IMF issues recommendations for reviving Algerian economy

Especially since such projects often result in the creation of new jobs: according to ADEME, recycling generates twenty times more than landfill, most of which are not relocatable and accessible to low-skilled people. At the center of many of these social projects, the social and solidarity economy (ESS) is also renewing itself in order to make the most of the potential of change, sometimes even borrowing the codes of for-profit companies.

The International Monetary Fund released Monday, March 12 its impressions and recommendations for the economic recovery in Algeria. For the experts at the Bretton Woods institution, economic diversification to reduce the dependence of hydrocarbons and the continuation of the reforms undertaken are able to ensure the economic take-off of the country.

Following a mission carried out from 27 February to 12 March in Algeria, a team from the International Monetary Fund wanted to give the government its impressions of the country’s economy, giving prominence to recommendations for the revival of this country. last.

 

“Algeria still faces significant challenges posed by the decline in oil prices four years ago. Despite a major fiscal adjustment in 2017, fiscal and current account deficits remain high. While reserves remain plentiful, they fell by $ 17 billion to $ 96 billion, excluding SDRs. Overall economic activity slowed, although growth outside the hydrocarbon sector remained stable. Inflation has slowed from 6.4% in 2016 to 5.6% in 2017, “said Jean-François Dauphin, IMF Chief of Mission.

 

Despite the various measures taken by the Algerian government to stabilize the economy and promote more sustainable and inclusive growth, the Algerian economy continues to face enormous risks, including worsening imbalances, heightened inflationary pressures and the acceleration of the loss of foreign exchange reserves, explains Jean-François Dauphin. To remedy this, the IMF suggests that the government undertake a diversification policy.

 

Structural reforms are needed

The Bretton Woods Institution recommends Algeria to diversify the sources of its funds. The IMF believes that the country must reduce its dependence on oil and gas in order to finance major projects that will allow it to enhance its development.

 

“This involves using a wide range of financing instruments, including the issuance of public debt at market rates, public-private partnerships, asset sales and, ideally, external borrowing. to finance well-chosen investment projects, “suggests Jean-François Dauphin before indicating that” the consolidation should be conducted, on the one hand by increasing non-oil revenues through the broadening of the tax base and, on the other hand, by gradually reducing the weight of current expenditure in GDP and by reducing investments while improving their efficiency. A gradual depreciation of the exchange rate combined with efforts to eliminate the parallel foreign exchange market would also promote adjustment. ”

 

According to the IMF, regardless of the authorities’ economic policy mix, structural reforms will have to be made, which are very important in order to encourage “the emergence of a diversified and private sector-driven economy”. , and thus reduce dependence on oil and gas.

 

Apart from economic diversification, the IMF also recommends that Algeria simplify various procedures in the business world. “There is a need for urgent action on a number of fronts to simplify bureaucracy, improve access to credit, strengthen governance, transparency and competition, further open the economy to foreign investment, improve the functioning of the labor market work and matching jobs and skills, and promoting women’s employment, “said the head of the IMF delegation.

 

The Algerian state should also strengthen the economic framework to hope to increase the effectiveness of economic policy. To this end, the IMF proposes to continue strengthening public financial management, improving the efficiency of public spending, as well as strengthening the prudential framework and the crisis preparedness mechanism.

 

According to Jean-François Dauphin, “the main objective of trade policy should be to encourage exports rather than impose non-tariff barriers on imports, barriers that create distortions”.

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