.7 -2.7 -0.9 -0.2 -1.0 -1.2 -1.4
Nonhydrocarbons -7.6 -7.8 138.9 30.6 -13.9 19.5 16.3 12.7 11.4 11.7 9.9
Imports, f.o.b. (percent change) -8.1 -20.4 5.4 3.7 12.7 11.2 8.9 6.0 3.2 2.8 2.3
Crude oil export unit value (US$/bbl) 64.5 41.9 72.3 103.9 84.0 81.2 77.1 74.2 72.4 71.4 70.9
Gross official reserves
In US$ billions 62.8 48.2 45.3 61.0 68.9 71.3 69.3 64.2 57.7 49.8 40.5
In months of next year's imports of goods and services 17.6 13.0 11.6 13.9 14.1 13.5 12.4 11.1 9.7 8.2 6.6
Gross external debt (percent of GDP) 2.0 2.1 1.7 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2
Money and credit (Annual percentage change unless otherwise indicated)

Net foreign assets -20.3 -14.9 -5.2 35.5 6.7 9.5 2.2 -3.0 -5.9 -10.2 -15.8
Money and quasi-money -0.8 7.4 13.2 14.3 5.9 14.1 9.5 7.2 7.3 7.0 6.8
Memorandum items:
GDP (in billions of dinars at current prices) 23,090 20,902 25,158 32,028 33,225 36,764 40,152 43,634 46,947 50,347 53,855
Nominal GDP Growth 1.8 -9.5 20.4 27.3 3.7 10.7 9.2 8.7 7.6 7.2 7.0
NHGDP (in billions of dinars at current prices) 19,216 18,396 20,383 23,561 26,773 30,357 33,463 36,600 39,615 42,721 45,937
GDP capita per (in US$) 4,453 3,758 4,170 4,982 … … … … … … …
Exchange rate (DA per US$) 119.4 126.9 135.3 142.0 … … … … … … …
REER (percent change) 2.1 -4.4 -4.8 6.2 … … … … … … …

1/ Including public enterprises.
2/ In U.S. dollars unless otherwise indicated.

ALGERIA
Table 2a. Algeria: Balance of Payments, 2019–29

(Billions of US dollars)
Projections
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Current account -16.9 -18.7 -4.5 19.1 5.3 0.4 -4.2 -7.3 -8.6 -10.2 -11.6
Balance on goods -9.3 -13.6 1.2 26.7 11.0 5.7 1.9 -0.5 -1.9 -3.0 -4.0
Exports, f.o.b. 35.3 21.9 38.6 65.5 54.8 54.4 55.0 55.8 56.2 56.7 57.0
Hydrocarbons 33.2 20.0 34.1 59.5 49.6 48.3 47.8 47.7 47.3 46.7 46.0
Other 2.1 1.9 4.6 6.0 5.2 6.2 7.2 8.1 9.0 10.0 11.0
Imports, f.o.b. 44.6 35.5 37.5 38.9 43.8 48.7 53.1 56.3 58.1 59.7 61.1
Balance on services Services (net) -6.4 -4.3 -3.6 -4.3 -4.9 -5.6 -6.3 -6.8 -7.1 -7.4 -7.7
Exports 3.2 3.0 3.2 3.6 3.9 4.2 4.2 4.3 4.3 4.3 4.4
Imports 9.6 7.3 6.8 7.8 8.8 9.8 10.5 11.1 11.4 11.7 12.1
Primary Income (net) -4.3 -3.0 -4.0 -5.4 -2.92 -2.3 -2.7 -3.3 -3.6 -3.8 -4.0
Inflows 1.0 0.8 0.7 0.8 2.3 2.9 2.5 2.0 1.8 1.6 1.3
Outflows -5.3 -3.8 -4.7 -6.2 -5.2 -5.2 -5.2 -5.3 -5.3 -5.3 -5.3
Interest payments -0.1 0.0 -0.1 -0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Secondary income (net) 3.0 2.3 2.0 2.0 2.2 2.6 2.9 3.3 3.9 4.0 4.2
Capital and financial account 17.0 18.8 4.7 -19.0 -5.2 -0.3 4.2 7.3 8.6 10.2 11.6
Capital account 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Foreign Direct Investment 1.4 1.1 0.9 0.0 0.9 1.9 2.0 2.1 2.1 2.2 2.2
Portfolio Investment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Investment -1.3 1.3 2.2 -0.7 0.2 0.2 0.2 0.0 0.0 0.0 0.1
Net Errors and omissions -0.1 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Official reserves (increases (-)) 16.9 16.4 1.5 -18.3 -6.3 -2.4 2.0 5.2 6.4 8.0 9.3
Memorandum items:
Current account balance (in percent of GDP) -8.7 -11.3 -2.4 8.4 2.2 0.1 -1.5 -2.5 -2.9 -3.4 -3.8
Algerian crude oil price (US$/barrel) 1/ 64.5 41.9 72.3 103.9 84.0 81.2 77.1 74.2 72.4 71.4 70.9
Gross official reserves (in billions of US$) excl SDR holdings 61.5 46.9 41.4 56.8 64.7 67.1 65.1 59.9 53.5 45.5 36.3
Gross official reserves (in billions of US$) 2/ 62.8 48.2 45.3 61.0 68.9 71.3 69.3 64.2 57.7 49.8 40.5
Idem, in months of next year's imports 17.6 13.0 11.6 13.9 14.1 13.5 12.4 11.1 9.7 8.2 6.6
Reserves (in percent of ARA EM metric) 3/ 537.9 476.7 344.6 356.8 412.8 175.6 151.9 127.4 114.8 98.4 78.9
Net international investment position (in billions of US$) 47.7 32.4 27.8 44.4 49.6 50.0 45.8 38.5 29.9 19.7 8.1
Gross external debt (in billions of US$) 3.8 3.4 3.1 3.0 3.2 3.4 3.6 3.6 3.6 3.7 3.8

1/ Weighted average of quarterly data.
2/ Gross official reserves include holdings of SDR assets and, for 2021, Algeria's share of the general SDR allocation by the IMF in
August 2021.
3/ ARA EM metric includes additional buffer for commodity intensive countries (projection period only).

ALGERIA
Table 2b. Algeria: Balance of Payments, 2019–29

(Percent of GDP)
Projections
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
(In percent of GDP; unless otherwise indicated)
Current account -8.7 -11.3 -2.4 8.4 2.2 0.1 -1.5 -2.5 -2.9 -3.4 -3.8
Balance on goods -4.8 -8.3 0.6 11.8 4.5 2.1 0.7 -0.2 -0.6 -1.0 -1.3
Exports, f.o.b. 18.3 13.3 20.8 29.0 22.4 20.4 19.8 19.4 19.1 18.9 18.6
Hydrocarbons 17.2 12.1 18.3 26.4 20.3 18.1 17.2 16.6 16.1 15.5 15.0
Other 1.1 1.2 2.5 2.7 2.1 2.3 2.6 2.8 3.1 3.3 3.6
Imports, f.o.b. 23.1 21.6 20.2 17.2 17.9 18.3 19.1 19.6 19.8 19.9 20.0
Balance on services Services (net) -3.3 -2.6 -1.9 -1.9 -2.0 -2.1 -2.3 -2.4 -2.4 -2.5 -2.5
Exports 1.7 1.8 1.7 1.6 1.6 1.6 1.5 1.5 1.5 1.4 1.4
Imports 5.0 4.4 3.7 3.5 3.6 3.7 3.8 3.9 3.9 3.9 3.9
Primary Income (net) -2.2 -1.8 -2.2 -2.4 -1.2 -0.8 -1.0 -1.1 -1.2 -1.3 -1.3
Inflows 0.5 0.5 0.4 0.4 0.9 1.1 0.9 0.7 0.6 0.5 0.4
Outflows -2.7 -2.3 -2.5 -2.7 -2.1 -1.9 -1.9 -1.8 -1.8 -1.8 -1.7
Interest payments 0.0 0.0 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Secondary income (net) 1.6 1.4 1.1 0.9 0.9 1.0 1.0 1.1 1.3 1.3 1.4
Capital and financial account 8.8 11.4 2.5 -8.4 -2.1 -0.1 1.5 2.5 2.9 3.4 3.8
Capital account 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Foreign Direct Investment 0.7 0.7 0.5 0.0 0.4 0.7 0.7 0.7 0.7 0.7 0.7
Portfolio Investment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Investment -0.7 0.8 1.2 -0.3 0.1 0.1 0.1 0.0 0.0 0.0 0.0
Net errors and omissions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Official reserves (increases (-)) 8.8 9.9 0.8 -8.1 -2.6 -0.9 0.7 1.8 2.2 2.6 3.0
Memorandum items:
Current account balance (in percent of GDP) -8.7 -11.3 -2.4 8.4 2.2 0.1 -1.5 -2.5 -2.9 -3.4 -3.8
Algerian crude oil price (US$/barrel) 1/ 64.5 41.9 72.3 103.9 84.0 81.2 77.1 74.2 72.4 71.4 70.9
Gross official reserves (in billions of US$) 2/ 62.8 48.2 45.3 61.0 68.9 71.3 69.3 64.2 57.7 49.8 40.5
Idem, in months of next year's imports 17.6 13.0 11.6 13.9 14.1 13.5 12.4 11.1 9.7 8.2 6.6
Reserves (in percent of ARA EM metric) 3/ 537.9 476.7 344.6 356.8 412.8 175.6 151.9 127.4 114.8 98.4 78.9
Net international investment position (in percent of GDP) 24.7 19.6 14.9 19.7 20.3 18.7 16.5 13.4 10.2 6.6 2.7
Gross external debt (in percent of GDP) 2.0 2.1 1.7 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2

1/ Weighted average of quarterly data.
2/ Gross official reserves include holdings of SDR assets and, for 2021, Algeria's share of the general SDR allocation by the IMF in August
2021.
3/ ARA EM metric includes additional buffer for commodity intensive countries (projection period only).

ALGERIA
Table 3a. Algeria: Summary of Central Government Operations, 2019–29 1/

Projections
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
(In billions of Algerian dinars)

Budget revenue and grants 6,602 5,641 6,598 9,467 10,322 10,216 10,773 11,541 12,062 12,811 13,563
Hydrocarbon revenue 2/ 2,668 1,922 2,609 5,658 6,065 5,070 5,093 5,317 5,319 5,505 5,718
Nonhydrocarbon revenue 3,933 3,719 3,982 3,810 4,257 5,146 5,680 6,224 6,743 7,307 7,845
Tax revenue 2,843 2,625 2,762 2,943 3,429 4,115 4,682 5,192 5,646 6,107 6,590
Nontax revenues 1,090 1,094 1,220 866 828 1,031 998 1,032 1,096 1,200 1,256
o/w Fees 204 178 208 262 271 293 315 357 399 443 468
Bank of Algeria dividends and interests 800 800 900 503 457 526 530 506 512 557 572
Other 86 116 111 102 100 213 154 169 185 201 216
Grants 0 0 6 0 0 0 0 0 0 0 0
Total expenditure (incl. net lending and special Treasury accounts) 8,566 7,839 8,186 10,259 11,314 13,345 13,919 14,470 15,225 16,177 17,179
Current expenditure 4,895 5,009 5,480 7,574 8,352 10,119 10,653 11,160 11,798 12,534 13,311
Current non-interest 4,781 4,838 5,336 7,184 7,952 9,467 9,896 10,268 10,755 11,346 11,997
Personnel expenditure 2,283 2,283 2,397 2,626 3,091 3,822 3,970 4,086 4,312 4,590 4,920
Mudjahidins' pensions 253 267 266 241 234 252 268 284 300 315 331
Material and supplies 216 109 171 201 213 321 354 387 419 452 486
Current transfers 2,029 2,178 2,502 4,114 4,414 5,072 5,304 5,511 5,724 5,989 6,260
Interest payments 114 172 144 390 400 652 757 893 1,042 1,187 1,314
Capital expenditure 2,846 1,894 1,956 2,086 2,397 2,560 2,600 2,643 2,761 2,978 3,202
Net lending and special Treasury accounts net operations 825 937 750 599 566 666 666 666 666 666 666
Budget balance -1,140 -1,262 -839 -193 -427 -2,463 -2,480 -2,263 -2,497 -2,700 -2,950
Overall balance -1,965 -2,199 -1,589 -791 -993 -3,129 -3,146 -2,929 -3,163 -3,366 -3,616
Nonhydrocarbon balance -4,633 -4,120 -4,198 -6,449 -7,058 -8,199 -8,239 -8,246 -8,482 -8,871 -9,334
Nonhydrocarbon primary balance (excluding Bank of Algeria dividends) -5,319 -4,748 -4,961 -6,562 -7,115 -8,072 -8,011 -7,859 -7,952 -8,240 -8,591
Net financing 1,965 2,199 3,669 1,343 993 3,129 3,146 2,929 3,163 3,366 3,616
Domestic 1,966 2,200 3,675 1,352 1,004 3,140 3,158 2,941 3,176 3,380 3,616
Bank 3/ 1,842 1,302 3,267 612 300 2,473 2,384 2,360 2,681 2,982 3,317
o/w gross central bank financing 1,001 1 517 -40 -247 -405 -584 -200 -320 -652 -652
Nonbank 4/ 125 898 408 740 704 666 773 582 495 398 299
Foreign -2 -2 -7 -10 -11 -11 -12 -12 -13 -13 0
Memorandum items
Gross financing requirements 2,525 2,716 2,429 1,673 2,466 5,266 4,297 3,651 3,994 4,806 5,104
Financing need to be filled with new domestic debt issuance 2,172 623 4,987 2,768 2,517 2,748 4,047 3,401 3,744 4,556 4,854
Principal payments on public debt 561 517 841 881 1,473 2,137 1,151 722 831 1,440 1,488
Oil stabilization fund
in billions of Algerian dinars 306 0 682 1,967 2,268 0 0 0 0 0 0
in percent of GDP 1.3 0.0 2.7 6.1 6.8 0.0 0.0 0.0 0.0 0.0 0.0
Gross government debt, including guarantees (percent of GDP) 55.6 65.1 71.1 52.1 54.6 51.0 53.9 55.8 58.1 60.3 62.7
Gross government debt, excluding guarantees (percent of GDP) 40.9 46.0 55.1 48.1 49.5 46.4 49.7 51.9 54.5 57.0 59.5
o/w owed to central bank 28.4 31.4 26.1 20.3 18.1 14.2 10.1 8.4 6.4 3.4 0.7

1/ On a cash basis.
2/ Including Sonatrach dividends.
3/ Bank financing includes domestic debt issuance and a drawdown of the oil stabilization fund and other government deposits at the
central bank. It includes the repurchase of syndicated loans owed by SOEs for a total amount of DZD 2,080 billion in 2021 and DZD 520
billion in 2022, under the financial scheme including the PSR.
4/ Includes proceeds from sales of state-owned assets.

ALGERIA
Table 3b. Algeria: Summary of Central Government Operations, 2019–29 1/

1/ On a cash basis.
2/ Including Sonatrach dividends.
3/ Bank financing includes domestic debt issuance and a drawdown of the oil stabilization fund and other government deposits at the
central bank. It includes the repurchase of syndicated loans owed by SOEs for a total amount of DZD 2,080 billion in 2021 and
DZD 520 billion in 2022, under the financial scheme including the PSR.
4/ Includes proceeds from sales of state-owned assets.

ALGERIA
Table 4. Algeria: Monetary Survey, 2019–29

Projections
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
(In billions of Algerian dinars; at end of period)

Net foreign assets 7,429 6,321 5,994 8,119 8,667 9,486 9,697 9,407 8,848 7,944 6,688
o/w Bank of Algeria 7,472 6,384 6,036 8,189 8,735 9,514 9,692 9,375 8,793 7,870 6,597
Foreign assets (BA) 7,672 6,615 6,636 8,754 9,288 10,095 10,302 10,015 9,466 8,576 7,338
Foreign liabilities (BA) 200 231 600 565 553 581 610 640 672 706 741
Foreign assets (comm. banks) 90 82 95 100 97 102 107 113 118 124 131
Foreign liabilities (comm. banks) 134 144 137 169 166 130 103 81 64 50 40
Net domestic assets 9,082 11,419 14,085 14,836 15,654 18,260 20,676 23,156 26,083 29,419 33,210
o/w Bank of Algeria -839 495 2,107 1,030 1,112 2,108 2,915 4,485 5,968 8,090 10,354
Domestic credit 16,828 19,126 21,259 21,605 22,498 25,560 28,459 31,420 34,808 38,569 42,733
Credit to government (net) 1/ 5,820 7,788 11,296 11,319 11,619 14,093 16,477 18,836 21,517 24,499 27,816
Credit to the economy 11,008 11,338 9,964 10,286 10,878 11,468 11,982 12,584 13,290 14,070 14,918
o/w Private sector 5,291 5,459 5,700 5,842 6,174 6,500 6,797 7,144 7,550 8,000 8,490
Other items net -7,746 -7,707 -7,174 -6,769 -6,843 -7,300 -7,783 -8,264 -8,725 -9,150 -9,523
Money and quasi-money (M2) 16,511 17,740 20,079 22,955 24,321 27,746 30,372 32,563 34,931 37,363 39,898
Excluding Sonatrach deposits 16,073 17,496 19,143 21,361 22,944 26,388 28,960 31,082 33,381 35,757 38,236
o/w Money 10,979 11,931 13,616 15,370 16,510 18,988 20,838 22,365 24,019 25,729 27,513
Reserve money 6,633 6,879 8,143 9,219 9,847 11,622 12,607 13,859 14,762 15,960 16,951
(In percent change over 12-month period)
Money and quasi-money (M2) -0.8 7.4 13.2 14.3 5.9 14.1 9.5 7.2 7.3 7.0 6.8
2
o/w Private sector 4.2 3.2 4.4 2.5 5.7 5.3 4.6 5.1 5.7 6.0 6.1
Memorandum items:
Credit to the economy/GDP 47.7 54.2 39.6 32.1 32.7 31.2 29.8 28.8 28.3 27.9 27.7
Credit to the economy/NHGDP 57.3 61.6 48.9 43.7 40.6 37.8 35.8 34.4 33.5 32.9 32.5
Credit to private sector/NHGDP 27.5 29.7 28.0 24.8 23.1 21.4 20.3 19.5 19.1 18.7 18.5
Sources: Bank of Algeria; and IMF staff estimates and projections.

1/ Net credit to government excludes Treasury postal accounts ("dépôts CCP") deposited at the BA.
2/ The decline in credit to the economy in 2021 reflects the effect of a debt buyback operation by the Treasury which reduced
banks' claims on state-owned enterprises (the public sector).

ALGERIA
Table 5. Algeria: Financial Soundness Indicators, 2012–23H1

(in percent)
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Jun-23
Capital adequacy ratio 23.6 21.5 15.8 18.4 18.8 19.5 19.0 18.0 19.2 21.6 21.5 20.9
- Public banks 21.7 19.9 14.7 17.8 18.4 19.6 19.2 17.8 19.0 22.2 22.0 21.4
- Private banks 32.2 28.5 20.4 21.0 20.3 18.9 18.2 18.9 20.3 19.1 19.3 18.8
Tier I capital adequacy ratio 17.5 15.5 13.2 15.8 16.2 15.0 15.0 14.3 15.4 17.7 17.7 17.4
- Public banks 14.8 13.1 11.6 14.6 15.4 14.3 14.4 13.5 14.6 17.6 17.6 17.3
- Private banks 29.7 26.3 19.7 20.3 19.6 18.1 17.4 18.2 19.5 18.2 18.5 17.9
NPLs net of provisions/Regulatory capital 16.1 17.1 24.8 26.5 35.0 36.4 39.3 52.6 59.6 58.2 56.2 54.7
- Public banks 20.3 21.7 28.1 29.6 40.0 40.8 44.9 60.7 69.2 67.4 65.6 21.4
- Private banks 3.2 2.6 14.5 15.8 16.7 16.2 13.4 14.6 14.0 13.3 10.5 18.8
NPLs/total loans 11.7 10.6 9.9 9.8 12.1 13.0 12.7 14.8 16.4 19.6 19.9 19.8
- Public banks 12.7 11.4 10.1 9.9 12.6 13.7 13.4 15.6 17.2 21.1 21.4 21.4
- Private banks 5.2 4.8 8.5 8.6 8.7 7.8 7.1 8.2 9.7 9.6 9.1 8.6
NPLs net of provisions/total loans 3.5 3.4 3.8 3.9 5.5 6.2 6.3 7.9 8.8 10.1 9.9 9.8
- Public banks 3.9 3.7 3.7 3.8 5.6 6.5 6.8 8.4 9.5 11.1 11.0 10.9
- Private banks 1.3 0.9 4.7 4.7 4.6 3.9 3.0 3.4 3.4 3.2 2.6 2.3
Provisions/classified loans 69.8 68.2 61.8 59.9 54.6 52.3 50.1 46.7 46.1 48.7 49.9 50.5
- Public banks 69.5 67.4 63.6 61.5 55.4 52.4 49.4 45.9 44.8 47.5 48.7 49.1
- Private banks 74.1 80.3 45.0 45.3 46.1 50.6 57.3 58.7 65.2 67.1 71.7 73.2
Return on equity 22.7 19.0 23.7 21.3 17.8 18.8 22.4 13.7 8.3 14.4 13.5 NA
- Public banks 22.0 18.0 25.1 23.1 18.9 20.0 22.7 11.9 7.3 13.5 12.0 NA
- Private banks 24.4 21.5 20.0 16.1 15.3 14.7 21.2 22.4 13.6 18.3 20.1 NA
Return on assets 1.9 1.7 2.0 1.9 1.8 2.0 2.4 1.5 1.4 1.7 1.4 NA
- Public banks 1.5 1.3 1.8 1.7 1.7 2.0 2.3 1.2 1.2 1.5 1.1 NA
- Private banks 4.5 3.7 3.4 3.1 2.8 2.6 3.4 3.2 2.7 2.9 3.1 NA
Interest margin/gross revenues 64.2 69.5 67.2 66.8 72.5 73.0 78.8 78.9 73.4 78.5 78.7 NA
- Public banks 72.1 73.3 66.7 65.8 72.3 72.7 80.8 81.7 73.0 78.3 79.1 NA
- Private banks 45.2 59.1 69.1 71.5 73.4 74.2 71.1 69.7 75.3 79.1 77.4 NA
Non-interest expenses/earnings before tax 35.6 33.5 40.7 40.0 34.1 36.0 29.3 30.8 35.8 35.3 40.0 NA
- Public banks 38.1 34.0 40.6 39.2 31.4 33.7 26.4 28.1 34.3 33.1 38.2 NA
- Private banks 29.8 32.3 41.3 43.4 46.3 46.2 40.5 39.5 41.5 43.0 45.5 NA
Liquid assets/total assets 45.9 40.5 38.0 27.1 23.5 23.5 19.8 16.0 13.1 36.0 40.2 39.7
- Public banks 45.1 39.4 37.0 25.8 22.7 21.9 18.4 14.2 10.3 35.9 40.5 39.7
- Private banks 50.9 46.5 44.0 35.9 29.1 33.1 28.5 27.3 30.3 36.3 37.9 40.4
Liquid assets/short-term debt 107.5 93.5 82.1 61.6 58.4 53.7 47.4 44.2 37.1 102.1 108.5 114.1
- Public banks 110.5 95.7 83.4 60.2 58.8 52.2 46.3 42.2 31.5 110.2 115.6 122.7
- Private banks 93.5 84.1 75.4 69.8 56.2 60.6 52.6 52.5 59.5 68.9 73.8 76.6
Source: Bank of Algeria.

40
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INTERNATIONAL MONETARY FUND
shorter horizon (between 12 to 18 months) given the current baseline. Structural risks are those that are likely to remain salient over a longer horizon.
authorities. Non-mutually exclusive risks may interact and materialize jointly. The conjunctural shocks and scenarios highlight risks that may materialize over a
probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the
risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a
1
The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path. The relative likelihood is the staff’s subjective assessment of the
Risks Likelihood Economic Impact Policy Response

Conjunctural risks (Global)
Intensification of regional conflicts. High Low. Algeria has little direct exposure to Reduce procyclicality of the budget
Escalation or spread of the conflict in Gaza Russia’s war in Ukraine. Indirect and build financial buffers, build
Annex I. Risk Assessment Matrix1

and Israel, Russia’s war in Ukraine, and/or exposure could result from the impact of emergency food stock, diversify the
other regional conflicts or terrorism disrupt the war on Europe (trade channel), economy and export markets. Allow
trade (e.g., energy, food, tourism, supply energy security, and the international the exchange rate to play its role as
chains), remittances, FDI and financial flows, prices for hydrocarbons, food, and other shock absorber. Continue reforms to
payment systems, and increase refugee flows. commodities (per below). Algeria could diversify the economy, including
benefit from higher natural gas prices as nonhydrocarbon exports and
Europe seeks to diversify supply. tapping new export markets.
Commodity price volatility. A succession of High High. Algeria’s economy is highly Reduce the procyclicality of the
supply disruptions (e.g., due to conflicts, dependent on hydrocarbon exports and budget including by diversifying
export restrictions, and OPEC+ decisions) and food imports. The volatility would revenue and funding sources and by
demand fluctuations causes recurrent transmit via the current account (and building a financial savings buffer
commodity price volatility, external and fiscal international reserves), the budget when hydrocarbon prices are high.
pressures in EMDEs, cross-border spillovers, (hydrocarbon revenues, food subsidies), Allow the exchange rate to play the
and social and economic instability. inflation, and economic growth. role of shock absorber, in the
context of tighter policies. Continue
reforms to diversify the economy.
Abrupt global slowdown. Global and Medium High. Transmission would likely mainly Build savings buffer to help absorb
idiosyncratic risk factors cause a come from trade with Europe, Algeria’s the impact of lower hydrocarbon
synchronized sharp growth downturn, with main export market, which would affect exports and revenues, including
recessions in some countries, adverse hydrocarbon exports. Financial spillovers through prudent monetary and
spillovers through trade and financial fiscal policies; allow the exchange
channels, and market fragmentation would be limited because Algeria’s rate to play its role of shock
triggering sudden stops in EMDEs. financial account is largely closed. absorber.
 Europe: Intensifying fallout from Russia’s Medium High. Algeria’s exports are highly Prepare for downside risks by
war in Ukraine, supply disruptions, tight dependent on the European market. A building fiscal space, including a
financial conditions, and real estate market slowdown in Europe would mainly affect savings buffer and broad-based
corrections exacerbate economic the current account (less hydrocarbon fiscal rebalancing. Allow the
downturn. exports), international reserves, and the exchange rate to play its role as
budget. shock absorber, in the context of
aligned monetary and fiscal policies.
Continue efforts to diversify the
economy and export markets.
Structural risks (Global)
Deepening geoeconomic fragmentation. High Medium. Deepening geographic Accelerate diversification and
Broader conflicts, inward-oriented policies, fragmentation and geopolitical tensions economic resilience through well-
and weakened international cooperation could disrupt trade flows and hamper timed and sequenced
result in a less efficient configuration of trade economic diversification. Algeria could implementation of the reforms
and FDI, supply disruptions, protectionism, nevertheless benefit if disruptions outlined in the Government Action
policy uncertainty, technological and caused an increase in hydrocarbon Plan, and measures to strengthen
payments systems fragmentation, rising prices. the fiscal and monetary policy
shipping and input costs, financial instability, frameworks.

a fracturing of international monetary system,
and lower growth.
Extreme climate events. Extreme climate Medium High. Algeria is vulnerable, like other Invest in climate-resilient
events driven by rising temperatures cause countries in North Africa, to climate infrastructure and agriculture;
loss of human lives, severe damage to shocks. In addition to the impact on lives implement the authorities’ Climate
infrastructure, supply disruptions, lower and livelihoods, these shocks could carry Action Plan. Accelerate economic
ALGERIA
growth, and financial instability. large fiscal costs and add to inflationary diversification, including by
pressures. harnessing the potential of
renewable energies.
41
42
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Disorderly energy transition. A disorderly Medium High. The high dependence on Accelerate efforts to diversify the
shift to net-zero emissions (e.g., owing to hydrocarbon production and exports economy (including by investing in
shortages in critical metals) and climate makes the Algerian economy vulnerable renewables), create fiscal space to
policy uncertainty cause supply disruptions, to transition risks. build financial buffers, and reduce
stranded assets, market volatility, and the procyclicality of the budget.
subdued investment and growth. Allow the exchange rate to play its
role as shock absorber. Further open
the economy (and SOEs) to private
sector involvement, building on the
Investment Law.
Idiosyncratic risks
Calls on government-guaranteed debt or Medium High. The banking sector appears liquid Monitor and manage fiscal risks.
capital injection needs for public banks and profitable but NPLs weigh on Streamline SOE governance and
and SOEs. balance sheets, especially for public condition state support on
banks, and some of these are transparency, restructuring, and
government-guaranteed. reforms. Develop a government
shareholder policy focused on
enhancing profitability and
efficiency. Divest from non-core
assets and open the capital of
selected SOEs to the private sector.
Deepening sovereign-SOE-SOB nexus. Medium High. Fiscal financing needs are Refrain from (in)direct financing of
projected to remain significant in the the budget deficit by the central
absence of fiscal rebalancing and/or bank, consistent with the new Loi
diversification of funding sources. The Monétaire et Bancaire, and explore
strengthening of the feedback loop new sources of financing, such as
weakens the transmission of monetary from deepening the public debt
policy and raises financial stability market. Expand fiscal space by
concerns. mobilizing nonhydrocarbon revenue
and reducing spending, within a
medium-term fiscal adjustment
plan. Reform SOB governance, focus
their lending on profitable projects,
and conduct asset quality review.
Partial or delayed implementation of Medium High. Partial or delayed reform Increase transparency about the
macroeconomic adjustment and necessary implementation could have significant state of the economy including
structural reforms. costs to the budget and raise financing through timely publication of
needs, especially in the event of sharply economic data and communication.
lower international gas prices, while Adopt a medium-term fiscal
yielding limited growth dividends, adjustment plan supported by
increasing the risk of policy coherent monetary and exchange
inconsistency, and reform reversals. rate policies. Mitigate the social
impact of reforms to low-income
households through temporary and
targeted fiscal support.
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43
44
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Recommendation Implementation Status
Annex II. Implementation of Past IMF Recommendations

Monetary/Exchange Rate Policies and Operations
Tighten monetary policy to forestall possible de-anchoring of The Banque d’Algérie (BA) in April 2023 increased the
expectations and persistent high inflation. required reserve ratio by one percentage point (to three
percent) and increased its bilateral liquidity operation. The
policy rate was unchanged and there remained ample
liquidity in the banking system.
Include a formal ban on monetary financing in the Loi Monétaire et Art. 48 of the LMB allows the BA to extend to the Treasury
Bancaire (LMB) to enhance BA’s independence and ability to overdrafts on the current account up to a limit of maximum
defend price stability. ten percent of ordinary revenue of the previous budget year
and with a duration not exceeding 240 days (whether or not
consecutive), during a calendar year. The LMB also allows the
BA to extend an advance to the Treasury in the event of an
exceptional, unforeseen, and declared crisis, and under the
conditions and modalities set by the Conseil monétaire et
bancaire.
Use the new Loi Monétaire et Bancaire (LMB) to strengthen the The LMB includes a governance framework covering
governance framework of the BA. mandates, autonomy, and controls. Staff recommends that
implementation regulations or future updates of the law
further clarify and strengthen the governance framework in a
number of areas (such as the eligibility criteria for nominating
(Vice)-Governors), the role of external auditors, etc.)
Reform the FX and trade regulatory frameworks, including The BA targets a real effective exchange rate that is derived
measures to deepen the interbank FX market, and allow for from an econometric model that considers various variables
greater exchange rate flexibility in the medium term. (e.g., oil price, budget deficit, etc.) The buy/sell spread of the
BA’s transactions in FX is very narrow (e.g., 0.015 DZD on U.S.
dollar transactions). Since 2021, businesses are no longer
required to surrender their FX to the BA (except for the
hydrocarbon and mining sectors, which accounts for the bulk
of Algeria’s FX revenue). Exporters can use their FX to finance
imports and operations to promote export activities. Banks
can also offer FX term contracts.
Fiscal Policies and Operations
Proceed with gradual fiscal rebalancing, guided by a rules-based The authorities envisaged a fiscal expansion in 2023 and 2024
fiscal framework, to enhance the resilience of public finances and with the aim of supporting the purchasing power of civil
safeguard macroeconomic stability in the medium term. servants and households and increasing investment
spending.
Adopt a medium-term fiscal framework based on well-calibrated The authorities include three-year projections in their budget
rules comprising a savings floor and nominal debt anchor. documents, but without a clear anchor.
Accelerate preparatory work and launch the gradual phase-out of The 2020 budget law envisaged gradually phasing out
universal subsidies, part of which could finance targeted support universal subsidies and replacing those with a targeted
to low-income households. compensation mechanism to support households. The
authorities are collaborating with the World Bank on

identifying appropriate compensatory measures, building on
a household survey.
Diversify budget financing sources. The authorities have a policy of financing the budget only
with domestic sources. The authorities are looking into
optimizing debt financing with different maturities of debt
ALGERIA
instruments.
Strengthen the fiscal framework with PFM reforms, including by Implementation of the Organic Budget Law is well advanced,
(i) fully implementing the Organic Budget Law in 2023; (ii) keeping especially with the adoption of program budgeting. The 2024
budget projections in line with execution capacity and available budget law introduced an initial version of Etat D (“Annex D”),
45
46
ALGERIA

fiscal space; (iii) incorporating comprehensive and transparent albeit without specifying the financing side of the budget.
financing plans; and (iv) strengthening cash management and Further efforts are needed to strengthen cash management
transparency on budget execution. and transparency on budget execution.
Private Sector Initiative
Lift constraints to private sector financing, level the playing field, The LMB will be the impetus for reforms to modernize and
and enable the financial system to better support growth, develop financial markets and payment systems, including by
including through: (i) strengthening SOB governance; facilitating the development of Islamic finance and digital
(ii) reforming loan subsidy programs; (iii) developing prudential banking. They are preparing reforms to deepen the
policies to boost credit to small and medium-sized enterprises government debt market, develop long-term savings, and
and households; (iv) introducing an effective public credit registry reinvigorate the stock market (including through the listing of
and a personal bankruptcy framework; and (v) deepening the shares of two public banks).
government debt market and encouraging private debt issuance.
Create an economic environment conducive for the private sector, The authorities relaxed the 49/51 investment rule (except in
enhance competitiveness, and stimulate economic diversification, the hydrocarbon and mining sectors). A new investment law
including through more trade openness and reforms in product was adopted in mid–2022. It has incentives for investments in
and labor markets. special zones and priority sectors. This law also created the
Algerian Agency for Promotion of Investment (AAPI) tasked
with promoting Algeria as an investment destination and
easing administrative burdens (including through a one-stop
shop window and electronic platform). The authorities are
adopted a Land Management Law (Loi Foncier) which would
make it easier for private investors to purchase land. They are
pursuing diversification of (non-hydrocarbon) exports and are
exploring new export markets (for example, they recently
opened bank branches in Senegal and Mauritania). A new law
on the “auto-entrepreneur” creates a legal statute for self-
employed individuals and aims at reducing informality.
Governance and Vulnerabilities to Corruption
Further strengthen efforts to improve governance, reduce The authorities adopted a May 2022 law which established a
corruption risks, and reinforce the legal AML/CFT framework, in High Committee of transparency, prevention, and fight
line with past IMF recommendations; strengthen institutional against corruption (Haute autorité de transparence, de
safeguards against conflicts of interest and the operational prévention et de lutte contre la corruption) and a February
autonomy of anti-corruption and judicial institutions. 2023 law on AML/CFT, which defined “politically exposed
persons”. They established a national taskforce to follow up
on the recommendations in the MENAFATF report, including
the preparation of a national risk strategy (and coordinated
by the Ministry of Justice). The authorities are also receiving
TA from the IMF’s LEG department.
Data Provision
Prioritize actions to improve the quality and availability of Although data provision remains broadly adequate for
macroeconomic data, including efforts to improve the timely surveillance, there is ample room for improvement. Key data
provision of data to the IMF such as data on budget outturns. are either missing (unemployment rate), outdated (CPI), or
transmitted with long delays (budget execution). The
authorities are rebasing the national accounts and the
Minister of Digitalization and Statistics is preparing a digital

platform to speed up data transmission.
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47
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Annex III. Sovereign Risk and Debt Sustainability Assessment

Algeria faces a “Moderate” risk of sovereign stress. The public debt ratio is projected to increase
over the medium term and beyond, on the back of projected large primary deficits, including those
expected for 2023–24. Large uncertainty, especially from volatile hydrocarbon revenue, add to
medium-to-long term risks of sovereign stress. Significant gross public financing needs could put
pressure on the domestic banking system, crowd out private activity, and potentially aggravate the
sovereign-bank nexus (all in the context of the authorities’ policy to avoid external borrowing). Staff
recommends additional fiscal rebalancing to stabilize the debt ratio over the medium term and
urges the Algerian authorities to expand the perimeter of available debt data, prepare a debt
management strategy, and develop domestic debt markets.
1. Public debt is almost entirely denominated in dinars and a large share is non-
marketable. As of 2022, nearly all the central government debt was held domestically and about
43 percent was held by the central bank, the former reflecting the authorities’ policy to avoid
external borrowing and the latter due to monetization of the budget deficit during 2017–19. The
reported data used for this SR-DSA underestimates central government debt as it does not
include some intra-government claims (e.g., use of deposits of the postal office) and does not
consider contingent liabilities, such as from future social security deficits.
2. Algeria’s central government debt-to-GDP ratio is projected to increase over the

medium-to-long term, in the absence of additional fiscal rebalancing. High commodity
prices supported the primary deficit reduction in 2022, which, together with large denominator
effects and negative real interest rates, reduced the public debt ratio to 48.1 percent of GDP.
Withdrawals from the Revenue Regulation Fund (FRR) in 2023 and 2024 would reduce the need
for new borrowing to cover financing needs in those years, pausing the increase in the public
debt ratio up to 2025 even as primary deficits widen. However, with the balances in the FRR
depleted, the public debt ratio would increase again from 2025 onwards and a gradual reduction
in fiscal deficits would not be sufficient to stabilize the debt ratio.
3. Staff assesses Algeria’s overall risk of sovereign stress as “Moderate”. The financial
cushion from the FRR is expected to mitigate the need for debt financing in 2023–24. Additional
mitigating factors to sovereign stress include the large share of non-marketable debt and the
near absence of external public debt. However, risks would build up over the medium term as the
FRR buffer is exhausted, gross financing needs are sizeable, and the public debt ratio is not
projected to stabilize. Large uncertainty, notably from volatile hydrocarbon revenue, create
additional risks over the medium term. Stress tests suggest that an (illustrative) banking crisis
shock would worsen public debt and gross financing needs, underscoring the risks of large
reliance on domestic bank financing and the sovereign-SOB “nexus”. The SR-DSA also triggered
two (illustrative) long-run risk modules: (i) significant gross financing needs in the next years
would push large amortizations falling due over the long term; these would need to be rolled
over and their costs would further fuel the increase in the public debt ratio; and (ii) in the absence
of significant discoveries of new hydrocarbon fields, and possibly because of shifting

ALGERIA
global demand during the energy transition, a gradual decline in hydrocarbon production (and
associated fiscal revenue) would increase public deficits and result in additional debt build-up.
4. Staff recommends expanding the perimeter of available debt data, preparing a

comprehensive debt management strategy, and developing domestic debt markets.

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Annex III. Figure 1. Algeria: Risk of Sovereign Stress
Mechanical Final
Horizon Comments
signal assessment
Overall … Moderate Staff assesses the overall risk of sovereign stress as ‘Moderate’. While
medium-term projections indicate a ‘high’ risk of sovereign stress, there are
mitigating factors as well. Algeria has a fiscal cushion in the Revenue
Regulation Fund (FRR) thanks to the currently high international prices for
hydrocarbons, which would however be fully eroded by 2024 if the
authorities pursued the large fiscal impulse currently included in staff’s
baseline projections. A more prudent fiscal stance would help stabilize the
debt ratio (per staff’s alternative scenario). Also, Algeria has almost no
external public debt and the authorities do not plan to borrow externally.
Near term 1/
Medium term High High Staff assesses medium-term risks of sovereign stress as ‘High’, consistent
with the mechanical signal, reflecting the baseline’s non-stabilization of
Fanchart High …
public debt over the medium term, the risks from volatile hydrocarbon
GFN High … revenues (which contribute to the wide range of possible outcomes over a
Stress test Banking crisis, … five-year horizon), and elevated gross financing needs. A banking sector
Commodity shock, natural disasters and/or the realisation of contingent liabilities could
prices, significantly add to financing constraints.
Contingent
liabilities, Natural
disasters
Long term … High Staff assesses long-term risks of sovereign stress as ‘High’, as pressures
from social security deficits would add to pressures on public debt on top of
the factors that result in the assessment of ‘High’ medium-term risk of
sovereign stress. Transition and physical risks from climate change add to
long-term vulnerabilities.
Not required
Not required for
Sustainability for
surveillance
assessment 2/ surveillance
countries
countries
Debt stabilization in the baseline No
DSA Summary Assessment
Commentary: Staff assesses Algeria's public debt to have a ‘Moderate’ overall risk of sovereign stress. While high commodity
prices helped the country improve its fiscal stance in 2022, projected sizable primary deficits over the medium term and
associated debt service will increase the public debt level and Gross Financing Needs (GFNs) significantly. Accordingly, staff
projects that public debt will not stabilize in the baseline scenario. The fiscal path is also subject to large uncertainty, reflecting
the dependence on volatile hydrocarbon revenue. Medium-term risks are also high because of large (re)financing needs in a
context of heavy reliance on domestic bank financing. Mitigating factors include the small share of external public debt and the
large share of non-marketable debt on favorable financing terms.
Source: Fund staff.

Note: The risk of sovereign stress is a broader concept than debt sustainability. Unsustainable debt can only be resolved through
exceptional measures (such as debt restructuring). In contrast, a sovereign can face stress without its debt necessarily being
unsustainable, and there can be various measures—that do not involve a debt restructuring—to remedy such a situation, such
as fiscal adjustment and new financing.
1/ The near-term assessment is not applicable in cases where there is a disbursing IMF arrangement. In surveillance-only cases
or in cases with precautionary IMF arrangements, the near-term assessment is performed but not published.
2/ A debt sustainability assessment is optional for surveillance-only cases and mandatory in cases where there is a Fund
arrangement. The mechanical signal of the debt sustainability assessment is deleted before publication. In surveillance-only
cases or cases with IMF arrangements with normal access, the qualifier indicating probability of sustainable debt ("with high
probability" or "but not with high probability") is deleted before publication.

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Annex III. Figure 2. Algeria: Debt Coverage and Disclosures

Comments
1. Debt coverage in the DSA: 1/ CG GG NFPS CPS Other
1a. If central government, are non-central government entities insignificant? 0
2. Subsectors included in the chosen coverage in (1) above:
Subsectors captured in the baseline Inclusion
1 Budgetary central government Yes
GG: expected
CG
2 Extra budgetary funds (EBFs) No

NFPS
3 Social security funds (SSFs) No

4 State governments No
CPS
5 Local governments No
6 Public nonfinancial corporations No
7 Central bank No
8 Other public financial corporations No
3. Instrument coverage: Currency Oth acct.
Debt IPSGSs
& Loans payable
securities 3/
deposits 2/
4. Accounting principles: Basis of recording Valuation of debt stock

Non-cash Cash Nominal Face Market
basis 4/ basis value 5/ value 6/ value 7/
5. Debt consolidation across sectors: Consolidated Non-consolidated

Color code: █ chosen coverage █ Missing from recommended coverage █ Not applicable
Reporting on intra-government debt holdings
Holder Budget. Extra- Social
Nonfin. Central Oth. pub.
central budget. security State govt. Local govt. Total
Issuer pub. corp. bank fin corp
govt funds funds
1 Budget. central govt 0
GG: expected
CG
2 Extra-budget. funds 0
NFPS
3 Social security funds 0

4 State govt. 0
CPS
5 Local govt. 0
6 Nonfin pub. corp. 0
7 Central bank 0
8 Oth. pub. fin. corp 0
Total 0 0 0 0 0 0 0 0 0
1/ CG=Central government; GG=General government; NFPS=Nonfinancial public sector; PS=Public sector.
2/ Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable.
3/ Insurance, Pension, and Standardized Guarantee Schemes, typically including government employee pension liabilities.
4/ Includes accrual recording, commitment basis, due for payment, etc.
5/ Nominal value at any moment in time is the amount the debtor owes to the creditor. It reflects the value of the instrument at creation and
subsequent economic flows (such as transactions, exchange rate, and other valuation changes other than market price changes, and other
volume changes).
6/ The face value of a debt instrument is the undiscounted amount of principal to be paid at (or before) maturity.
7/ Market value of debt instruments is the value as if they were acquired in market transactions on the balance sheet reporting date
(reference date). Only traded debt securities have observed market values.
Commentary: The fiscal data used in this SR-DSF cover the central government. Intra-public sector claims could add to the debt stock, as
use of deposits of public entities (like those from the post office) have supported financing the deficit and are not recorded in the debt
stock. Algeria will also face deficits in social security funds over the medium-to-long term, adding to contingent liabilities.

ALGERIA
Annex III. Figure 3. Algeria: Public Debt Structure Indicators

Debt by currency (percent of GDP)
90
80 Projection
70
60
50
40
30
20
10
0
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031
Foreign currency Local currency Local-linked
Note: The perimeter shown is central government.
Public debt by holder (percent of GDP) Public debt by governing law, 2022 (percent)
60
40
20
0
2013 2015 2017 2019 2021 Domestic law
External private creditors
External official creditors Foreign law ex. multilateral
Domestic other creditors Multilateral
Domestic commercial banks
Domestic central bank
Note: The perimeter shown is central government. Note: The perimeter shown is central government.
Debt by instruments (percent of GDP) Public debt by maturity (percent of GDP)

80 70
70 60
Proj. Proj
60 50
50
40
40
30
30
20 20
10 10
0 0
2018 2020 2022 2024 2026 2028 2018 2020 2022 2024 2026 2028
Marketable debt Nonmarketable debt Residual maturity: 6. years

≤ 1 year 1-5 years > 5 years
Note: The perimeter shown is central government. Note: The perimeter shown is central government.
Commentary: Public debt is primarily domestic and owed to the central bank and commercial banks reflecting the authorities'
policy of avoiding external borrowing and the run-up of non-marketable debt in recent years (including monetary financing).
Around 99 percent of debt is held domestically and denominated in dinars. While this policy limits public debt foreign
exchange rate exposure, it raises concerns regarding the domestic banking market capacity to absorb projected growing
GFN.

ALGERIA
Annex III. Figure 4. Algeria: Baseline Scenario
(percent of GDP unless indicated otherwise)

Actual Medium-term projection Extended projection
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Public debt 48.1 49.5 46.4 49.7 51.9 54.5 57.0 59.5 62.0 64.4 66.7
Change in public debt -7.0 1.4 -3.1 3.3 2.2 2.6 2.5 2.5 2.5 2.4 2.3
Contribution of identified flows -5.9 1.4 -3.1 3.3 2.2 2.6 2.5 2.5 2.5 2.3 2.3
Primary deficit 1.3 1.8 6.7 5.9 4.7 4.5 4.3 4.3 4.3 4.2 4.2
Noninterest revenues 29.6 31.1 27.8 26.8 26.4 25.7 25.4 25.2 25.1 25.1 25.1
Noninterest expenditures 30.8 32.9 34.5 32.8 31.1 30.2 29.8 29.5 29.4 29.3 29.3
Automatic debt dynamics -10.6 -0.5 -3.0 -2.0 -1.9 -1.4 -1.3 -1.3 -1.4 -1.5 -1.5
Real interest rate and relative inflation -8.6 1.4 -1.1 -0.6 -0.7 -0.4 -0.2 -0.1 -0.1 -0.2 -0.2
Real interest rate -8.7 1.4 -1.2 -0.6 -0.7 -0.4 -0.2 -0.1 -0.1 -0.2 -0.2
Relative inflation 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Real growth rate -1.9 -1.9 -1.8 -1.4 -1.2 -1.1 -1.1 . -1.2 -1.2 -1.3 -1.3
Real exchange rate -0.1 … … … … … …… … … … …
Other identified flows 3.4 0.2 -6.8 -0.6 -0.6 -0.5 -0.5 -0.5 -0.4 -0.4 -0.4
Contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other transactions 3.4 0.2 -6.8 -0.6 -0.6 -0.5 -0.5 -0.5 -0.4 -0.4 -0.4
Contribution of residual -1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1
Gross financing needs 5.2 7.4 14.3 10.7 8.4 8.5 9.5 9.5 10.6 10.3 10.3
of which: debt service 4.0 5.6 7.6 4.8 3.7 4.0 5.2 5.2 6.3 6.1 6.1
Local currency 3.9 5.6 7.6 4.7 3.7 4.0 5.2 5.2 6.3 6.1 6.1
Foreign currency 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Memo:
Real GDP growth (percent) 3.6 4.2 3.8 3.1 2.5 2.1 2.1 2.1 2.1 2.1 2.1
Inflation (GDP deflator; percent) 22.9 -0.4 6.5 5.9 6.0 5.4 5.0 4.8 4.8 4.8 4.8
Nominal GDP growth (percent) 27.3 3.7 10.7 9.2 8.7 7.6 7.2 7.0 6.9 6.9 6.9
Effective interest rate (percent) 2.8 2.6 4.0 4.4 4.5 4.6 4.6 4.6 4.5 4.4 4.4
Contribution to change in public debt
(percent of GDP)
25
60
20 Projection Primary deficit
50
15 40 49
10 30 21 Real Interest rate
and relative
5 20
inflation
10 Real GDP
0
growth
0 0
-5 -11
-10 Exch. rate
-10 -15 depreciation
-20
-15 -30 -2 Other flows
-20 -40
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 Cumulative
Staff commentary:Public debt is expected to rise over the forecast horizon in spite of a medium-term consolidation envisaged in the staff
baseline scenario; the fiscal expansion planned for 2024 is expected to add pressure on financing needs over the medium term. A more
ambitious fiscal adjustment would help stabilize the public debt path.

ALGERIA
Annex III. Figure 5. Algeria: Realism of Baseline Assumptions

ALGERIA
Annex III. Figure 6. Algeria: Medium-Term Risk Analysis

Debt Fanchart and GFN Financeability Indexes
(percent of GDP unless otherwise indicated)
Module Indicator Value Risk Risk Adv. Econ., Non-Com. Exp, Program
index signal 0 25 50 75 100
Debt Fanchart width 122.6 1.8 …
fanchart
Probability of debt not stabilizing (pct) 98.1 0.8 …
module
Terminal debt level x institutions index 63.2 1.4 …
Debt fanchart index … 4.0 High
GFN Average GFN in baseline 9.8 3.3 …
finance-
ability Bank claims on government (pct bank assets) 35.5 11.5 …
module Chg. in claims on govt. in stress (pct bank assets) 37.2 12.4 …
GFN financeability index … 27.3 High
Legend: Interquartile range ▌ Algeria
## Gross Financing Needs (pct of GDP)
200 5-25 pct 40 Financing provided by banks
25-50 pct Actual
50-75 pct Baseline
150 Stress scenario
75-95 pct
Actual
Baseline
100 20
50
0 0
2018 2020 2022 2024 2026 2028 2018 2020 2022 2024 2026 2028
Triggered stress tests (stress tests not activated in gray)
Banking crisis Commodity prices Exchange rate Contingent liab. Natural disaster
Medium-Term Index Medium-Term Risk Analysis
(index number) Low risk High risk Weight Normalized
threshold threhsold in MTI level
0.80
Medium-term
0.70 index Debt fanchart
1.1 2.1 0.5 0.9
0.60 index
Low risk GFN
0.50
financeability 7.6 17.9 0.5 0.5
0.40
index
0.30
Medium-term
0.20 0.3 0.4 … 0.7, High
index (MTI)
0.10
Prob. of missed crisis, 2023-2028 (if stress not predicted): 81.8 pct.
0.00
Prob. of false alarm, 2023-2028 (if stress predicted): 1.1 pct.
2020 2021 2022 2023
Commentary: Both the Debt Fan chart Module and Gross Financing Needs (GFN) Financeability Module suggest a ‘High’ risk
of sovereign stress over the medium term. Stress tests indicate that Algeria’s public debt path and associated GFNs would be
impacted by an (illustrative) banking stress shock, which would push the public debt ratio to 76 percent of GDP by 2028. Such
a shock illustrates the sovereign/bank nexus (i.e., debt feedback loop) with would also challenge the government’s ability to
meet its funding needs given its nearly exclusive reliance on domestic financial markets.The impact of a commodity price shock
would also be sizable, pushing the public debt ratio to 71 percent of GDP by 2028. The effects of a natural disaster shock and a
contingent liability shock on debt are more moderate but they would also raise significant liquidity challenges with GFNs
increasing by about 5 percentage points of GDP the year of the shock.

ALGERIA
Annex III. Figure 7. Algeria: Long-Term Risk Analysis

ALGERIA
Annex IV. External Debt Sustainability Analysis

Total external debt Algeria is low and expected to remain stable over the medium term. Its trajectory
is nevertheless sensitive to several risks, notably negative current account shocks.
Algeria’s low external debt level would further decline over the medium term as the
government avoids borrowing externally and the financial account is relatively closed.
External debt fell from 2.1 percent of GDP in 2020 to 1.3 percent in 2022 (Annex IV Figure 1).
Staff estimates that total external debt would stabilize at around 1.3 percent of GDP in 2023.
External debt is projected to further decline to 1.2 percent of GDP through 2028, as FX reserves
are used to finance the predicted widening current account deficit from 2025 onwards. Bound
stress tests indicate that the external debt dynamics are subject to risks, notably an adverse
current account shock (Annex IV Figure 2).

ALGERIA
Annex IV Figure 1. Algeria: External Debt Sustainability Framework
(In percent of GDP, unless otherwise indicated)
Actual Projections
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Debt-stabilizing
non-interest
current account 6/
Baseline: External debt 2.1 2.0 2.1 1.7 1.3 1.3 1.3 1.3 1.3 1.2 1.2 -0.7
Change in external debt 0.0 -0.1 0.1 -0.4 -0.3 0.0 -0.1 0.0 0.0 0.0 0.0
Identified external debt-creating flows (4+8+9) 8.3 8.1 11.0 1.7 -8.7 -2.6 -0.9 0.7 1.8 2.2 2.6
Current account deficit, excluding interest payments 8.7 8.7 11.3 2.4 -8.5 -2.2 -0.1 1.5 2.5 2.9 3.4
Deficit in balance of goods and services 8.1 8.1 10.9 1.3 -9.9 -2.5 0.0 1.6 2.5 3.0 3.5
Exports 22.8 19.9 15.1 22.5 30.6 24.0 22.0 21.3 20.9 20.6 20.3
Imports 30.9 28.0 26.0 23.8 20.7 21.5 21.9 22.9 23.5 23.6 23.8
Net non-debt creating capital inflows (negative) -0.3 -0.7 -0.7 -0.5 0.0 -0.4 -0.7 -0.7 -0.7 -0.7 -0.7
Automatic debt dynamics 1/ 0.0 0.0 0.4 -0.2 -0.2 0.0 0.0 0.0 0.0 0.0 0.0
Contribution from nominal interest rate 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0
Contribution from real GDP growth 0.0 0.0 0.1 -0.1 0.0 -0.1 0.0 0.0 0.0 0.0 0.0
Contribution from price and exchange rate changes 2/ 0.0 0.0 0.2 -0.2 -0.2 ... ... ... ... ... ...
Residual, incl. change in gross foreign assets (2-3) 3/ -8.3 -8.1 -10.9 -2.1 8.4 2.5 0.9 -0.7 -1.8 -2.2 -2.6
External debt-to-exports ratio (in percent) 9.0 9.9 13.8 7.3 4.4 5.5 5.8 6.0 6.0 6.0 6.0
Gross external financing need (in billions of US dollars) 4/ 19.1 19.3 21.0 6.7 -17.0 -3.0 2.3 7.2 10.6 12.1 13.8
in percent of GDP 9.8 10.0 12.8 3.6 -7.5 -1.2 0.9 2.6 3.7 4.1 4.6
Scenario with key variables at their historical averages 5/ 1.3 8.5 14.1 18.5 22.4 25.9 0.0
Key Macroeconomic Assumptions Underlying Baseline
Real GDP growth (in percent) 1.4 0.9 -5.0 3.8 3.6 4.2 3.8 3.1 2.5 2.1 2.1
GDP deflator in US dollars (change in percent) 0.9 -1.5 -10.3 8.7 17.1 4.1 5.0 0.8 1.0 0.4 0.0
Nominal external interest rate (in percent) 1.1 1.7 1.1 3.8 5.9 1.2 1.1 0.9 0.8 0.7 0.7
Growth of exports (US dollar terms, in percent) 17.7 -13.1 -35.4 68.0 65.0 -15.1 -0.1 1.0 1.5 0.8 0.8
Growth of imports (US dollar terms, in percent) -0.1 -9.7 -20.9 3.4 5.4 12.7 11.2 8.6 5.9 3.2 2.9
Current account balance, excluding interest payments -8.7 -8.7 -11.3 -2.4 8.5 2.2 0.1 -1.5 -2.5 -2.9 -3.4
Net non-debt creating capital inflows 0.3 0.7 0.7 0.5 0.0 0.4 0.7 0.7 0.7 0.7 0.7
1/ Derived as [r - g - r(1+g) + ea(1+r)]/(1+g+r+gr) times previous period debt stock, with r = nominal effective interest rate on external debt; r = change in domestic GDP deflator in US dollar
terms, g = real GDP growth rate, e = nominal appreciation (increase in dollar value of domestic currency), and a = share of domestic-currency denominated debt in total external debt.
2/ The contribution from price and exchange rate changes is defined as [-r(1+g) + ea(1+r)]/(1+g+r+gr) times previous period debt stock. r increases with an appreciating domestic
currency (e > 0) and rising inflation (based on GDP deflator).
3/ For projection, line includes the impact of price and exchange rate changes.
4/ Defined as current account deficit, plus amortization on medium- and long-term debt, plus short-term debt at end of previous period.
5/ The key variables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-interest current account and non-debt inflows in percent of GDP.
6/ Long-run, constant balance that stabilizes the debt ratio assuming that key variables (real GDP growth, nominal interest rate, dollar deflator growth, and non-debt inflows in percent of GDP)
remain at their levels of the last projection year.
ALGERIA
Annex IV Figure 2. Algeria: External Debt Sustainability: Bound Tests 1/ 2/

(External debt in percent of GDP)
Baseline and historical scenarios Interest rate shock (in percent)
30 15 2.5
Historical Baseline: 0.8
25 Gross financing need Scenario: 1.7
10
under baseline Historical: 2.3
26
20 (right scale) 2.0
5
15
0 i-rate
10 1.5
shock
1
-5
5
Baseline Baseline 1
1
0 -10 1.0
2018 2020 2022 2024 2026 2028 2018 2020 2022 2024 2026 2028
Growth shock Non-interest current account shock

(in percent per year) (in percent of GDP)
2.5 25
Baseline: 2.7 Baseline: -2.0
Scenario: 1.4 Scenario: -5.7
2.0 20 19
Historical: 2.0 Historical: -6.7
1.5 15
Baseline 1
1.0 10 CA shock
Growth
1
shock
0.5 5
1
Baseline
0.0 0
2018 2020 2022 2024 2026 2028 2018 2020 2022 2024 2026 2028
Combined shock 3/ Real depreciation shock 4/

14 3
12
30 %
10 depreciation
10 2
2
8
Combined
shock
6
1 Baseline 1
4
2 Baseline 1
0 0
2018 2020 2022 2024 2026 2028 2018 2020 2022 2024 2026 2028
Sources: International Monetary Fund, Country desk data, and staff estimates.
1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation
shocks. Figures in the boxes represent average projections for the respective variables in the
baseline and scenario being presented. Ten-year historical average for the variable is also shown.
2/ For historical scenarios, the historical averages are calculated over the ten-year period, and the
information is used to project debt dynamics five years ahead.
3/ Permanent 1/4 standard deviation shocks applied to real interest rate, growth rate, and current
account balance.
4/ One-time real depreciation of 30 percent occurs in 2023.

ALGERIA
Annex V. Alternative Fiscal Scenario

Additional fiscal adjustment of three percentage points of GDP over 2024–26 would support
macroeconomic stability by rebuilding fiscal buffers. It would stabilize public debt to GDP ratio at
about 47 percent of GDP and any additional windfall would accumulate in the FRR. The additional
deficit reduction would provide some relief for public borrowing from the banking sector, leaving
more space for private sector borrowing.
1. During the 2022 Article IV consultations staff proposed the introduction of a rules-
based framework to guide medium-term fiscal projections, with the aim of reducing the
vulnerability of budget execution to revenue volatility. The framework proposed a two-pillar
approach to building buffers: first, by creating a margin for public debt (the distance between the
projected debt ratio and a benchmark upper limit), and second, by creating a liquidity buffer
(funds held in the Revenue Regulation Fund, FRR). A value-at-risk (VAR) type simulation exercise
found that a combined buffer of 36 percent of GDP would avoid breaching the debt anchor in
95 percent of the simulated medium-term debt trajectories.
2. In the run-up towards implementing such a rules-based medium-term fiscal

framework, staff proposed anchoring the fiscal path on stabilizing the public debt ratio
over the medium term. The projection period would be three years (2024–26), which is the
same horizon as that of the medium-term budget projections prepared by the authorities.
3. Staff prepared an alternative fiscal scenario with fiscal measures of three pps. of
GDP over three years and which would stabilize the public debt to GDP ratio at about
47 percent of GDP by 2026 (Annex V Table 1 and Figure 1). The alternative scenario assumes
that the adjustment would be obtained through additional revenue mobilization (1.25 pps. of
GDP over three years) and spending restraint (1.75 pps. of GDP, also spread over three years).
The adjustment would be gradual, recognizing that measures take time to implement and that
the execution of the 2024 budget (a Presidential election year) is already underway. The
additional revenue could be raised by eliminating inefficient VAT exemptions,1 capturing gains
from digitalization through improved compliance, and improving procedures for tax debt
recovery. Spending restraint could focus on the gradual phasing out of universal subsidies
(partially compensated by cash transfers to vulnerable households) as envisaged by the
authorities; limiting transfers to SOEs including by strict enforcement of performance contracts;
1
A partial list of tax expenditures included in “État H” of the 2024 budget law amounts to DZD 495 billion (about
1.3 percent of GDP), with customs rights and VAT on imports accounting for more than half of this amount.

ALGERIA
and containing the wage bill (for example, by spreading the introduction of additional benefits
and hiring over a longer period).
Annex V. Table 1. Algeria: Alternative Fiscal Scenario (with public debt

stabilization by 2026), 2022–26
Annex V. Figure 1. Algeria: Impact of Additional Fiscal Measures on Fiscal Balances

and Public Debt, 2021–29 (in percent of GDP)
A more ambitious fiscal adjustment over … and stabilize the public debt ratio around
2024–26 would reduce the overall deficit by 47 percent of GDP.
about three pps. of GDP by 2026…

ALGERIA
5. Staff estimates that the fiscal measures would have a modest impact on economic
activity, given Algeria’s relatively low fiscal multipliers. The suggested tighter fiscal policy
would reduce average real GDP growth by 0.15 pps. per year over 2024–26 (Annex V Figure 2) as
fiscal multipliers for Algeria are estimated to be low.2 The reduction in gross financing
requirements would provide some relief from public borrowing from the banking sector, leaving
more space for private sector borrowing.
Annex V. Figure 2. Algeria: Impact of Additional Measures

on Real GDP Growth (percentage change, y-o-y)
The additional fiscal measures would have a modest impact on

real GDP growth, given Algeria’s low multipliers.
Sources: IMF Staff estimates and projections.
2
See Elkhadari, M., Souissi M., and Jewell A, 2018. Empirical Estimation of Fiscal Multipliers in MENA Oil-
Exporting Countries with an application to Algeria, IMF Working paper 18/24.

ALGERIA
Annex VI. External Sector Assessment
Overall Assessment: Algeria’s external position in 2023 was moderately stronger than the level
implied by fundamentals and desirable policy settings, based on the results of the IMF’s EBA-lite
current account model.1 The current account gap is estimated at 1.7 percent of GDP in 2023,
compared with 4.7 percent in 2022. After a historical surplus in 2022 owing to the rally in
hydrocarbon prices, the current account likely posted a modest surplus in 2023. The relatively
weaker performance of the external sector in 2023 compared with 2022 mainly reflects lower
hydrocarbon prices, though nonhydrocarbon exports also slowed. Foreign exchange reserves
continued to increase in 2023. They are projected to further increase in the near term but would
start falling over the medium term as the current account returns to deficits, while remaining
above adequacy benchmarks. External debt is low, reflecting the authorities’ policy not to borrow
public debt externally and the largely closed financial account.
Potential Policy Responses: A gradual fiscal rebalancing anchored in a credible medium-term

framework, complemented by structural reforms—to promote economic diversification and
strengthen non-price competitiveness―and greater flexibility of the nominal exchange rate
would contribute to maintaining external sustainability over the medium-term.
Foreign Assets and Liabilities: Position and Trajectory
Background. The largest component of Algeria’s external assets is international reserves,

which considerably outweigh its Foreign Direct Investment (FDI) liabilities and external debt.
After a steady decline to a low of US$45.3 billion (or 11.6 months of imports) at end–2021,
international reserves, excluding monetary gold but including SDRs, recorded a notable rise in
2022 to US$61.0 billion in 2022 and increased further to US$68.9 billion (14.1 months of
imports) in 2023. Likewise, the Net International Investment Position (NIIP) increased from
US$27.8 billion in 2021 to US$49.6 billion in 2023, mirroring the sharp increase in reserves
assets.
Assessment. The trajectory of Algeria’s NIIP reflects the dependence of the economy on
hydrocarbon exports revenue, highlighting its vulnerability to price fluctuations in the medium
term. Under staff’s baseline scenario, international reserves are projected to decline to
US$40.4 billion (6.6 months of imports) by 2029 as the current account is projected to return
to deficits starting in 2025. Accordingly, the NIIP is projected to decline to US$8.1 billion
(2.7 percent of GDP) by 2029.
2023 NIIP Gross Assets Debt Assets Gross Liabilities Debt Liabilities
(in percent 20.3 31.7 1.9 15.6 6.6

of GDP)
Current Account
1
The assessment uses the 2023 EBA-lite template with staff projections for 2023 data.

ALGERIA
Background. Algeria’s external current account balance is primarily determined by the trade
balance. Hydrocarbons dominate Algeria exports, although the share of non-hydrocarbon
exports has increased in recent years, partly reflecting the authorities’ policy to diversify
exports. The share of hydrocarbons is declining but remains substantial, averaging 84 percent
of total exports over 2019–23. The current account balance is projected to have posted a
surplus of 2.2 percent of GDP in 2023, lower than the historical record of 8.4 percent in 2022,
mainly reflecting lower hydrocarbon prices. Imports have stabilized at around 21 percent of
GDP following a fast-paced downwards trend since 2015 following the introduction of various
import compression policies with the aim of protecting FX reserves and reducing over-
invoicing and fraud. Goods imports declined from 28.1 percent of GDP in 2015 to (likely)
17.9 percent in 2023.The narrowing current account surplus in 2023 also reflects a
deterioration of the government balance (with public investment increasing) and an overall
decline in savings.
Annex VI Table 1. Algeria: EBA-lite Model Results, 2023
CA model 1/ REER model 1/

(in percent of GDP)
CA-Actual 2.2
Cyclical contributions (from model) (-) 0.2
Natural disasters and conflicts (-) 0.0
Adjusted CA 1.9
CA Norm (from model) 2/ 0.2

Adjusted CA Norm 0.2
CA Gap 1.7 0.3

o/w Relative policy gap 6.2
Elasticity -0.2
REER Gap (in percent) -10.3 -1.7

1/ Based on the EBA-lite 3.0 methodology
2/ Cyclically adjusted, including multilateral consistency adjustments.
Assessment. The EBA-lite current account (CA) model approach of the Fund’s external balance
assessment methodologies (updated in 2022) suggests that Algeria’s current account balance,
while slightly deteriorating, remained above its norm in 2023, which in turn translates into a
moderate REER undervaluation. The relatively weaker external performance underscores the
strong correlation between fiscal and external balances. Going forward, a gradual fiscal
rebalancing combined with greater nominal exchange rate flexibility would help close policy
gaps and maintain the current account balance closer to its norm, especially as hydrocarbon
prices are projected to continue to decline over the medium term.

ALGERIA
 The EBA-lite current account model indicates that the (likely) realized current account was
moderately stronger than warranted by medium-term fundamentals and desirable policies
in 2023. The current account gap estimated using this approach was 1.7 percent of GDP, of
which 1.7 percent of GDP reflects the contribution from the increase in reserves in 2023.
With an assumed elasticity of the current account with respect to the REER of -0.2, the
current account gap translates into a REER undervaluation of 10.3 percent. However, this
estimate is subject to considerable uncertainty as it is sensitive to various underlying
assumptions―including long-term hydrocarbon prices, trade elasticities, and desirable
policies. As highlighted in previous assessments, the existence of a parallel exchange
market (with an exchange rate premium that is currently well over 50 percent) also
complicates the interpretation of model results.
 According to the consumption allocation rules for exporters of exhaustible resources, the
estimated current account norm in the medium term is 15.5 percent of GDP for Algeria
against a projected cyclically adjusted current account balance of -4.0 percent of GDP
(over the medium term). Thus, this consumption-based model (which accounts for the
exhaustibility of resources to assess the sustainability of the current account path)
suggests that the projected medium-term path for the current account is inconsistent with
intergenerational equity, despite the surplus in the near term. Under this methodology, for
example, a current account path is deemed sustainable if the Net Present Value (NPV) of
future wealth (hydrocarbon revenues plus income on financial assets or investment) is
greater than or equal to the NPV of imports of goods and services net of non-oil exports.1
This intertemporal constraint on the trajectory for imports (“annuities” or “allocation rules”)
then generates a current account norm consistent with intergenerational equity.2 When
import trajectories are computed using an allocation rule based on a constant real per
capita annuity (which incorporates the impact of population growth), the resulting current
account norm for the medium term is 15.5 percent of GDP. Comparing this trajectory
against the projected path for the current account results in a substantial current account
gap (-19.5 percent of GDP) over the medium term.
Real Exchange Rate
Background. Reversing several years of depreciation, the real appreciation of the dinar that
began in the second half of 2022 has continued in 2023. The year-average REER depreciated
by more than 15 percent over 2014–21. But the slow pace of this depreciation along with the
relatively small size of the nonhydrocarbon tradable sector and supply-side constraints
mitigated the impact on competitiveness, and current account deficits remained large. More
recently, the nominal appreciation of the dinar (by 2.4 percent y-o-y against the U.S. dollar
through December 2023), combined with relatively high inflation in Algeria, resulted in a
gradual real appreciation since May 2022. The real effective exchange rate appreciated by
10.2 percent between 2022 and 2023.
Assessment. The IMF’s EBA-REER model estimates suggest an undervaluation of 1.7 percent
while the EBA-lite CA model indicates an undervaluation of 10.3 percent. Staff assessment

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places greater emphasis on the EBA-lite CA model, which has frequently demonstrated better
reliability compared to the REER model. The latter tends to be less suitable for many countries
as it does not sufficiently account for their unique characteristics (IMF, 2019).3
Capital and Financial Accounts: Flows and Policy Measures
Background. Algeria’s openness to external capital flows continued to be severely constrained

in 2023. Financial flows consist mainly of foreign direct investment (FDI) which are small. FDI
inflows declined from 0.8 percent of GDP in 2018 to 0.5 percent of GDP in 2021 and declined
further in 2022 (to less than 0.1 percent of GDP). The latter was due mainly to the repurchase
by the National Investment Fund of equity shares from foreigners in a domestic
telecommunication company. Inward FDI slightly is projected to have recovered to around
0.4 percent of GDP in 2023 and is forecast to reach 0.75 of GDP in the short term, on account
for the impact of reforms and changes in regulations (below).
Assessment. The removal of the cap of 49 percent for foreign ownership in Algerian
investment projects (in non-strategic sectors) is a positive step in relaxing restrictions on FDI.
The abolition in 2021 of the surrender requirements of export revenue, excluding hydrocarbon
and mineral products, could make it easier to import inputs, thus alleviating constraints on
supply and facilitating export diversification. The implementation of a new investment law as
well as ongoing reforms to incentivize private investment in strategic sectors―including
through digitalization and the setup of “one-stop shop” to handle administrative
processes―could further enhance the appeal for FDI and foster private sector development in
the medium term, if combined with sustained efforts to enhance the business climate and
ensure policy predictability.
FX Intervention and Reserves Level
Background. High hydrocarbon prices have continued to benefit Algeria and resulted in
accumulation of international reserves in the past two years. The country had been running
sizable current account deficits since 2015 and these were financed by official reserves which
consequently declined steadily, from US$178.9 billion (33.7 months of imports) in 2014 to
US$45.3 billion (11.6 months of imports) in 2021, and this despite continued measures to
contain imports. The surge in hydrocarbon prices since 2022 reversed this downward trend
and official reserves reached US$68.9 billion (14.1 months of imports) in 2023, a further
increase from US$61 billion in 2022. International reserves are projected to continue to build
up through 2024 but start falling afterwards mirroring the re-emergency of current account
deficits. Algeria’s de jure exchange rate arrangement is “managed floating”, while the de facto
exchange rate arrangement is a “stabilized” arrangement. The Banque of Algeria (BA)
intervenes in the foreign exchange market directly by proposing its own rates and by making
foreign exchange available to banks at their request. The BA sets the buying and selling rates
of the dinar against the US dollar in this market within a narrow margin of 0.015 dinar.
Assessment. The level of FX reserves in 2023 is comfortable and projected to increase through
2024. However, the downward trajectory in FX reserves is anticipated to return from 2025

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onwards. Nevertheless, FX reserves are expected to remain adequate over the medium term,
projected at nearly seven months of imports and 78.7 percent of the ARA metric in 2029.
1 Proven hydrocarbon reserves at end–2021 were estimated at 12,200 million barrels for crude oil and
4,504 cubic meters for natural gas (OPEC, Annual Statistical Bulletin 2022). Staff projections assume that
hydrocarbons production grows at a constant rate of one percent, peaking in 2040. From 2041 onwards, both
production and consumption decline by one percent annually. Hydrocarbon prices are assumed to increase in
line with the US GDP deflator by 1.9 percent. Future hydrocarbons revenues are discounted at a rate of five
percent (the assumed rate of return on foreign assets) and population growth is 1.4 percent.
2 Bems, R. and I. de Carvalho Filho. 2009. “Exchange Rate Assessments: Methodologies for Oil-Exporting
Countries”, IMF Working Paper 09/281.
3 IMF 2019. “The External Balance Assessment Methodology: 2018 Update”, IMF Working Paper 19/65,

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Annex VII. Improving Financial Inclusion in Algeria1

The new central bank law has given the Bank of Algeria a mandate and responsibilities regarding
financial inclusion and the development of digital finance. This note assesses the state of financial
inclusion in Algeria and reviews the various institutional factors and policies that can help spur
financial inclusion, including Fintech, and pitfalls to avoid.
A. Why is Financial Inclusion Important?
1. Financial inclusion has a vital role in economic development. Financial development

has been shown to promote economic growth and enhance productivity growth and capital
accumulation (Beck et al. (2020)). Financial inclusion has been shown to reduce income inequality
and poverty by increasing the supply of financial services to lower-income households and SMEs
(Cihak and Sahay, 2020). Barajas et al. (2020a) find that greater financial inclusion is associated
with lower income inequality. Provided the quality of regulation and supervision is high, financial
inclusion and stability can be pursued simultaneously.
2. Algeria’s new Monetary and Banking Law (LMB) includes financial inclusion and
digital finance as part of the mandates and objectives of the central bank.2 Article 36 of the
LMB stipulates that the central bank takes measures to facilitate the supply of financial services
to enhance financial inclusion, including by disseminating payment means such as cash and
ensuring that branches of financial institutions cover the entire country. Article 64 of the LMB
brings Payment Service Providers (PSP) within the perimeter of the central bank’s supervisory,
regulatory, licensing, and sanctioning powers, and Article 76 allows licensed PSPs to perform
payment services offered by banks. Article 2 of the LMB includes a central bank digital currency
(CBDC), Dinar Algérien Digital, as a possibility of a currency, together with fiduciary money.
B. What is the State of Financial Inclusion in Algeria?
3. Financial deepening and outreach have moderately improved in the past decades in
Algeria, but gaps remain relative to peer countries (Annex VII Figure 1). Loans to the private
sector increased by some ten percentage points of GDP between 2004 and 2022, while bank
deposits increased by about four percentage points of GDP.3 As for outreach, the number of
ATMs has increased by about seven per 100,000 adults since 2004, while the number of deposit-
1
Prepared by Thierry Tressel (MCM) with support from Jarin Nashin (MCD).
2 Implementation of the law will be detailed in regulations of the central bank.
3 Loans to households accounted for less than four percent of GDP at end–2022.

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taking institutions’ branches has remained broadly stable since 2004.4 When compared with peer
countries in the region, it appears that notable gaps remain in Algeria in terms of financial depth
and outreach, suggesting opportunities for more progress.5
4. Access to financial services and availability of new technologies seem broadly

aligned with the regional average, although the use of traditional banks and of Fintech
remain comparatively underdeveloped (Annex VII Figure 2). The extent to which individuals
have bank accounts and store financial savings broadly aligns with the regional and EMDE
average; likewise, ownership of mobile phones and internet access seem widespread in Algeria
and on par with other countries. However, fewer individuals borrow from a financial institution in
Algeria than in the MENA and SSA regions, and among EMDE, on average. The use of Fintech—
such as mobile phones and internet—to perform financial transactions is also well below average
in Algeria than in comparator groups of countries. In Algeria, the number of debit cards has
increased but the number of loan accounts has remained broadly unchanged.
5. There remains a gender gap (Annex VII Figure 3). The use of financial services
(savings and borrowing) is in Algeria notably higher among males than among females, as is the
case in peer countries.
C. What Policies Would Help Increase Financial Inclusion in Algeria?
Credit Market Infrastructure
6. A sound legal, regulatory, and oversight framework must be in place to contain

risks in the banking system as credit grows. A sound banking system—able to mitigate, assess
credit risk, provision for such risks, and deal with defaulted exposures ex-post—is a prerequisite
for improving financial inclusion. Thus, the reforms of the regulatory and supervisory framework
set out in the new LMB are critical.
7. Crisis management: a sound framework should deal efficiently and in a least cost
manner with failure and restructuring of financial institutions when they fail. This would
minimize disruptions in payment systems and credit supply.
4The authorities noted that statistics on bank branches may not always be comparable to other countries, due to
omission of post office branches offering financial services.
5 A central bank regulation adopted on September 21, 2023, set out the condition to license and regulate a
network of foreign exchange bureaus to be established in Algeria. Such initiative should contribute to reinforcing
financial inclusion in term of access and geographical outreach to financial services.

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8. Information sharing: platforms to share borrower information among financial

institutions would enhance financial inclusion.
a. Credit bureaus or credit registries—with records of risks regarding past and current loans
taken out by firms—can help improve access to credit for sound borrowers. Introducing a
credit bureau would be useful in Algeria.6
b. The BA could usefully review and strengthen the existing platforms—Centrale des
Risques, Centrale des Incidents de Paiement, and Centrale des Bilans.
c. Information sharing can be strengthened by better corporate accounting and by

supporting information-sharing among banks, utility companies, and suppliers (for
example, with databases on payments).
9. Collateral: A movable collateral registry would enhance access to credit for MSMEs.
Such movable collateral registries can help improve access to finance provided a sound legal and
regulatory framework is in place.
10. Insolvency regimes: Financial institutions may be less willing to lend in case of legal
gaps where insolvency frameworks cannot handle corporates or SMEs effectively. Such gaps may
also make it difficult for financial institutions to write off defaulted exposures and clean up their
balance sheets.
Country Level Strategy and Public-Private Sector Commitment
11. Direct Public Sector Involvement (such as directed lending, subsidies) has been used
extensively in Algeria but may be challenging to design and manage properly. Government-to-
person payments (such as wages, pensions, etc. as already done for public sector employees) and
reliance on the postal office branches can also foster financial inclusion.
12. Financial Inclusion Strategy: developing and publishing a financial inclusion

strategy can be an effective way to secure public and private sector commitments to meet
financial inclusion objectives. A national strategy of financial inclusion is a roadmap of actions,
agreed and defined at the national or subnational level, which stakeholders follow to achieve
financial inclusion objectives. The strategy: (i) articulates objectives and outlines reform areas to
achieve these; (ii) can lay out quantitative targets and a timeline to meet milestones;
6 METAC is working with the Algerian authorities to design a ratings system of non-financial firms, for the
purpose of collateral in emergency liquidity assistance. Such a rating system could potentially be expanded to
facilitate information sharing with banks for the purpose of credit risk assessment.

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(iii) communicates the commitment of authorities; and (iv) secures buy-in from public and private
sector stakeholders to help achieve the financial inclusion objectives. 7
13. Financial literacy initiatives and consumer protection laws: these raise awareness,
lead to more responsible use of traditional finance and Fintech and are often part of a financial
inclusion strategy.
Fintech and CBDC
14. Fintech innovations such as domestic and cross-border payment services, mobile
money, and internet banking can support financial inclusion and financial deepening, but
they can also raise risks in various areas: (i) financial stability; (ii) financial integrity;
(iii) regulations; (iv) market integrity; (v) cybersecurity; and (vi) data privacy.
15. Properly developing Fintech and maximizing the impact on financial inclusion,
while mitigating risks, requires that multiple layers of policies be in place. These should
cover: (i) facilitating infrastructures such as telecommunications and digital and financial
infrastructures (such as broadband internet, mobile data services, data repositories, and payment
and settlement services); (ii) enabling competition and committing to open and contestable
markets, which can incentivize new entrants to gain market shares and incumbents to develop
their own Fintech initiatives; (iii) including Fintech in a national financial inclusion strategy;
(iv) identifying and monitoring emerging opportunities and risks and facilitate policy responses,
including through regular dialogue with private sector; (v) adapting the legal, regulatory, and
supervisory framework to address emerging risks and safeguard the integrity of the financial
system; (vi) analyzing and understanding the implications of Fintech innovations for financial
stability; and (vii) developing data infrastructure.
7 Jordan has published a national financial inclusion strategy on the central bank’s website, laying out the goals
and sub-objectives by themes (see Annex VII Box 1). Saudi Arabia has a strategy for developing and diversifying
its Fintech sector. For more cross-country references, see: Overview: National Financial Inclusion Strategies
(worldbank.org).

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Annex VII Figure 4. Fintech and Payment Systems Architecture
16. A properly designed CBDC could support financial inclusion but is no panacea.
There is a growing interest in CBDC among central banks of several countries, including in the
region. CBDC would create competition in the payments system by allowing for transactions to
be settled more directly through reduced intermediation, thus reducing the cost of financial
products and services. However, CBDC could face the same potential barriers as for other FinTech
solutions, such as limited identifications and financial literacy, distrust in financial institutions, low
wealth and high informality, and a preference for cash.
17. CBDC also has risks. Benefits and risks are difficult to estimate and depend on country-
specific factors, including the central bank’s capacity and legal framework. CBDCs could lead to
financial stability risks, data privacy and legal challenges, financial integrity, cyber risks, and
central bank operational risks.

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Annex VII Figure 1. Financial Depth and Outreach

Financial deepening has moderately improved in Algeria However, there remain gaps in the level of financial depth
over the past two decades. relative to peer countries.
The geographical outreach of financial services has

… but a gap remains relative to peer countries.
improved in terms of ATMs…

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Annex VII Figure 2. Access and Use of Financial Services

Similarly, ownership of mobile phones and internet access
Bank account ownership is well developed but use of
are developed but these has not translated into use of
borrowing is lagging various country groups.
digital financial services.
The use of financial services has remained stable over the The use of financial services is similar to selected peer
past two decades, except for the surge in debit cards. countries.

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Annex VII Figure 3. Use of Digital Tools and Gender Gap

The use of mobile phones for digital finance has scope There is a gender gap in the access and use of
for growth. financial services.

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References
Bakker, N., and others, 2023, “The Rise and Impact of Fintech in Latin America”, Fintech Note
2023/003.
Barajas, A., Chen, S., Cihak, Fouejieu, A., Sahay, R., and Xie, P., 2020, “Finance and Inequality”, IMF
Staff Discussion Note SDN/20/01.
Beck, T., R. Levine and N. Loayza , 2000, “Finance and the Sources of Growth”, Journal of Financial
Economics 58, 261-300.
Blancher, N. and others, 2019, “Financial Inclusion of Small and Medium-Sized Enterprises in the
Middle East and Central Asia”, Departmental Paper No. 2019/002.
Cihak, M. and R. Sahay, 2020, “Finance and Inequality”, IMF Staff Discussion Note 2000/001.
Khera, P., Ng, S., Ogawa, S., and R. Sahay, 2021a, “Measuring Digital Financial Inclusion in
Emerging Market and Developing Economies: a New Index”, IMF WP/21/90.
Khera, P., Ng, S., Ogawa, S., and R. Sahay, 2021b, “Is Digital Financial Inclusion Unlocking
Growth?”, IMF WP/21/167.
Fouejie, A., Ndoye, A., and T. Sydorenko, 2020, “Unlocking Access to Finance for SMEs: A Cross-
Country Analysis”, IMF WP 20/55.
Mengistu, A., and H. Perez-Saiz, 2018c, “Financial Inclusion and Bank Competition in Sub-Saharan
Africa”, IMF WP 18/256.

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Annex VIII. Rebasing the National Accounts

1. The Algerian National Statistics Office (ONS) published new national account data
for 2001–22, which have with base year 2001 and adopt the 2008 System of National
Accounts (SNA) standard. The new nomenclature has 17 sectors.1 The previous national
accounts were based on the 1968 SNA, had base year 1989, and included seven sectors.
Methodological upgrades include: (i) classifying R&D as gross fixed capital formation (from
intermediate consumption); (ii) adding consumption of fixed capital to the production of the
public administration; and (iii) re-evaluating the unobserved economy, notably by valuing
imputed rent at market prices. The new accounts also use new data sources (2000 household
survey, the 2001 structural business survey, trade data, etc.)
2. The new national accounts increase annual nominal GDP by around ten percent on
average over 2001–22. Average annual real GDP growth is higher by about 0.1 pp. Much of the
increase is attributed to gross fixed capital formation and final consumption.
Annex VIII Figure 1. Algeria: New National Accounts, 2001–22
New national accounts data for 2001–22 use base 2001 and adopt the 2008 SNA standard. As a
result, annual nominal GDP is higher by ten percent and real GDP growth by 0.1 pp, on average.
Sources: Algerian authorities and IMF staff estimates.
1
The hydrocarbon sector is no longer a standalone sector. It is now divided between “Crude oil” (under Extractive
industries) and “Refined products” (under Manufacturing industries). It also excludes “Transport by pipes” (under
Transport and communication) but includes hydrocarbon-related “Building and construction activities”.

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STAFF REPORT FOR THE 2023 ARTICLE IV
March 7, 2024
CONSULTATION—INFORMATIONAL ANNEX
Prepared By Middle East and Central Asia Department in consultation with the
Statistics Department
CONTENTS
RELATIONS WITH THE FUND _____________________________________________________________ 2
RELATIONS WITH THE WORLD BANK GROUP __________________________________________ 6
STATISTICAL ISSUES ________________________________________________________________________ 7

ALGERIA
RELATIONS WITH THE FUND

As of December 31, 2023
Membership Status: Joined September 26, 1963; Article VIII.
General Resources Account SDR Percent of

(million) Quota
Quota 1,959.90 100.00
Fund holdings of currency 1,426.93 72.81
Reserve position in Fund 532.97 27.19
SDR Department SDR Percent of

(million) Quota
Net cumulative allocation 3,076.66 100.00
Holdings 3,220.25 104.67
Outstanding Purchases and Loans None
Financial Arrangement
Type Approval Expiration Amount Amount

Date Date Approved Drawn
(SDR million) (SDR million)
EFF 5/22/1995 5/21/1998 1,169.28 1,169.28
Stand-by 5/27/1994 5/22/1995 457.20 385.20
Stand-by 6/03/1991 3/31/1992 300.00 225.00
Projected Obligations to Fund
Forthcoming
2024 2025 2026 2027 2028

Principal 0.00 0.00 0.00 0.00
Interest/Charges 0.04 0.04 0.04 0.04

Total 0.04 0.04 0.04 0.04
Implementation of HIPC Initiative Not applicable

Implementation of Multilateral Debt Relief Initiative Not applicable
Implementation of Catastrophe Containment and Relief Not applicable

ALGERIA
Exchange Rate Arrangement
The de jure exchange rate arrangement is managed floating, and the de facto exchange regime
is classified as a stabilized arrangement. From January 21, 1974, to October 1, 1994, the
exchange rate of the dinar was determined on the basis of a fixed relationship with a basket of
currencies, adjusted occasionally. On October 1, 1994, the Bank of Algeria introduced a
managed float for the dinar through daily fixing sessions that included six commercial banks.
This system has been replaced by an interbank foreign exchange market as of January 2, 1996.
On January 23, 2024, the average of the buying and selling rates for the U.S. dollar was
US$1 = DZD 134.27, equivalent to SDR 1 = DZD 178.74. No margin limits are imposed on the
buying and selling exchange rates in the interbank foreign exchange market, except for a
margin of DA 0.015 between the buying and selling rates of the Bank of Algeria for the dinar
against the U.S. dollar. Algeria has accepted the obligations under Article VIII, Sections 2(a), 3,
and 4 of the IMF’s Articles of Agreements, and maintains an exchange system that is free from
restrictions on the making of payments and transfers for current international transactions and
multiple currency practices.
Article IV Consultation
Algeria is on a 12-month consultation cycle. The last Article IV consultation was concluded by
the Executive Board on February 1, 2023 (IMF Country Report 23/68). The discussions for the
2023 Article IV consultation were held in Algiers from December 3–14, 2023.
Technical Assistance
MCM Financial stability and macroprudential policy April 2016

framework
MCM Liquidity management May 2016
FAD Public financial management July 2016
FAD Tax administration October 2016
MCM Debt market development October 2016
FAD Tax administration November 2016
MCM Upgrading banking regulations March 2017
MCM Forward market development March 2017
FAD Tax administration April 2017
MCM Collateral framework July 2017
METAC Banking supervision October 2017
FAD Tax administration November 2017
FAD Medium-term budget framework and fiscal risk November 2017
management
MCM Forward market development (workshop) November 2017
FAD Custom administration December 2017
STA External sector statistics January 2018
FAD Tax policy (local government) March 2018

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METAC National accounts March 2018

MCM Monetary policy and risks to financial stability March 2018
FAD Tax administration September 2018
FAD/MET Implementation of organic budget law January 2019
AC
FAD Tax policy (local administration) July 2019
STA Government Finance Statistics July 2019
LEG Anti-money laundering regulations September 2019
METAC Tax arrears management October 2019
FAD Pension reform November 2019
FAD Tax administration (IT systems) January 2020
FAD Tax administration and Covid-19 June 2020
FAD Fiscal risk management and program budgeting November 2020
METAC Public investment management January 2021
METAC Tax arrears management January 2021
METAC Program budgeting March 2021
METAC Post-crisis tax administration June 2021
METAC Program budgeting July 2021
METAC Management of PPPs October 2021
METAC Tax arrears management October 2021
MCM Monetary policy operations and liquidity October 2016-October 2018
management (long-term expert resident)
METAC Follow-up mission on Supervisory Review and November 2019
Evaluation Process
METAC Follow-up mission on SREP April 2020
METAC Implementation of Basel II & III standards May 2020
METAC Implementation of Basel II & III standards June 2020
METAC Implementation of Basel II & III standards October 2020
MCM Analysis of domestic government securities markets August 2021
MCM Debt Management Framework October 2021
FAD Workshop on energy subsidies November 2021
MCM Liquidity forecasting March 2022
FAD/ Medium-Term Budget Framework and Program- February 2022
METAC Based Budgeting
METAC Regulation on Accounting and Valuation of July 2022
Financial Market Instruments
METAC Program-Based Budgeting July 2022
MCM Parallel FX Market July 2022
MCM Emergency Liquidity Assistance July 2022
METAC Enhancing the risk rating framework November 2022
FAD Program-based budgeting July 2022
FAD Implementation of program-based budgeting October 2022
FAD Cash and debt management October 2022
FAD VAT tax expenditures and implementation in the November 2022
digital sector

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FAD Strengthening mining tax administration November 2022

METAC Liquidity Forecasting October 2022
MCM In-house Credit Assessment System December 2022
METAC Development of Strategies to Improve On-time Janvier 2023
Payment
METAC In-house Credit Assessment System June 2023
ICD Macroeconomic Frameworks June 2023
METAC Regulating Outsourcing Activities July 2023
METAC Risk Rating Framework and Developing Early October 2023
Intervention Measures
LEG Enhancing AML/CFT Framework February 2024
ICD Macroeconomic Frameworks February 2024
Financial Sector Assessment Program
Algeria first participated in the FSAP in 2003. The FSAP was updated in 2007 and in 2013. A
Financial System Stability Assessment was conducted in 2019 and 2020 and was concluded by
the Executive Board on a lapse-of-time basis in July 2020 (Press Release 20/316).
Resident Representative
None.

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RELATIONS WITH THE WORLD BANK GROUP

Algeria collaborates with the World Bank Group. Further information can be obtained at:
World Bank: https://www.worldbank.org/en/country/algeria

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STATISTICAL ISSUES
I. Assessment of Data Adequacy for Surveillance
General: Data provision has several shortcomings but remains broadly adequate for surveillance. Key
shortcomings pertain to data on budget execution and outturns as well as to the real sector.
National Accounts: National accounts were upgraded in December 2023, to base 2001 and to
follow the 2008 SNA recommendations. The new annual national accounts data go back to 2001.
Volume measures are derived at prices of the previous year, then chain-linked. Quarterly data has
been published with substantial delay in recent years under the old base. Quarterly data in the new
base are not available yet.
Price Statistics: The monthly consumer price index was published with a delay of less than one
month prior to the pandemic but delays have lengthened. The index reference period is 2001 with
weights from 2000; as such, Algeria’s CPI is severely outdated which could lead to errors in the
measurement of inflation. The quarterly producer price index was published with a delay of less than
one quarter prior to the pandemic but delays have lengthened. The weight reference period for the
PPI is 1989, which is outdated and likely not representative of current production.
Government finance statistics: Key shortcomings include insufficient institutional coverage

(coverage is limited to the central government), classification problems, long lags for production of
statistics, and lack of reconciliation of financing with the monetary accounts. Key factors behind
these weaknesses include the lack of financial resources allocated to the compilation of statistics,
insufficient interagency coordination, and concerns about accuracy that give rise to reluctance to
publish provisional data. The authorities have not reported GFS data for publication in the
Government Finance Statistics Yearbook since 2011.
Monetary statistics: The central bank of Algeria (BA) submits the monetary statistics for the central
bank, other depository corporations (ODCs), and other financial corporations to STA on a timely
basis. Monetary statistics are published in the International Financial Statistics. The monetary data
are based on the Standardized Report Form (SRF) following the methodology of the Monetary and
Financial Statistics Manual and Compilation Guide (MFSMG). BA reports data on some key series and
indicators to the Financial Access Survey, including two indicators (commercial bank branches per
100,000 adults and ATMs per 100,000 adults) of the United Nations Sustainable Development Goals.
Financial Sector Surveillance: BA reports Financial Soundness Indicators (FSI), which are published
on the IMF’s FSI website. However, the periodicity and timeliness of the data need to be improved as
the FSIs are currently reported only on a yearly basis.
Balance of payments: Balance of payments statistics are of relatively good quality. The data
collection system appears comprehensive in terms of payments measurement but has incomplete
coverage of transactions other than settlements (e.g., reinvested earnings) and some position data. A
January 2018 TA mission worked with the compilers to address several weak areas, including
(i) recording of construction projects as FDI vs. services; (ii) trade statistics; and (iii) FDI position data.
Balance of payments and IIP statistics are transmitted to the IMF for dissemination in the IFS.

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II. Data Standards and Quality
On April 21, 2009, Algeria began participation in No data ROSC is available.

the General Data Dissemination System (GDDS;
that replaced with the enhanced framework, e-
GDDS, in 2015) and disseminates only metadata.

Algeria: Table of Common Indicators Required for Surveillance
As of January 24, 2024
Frequency Frequency
Date of latest Frequency of
Date received of of
observation publication7
Data7 Reporting7
Exchange Rates 12/2023 01/2024 M M M
International Reserve Assets and Reserve Liabilities of the Monetary Authorities 1
11/2023 01/2024 M M M
Reserve/Base Money 11/2023 01/2024 M M M
Broad Money 11/2023 01/2024 M M M
Central Bank Balance Sheet 11/2023 01/2024 M M M
Consolidated Balance Sheet of the Banking System 11/2023 01/2024 M M M
Interest Rates 2
11/2023 01/2024 M M M
Consumer Price Index 11/2023 01/2024 I I I
Revenue, Expenditure, Balance and Composition of Financing —General Government
3
NA NA - - -
Revenue, Expenditure, Balance and Composition of Financing —Central Government
3 4
09/2023 12/2023 I I A
Stocks of Central Government and Central Government-Guaranteed Debt 5
11/2023 12/2023 I I NA
External Current Account Balance Q3 2023 12/2023 Q Q Q
Exports and Imports of Goods and Services Q3 2023 11/2023 Q Q Q
GDP/GNP Q1 2023 08/2023 Q I I
Gross External Debt Q3 2023 11/2023 Q I Q
International Investment Position 6

Q2 2023 01/2024 Q Q Q
1
Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign
currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other
means.
2
Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.
3
Foreign domestic bank, and domestic nonbank financing.
4
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
5
Including currency and maturity composition.
6
Includes external gross financial asset and liability positions vis-à-vis nonresidents. Data are partial, because of shortcomings in the compilation of FDI.
7
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); and Not Available (NA), Partially available (PA)
ALGERIA
9
Statement by Bahador Bijani, Executive Director for Algeria
and Kamel Badsi, Senior Advisor to Executive Director
March 27, 2024
Introduction
On behalf of our Algerian authorities, we thank Mr. Chris Geiregat and his team for the
constructive and candid policy discussions during the Article IV consultation mission, as
well as for the high-quality Selected Issues Papers (SIP) on the role of fiscal reforms in
addressing climate change challenges. The Algerian authorities broadly share the Staff
Appraisal and assessment of policy priorities.
Recent Developments and Outlook
Despite strong and persisting global economic headwinds, the Algerian economy continues
to expand at a solid pace, buoyed by industrial activity, construction, services, and the
hydrocarbon sector. While headline inflation remains elevated, core inflation has continued
to decelerate steadily since 2022. In 2023, Algeria ran a current account surplus for the
second consecutive year; it has negligible external debt. International reserves, which
reached a level equivalent to 14 months of imports in 2023, are projected by staff to remain
above six months of import coverage through 2029. Moving forward, the economic activity
is set to be further reinforced by the combined impact of stability and growth-oriented
macro-economic policies and comprehensive structural reforms that the authorities are
pursuing. The authorities are determined to conduct a balanced and appropriate policy mix to
put the economy on a strong footing. In December 2023, the national statistics bureau (ONS)
rebased the national accounts data according to the 2008 System of National Accounts
(SNA) standard. As a result, Algeria’s annual nominal GDP is revised upward by ten
percent, and real GDP by 0.1 percentage points, on average, over 2001-2022. The authorities
agree with staff on the near- and medium-term outlook for the economy and are more
optimistic about the impact of the structural reforms currently underway.
Macroeconomic Policies
Fiscal Policy
In the post-COVID era, complicated by the adverse effects of current global geopolitical
crises and conflicts, the authorities consider maintaining household purchasing power as a
core fiscal policy priority. They also remain committed to preserving public finance and debt
sustainability over the medium term. Gross government debt stood at 55 percent of GDP in
2023 but remains below the benchmark for emerging markets. Significant progress has been
made to strengthen public finance management including through program budgeting
implementation, enacting new procurement and public accounting laws, and launching a new
data center on customs and taxation for the general public. The authorities have expressed
interest in conducting a Public Investment Management Assessment (C-PIMA) and are
working towards gradually replacing universal subsidies with targeted transfers. In line with
the staff’s recommendations, a comprehensive package of reforms is being prepared to
strengthen cash and public debt management.
Monetary Rate Policy and Exchange
Against a backdrop of excess liquidity and low credit to the economy, the Bank of Algeria
(BoA) seeks to strike a balance between controlling inflation while providing sufficient
liquidity to the private sector in support of economic activity. The authorities are concerned
about the sticky inflation and agree with the staff on the need for continuous improvement of
the monetary policy transmission mechanism that is less effective in the context of excess
liquidity. The Bank of Algeria is sterilizing liquidity through open market operations and
increases in the reserve requirement ratio. The new Monetary and Banking Law consolidates
the independence of the Bank of Algeria, establishes price stability in the mandate of its
Governor. It also paves the way for financial innovation, strengthens financial surveillance
and crisis management, and promotes new instruments of monetary policy, governance
bodies, and control functions. The Monetary and Banking Council has been tasked with
aligning the current banking regulations with the new law. The authorities agree with staff
that the exchange rate has a central role to play in absorbing external shocks.
Financial Sector
Algeria's financial sector remains resilient with robust capital and liquidity buffers. The
authorities are eager to accelerate banking sector reforms to improve financial inclusion, as
evidenced by the recent opening of the SOB capital to private investors, with the first
operation taking place in January of this year. The authorities note the limitations of the
staff's NPL assessment, which does not reflect the actual level of NPLs due to a lack of legal
provisions. This allows for the writing-off of old debt and the establishment of an asset
management company for NPL recovery. The authorities share the staff’s views on reforms
to improve transparency and financial service delivery through digital solutions and to
strengthen financial integrity, and to address governance and corruption risks by enhancing
the AML/CFT framework.
2
Climate Change
As indicated in the Staff’s SIP, the authorities are fully aware of the serious threats of climate
change, including recurrent drought, extreme temperatures, and flooding, and have
developed a comprehensive strategy to respond to the challenges. Algeria is utterly
committed to reducing carbon emissions by 7 percent by 2030. Water scarcity—the most
observable by-product of global climate change in arid North Africa—is a serious concern.
Concrete actions have been taken to mitigate the impact, including through water
desalination, wastewater recycling, optimizing agricultural practices, and expanding arable
lands, including in the southern region of Algeria.
Structural Reforms
The authorities aim to have in place an effective social safety net and to address the
challenging issues of youth and women unemployment, and income and gender disparities.
Algeria continues to implement a strategy to reduce its dependence on the hydrocarbon
sector by diversifying the economy, promoting private investment, and boosting non-
hydrocarbon exports. As part of their policy to diversify the economy, the authorities are
developing a national strategy to revitalize the mining sector. Meanwhile, as a major supplier
of gas to Europe, Algeria reiterates its commitment to the stability of international oil and gas
markets. Thanks to structural reforms implemented at the beginning of this decade, non-
hydrocarbon exports have grown by about 170 percent. In line with the staff’s
recommendations and as part of the national digitalization strategy, the authorities are
determined to boost governance and transparency, and scale up digitalization.
Policy Recommendations
Fiscal Policy
The authorities take note of the staff’s recommendations on gradual fiscal rebalancing. They
believe, however, that the immediate budget priority is to continue ensuring social equity and
preserving the purchasing power of citizens. They agree that the economy must address
multiple fiscal risks for which bold policy measures are being taken. Alongside other fiscal
measures, substantial strides are being made in implementing program budgeting to enhance
the effectiveness and efficiency of public finances.
Monetary and Exchange Rate Policies
3
The authorities note the staff’s recommendations for monetary policy tightening. However,
they believe that the existing excess market liquidity renders the transmission channels of
monetary policy, especially through an increase in the policy rate, ineffective. To achieve the
operational objective, the Bank of Algeria has been conducting a series of liquidity-
absorption operations.
Financial Sector
The authorities are of the view that the implementation of a national financial inclusion
strategy is crucial and believe that the new Monetary and Banking Law lays the foundation
for this purpose.
Regarding the economic and financial links between the central government, state-owned
banks (SOBs), and SOEs, it is important to note that the High Committee of Fiscal Risks
Assessment and Warning continues to monitor closely debt sustainability issues, fiscal risks
linked to SOEs, social security funds, and finances of the local authorities.
Structural Reforms
Supported by the new Law on Money and Banking and Program Budgeting, the new
Investment Law will be instrumental in promoting a sound business environment and
economic diversification. Further actions are being taken through the Algerian Investment
Promotion Agency (AAPI), a one-stop shop, to promote foreign investment and foster
private sector activity that is critical for unleashing potential growth and job creation,
especially among youth and women.
Concluding Remarks
Against a backdrop of challenging global economic conditions, Algeria continues to

strengthen its economic fundamentals while preserving debt sustainability and financial
stability. The authorities are determined to step up the pace of structural reforms and to
promote economic diversification. They look forward to continued engagements and strong
collaborations with the Fund, including on capacity development and policy dialogue.

Rapport Du FMi Sur L'algérie

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IMF Country Report No.

• An Informational Annex prepared by the IMF staff.

• A Statement by the Executive Director for Algeria.

The document listed below has been or will be released.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

International Monetary Fund

© 2024 International Monetary Fund

IMF Executive Board Concludes 2023 Article IV Consultation with

Executive Board Assessment 2

Algeria: Selected Macroeconomic Indicators, 2019–29

Output and prices (Annual percentage change)

Investment and savings (In percent of GDP)

Central government finances (In percent of GDP)

(In percent of nonhydrocarbon GDP)

Money and credit (Annual percentage change unless otherwise indicated)

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

Key Policy Recommendations

2 INTERNATIONAL MONETARY FUND

RECENT MACROECONOMIC DEVELOPMENTS _________________________________________________ 6

OUTLOOK AND RISKS ___________________________________________________________________________ 7

POLICY DISCUSSIONS ___________________________________________________________________________ 9

STAFF APPRAISAL ______________________________________________________________________________ 26

INTERNATIONAL MONETARY FUND 3

4. Monetary and Financial Sector Indicators _____________________________________________________ 32

4 INTERNATIONAL MONETARY FUND

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RECENT MACROECONOMIC DEVELOPMENTS

6 INTERNATIONAL MONETARY FUND

OUTLOOK AND RISKS

Text Table 1. Algeria: Macroeconomic and Financial Indicators, 2019–29

Sources: Algerian authorities and IMF staff estimates and projections.

6. Medium-term economic prospects depend on efforts to diversify the economy and

INTERNATIONAL MONETARY FUND 7

8 INTERNATIONAL MONETARY FUND

Baseline Fiscal Projections

Sources: Algerian authorities and IMF staff estimates and projections.

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11. The Sovereign Risk–Debt Sustainability Analysis (SR-DSA) results suggest a

Text Figure 1. Algeria: Fiscal Policy Developments, 2019–29

Sources: Algerian authorities and IMF Staff estimates.

Policy Focus: Increasing Budget Resilience to Shocks

10 INTERNATIONAL MONETARY FUND

Source: IMF staff estimates and projections.

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12 INTERNATIONAL MONETARY FUND

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 Integrating climate considerations in public finance management processes. This

14 INTERNATIONAL MONETARY FUND

B. Monetary and Exchange Rate Policies

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Sources: Algerian authorities and IMF Staff estimates.

24. Improving monetary policy transmission will require far-reaching reforms,

16 INTERNATIONAL MONETARY FUND

Text Figure 6. Algeria: Selected Short-Term Interest Rates (in percent)

Sources: Algerian authorities and IMF Staff estimates.

INTERNATIONAL MONETARY FUND 17

Exchange Rate Policy

Text Figure 7. Algeria: Effective Exchange Rates (Index, 2015Q1 = 100)

After years of near-steady depreciation, effective exchange rates have been

Sources: Algerian authorities and IMF Staff estimates.

18 INTERNATIONAL MONETARY FUND

C. Financial Sector Policies