News Brief No. 02/106

News Brief: IMF Managing Director Horst Köhler's Remarks in Algeria

October 17, 2002

International Monetary Fund (IMF) Managing Director Horst Köhler, made the following statement today at the conclusion of his visit to Algeria:

"I have had very fruitful meetings with President Bouteflika, Prime Minister Benflis, Governor Laksaci and Finance Minister Terbèche. Allow me to thank His Excellency and the authorities for their warm welcome on this, my first, visit to Algeria.

"Our discussions have revealed a shared understanding of Algeria's accomplishments and the challenges that lie ahead:

• Algeria has succeeded in restoring financial and monetary stability and has made progress in modernizing its economy. We, at the IMF, have supported you in these efforts and I congratulate you on your achievements; and

• Major challenges remain, in particular to quicken markedly the pace of sustainable growth to raise living standards and to reduce unemployment.

"His Excellency the President, the authorities, and I share the view that macroeconomic stability is a prerequisite for growth, increased investment, expansion of trade and capital flows. But this alone is not sufficient. While the Economic Recovery Program has contributed temporarily to growth, the sustained expansion needed to generate employment, reduce poverty, and increase general standards of living, requires structural reforms of the economy. Algeria's current strong fiscal and monetary position offers a window of opportunity to pursue these reforms, and to expand the social safety net.

"At the core of the needed reforms is the revitalization of the enterprise sector, because improved productivity and profitability are essential for faster economic growth A better regulatory environment, in a climate of greater transparency and accountability, will encourage private sector development. And restructuring and privatizing viable public enterprises, while treating their employees fairly, will enable them to grow again, make profits, and export, and, at the same time, relieve the cost of these enterprises to the Treasury.

"A complementary area of reform lies in the banking sector, given the importance of a modern financial system for financing the development of productive investment. In this regard, I welcome Algeria's decision to invite the IMF to undertake a Financial Sector Assessment Program. This assessment will form the basis for modernizing further the banking sector and enabling it to play an effective role in the economy, including through increased lending to small and medium-size enterprises.

"My advice to all the countries of the Maghreb is to enhance economic integration in order to enlarge your markets, increase the region's attractiveness for investment, and accelerate growth. This will also enlarge the region's collective benefits from its Association Agreements with the EU. For Algeria, the Association Agreement provides a further incentive for restructuring because a more competitive enterprise sector will allow the country to draw greater benefits from closer economic links to the EU.

"The IMF stands ready to assist Algeria in advancing its reform agenda. We are confident that the authorities will continue to build the consensus for reform to meet these important future challenges and we wish you every success."