## _cr1057

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### Executive summary — overview and main assessment
- Several years of strong economic performance driven by public spending; entered global slowdown from a position of relative strength.
- Nonhydrocarbon (NH) growth robust; inflation low; large savings accumulated in the oil stabilization fund (FRR) to finance a sizeable public infrastructure program (PIP).
- Key vulnerabilities: economy too dependent on hydrocarbon exports; youth unemployment at 24 percent; productivity and business climate lag regional partners.
- Public spending is main engine of NH growth and job creation; need to accelerate structural reforms to diversify the economy and develop a competitive outward-oriented private sector.
- IMF surveillance priorities: financial sector, tax policy and revenue administration, and further regional and global economic integration.

### Recent developments and sectoral performance
- Growth and inflation:
  - Annual overall GDP growth averaged close to 4 percent over the last decade; NH GDP growth averaged close to 5 percent.
  - NHGDP growth: 6.1 percent in 2008; expected possibly above 9 percent in 2009.
  - Hydrocarbon production projected to decline by 6–7 percent in 2009; overall growth about 2 percent in 2009.
  - Headline inflation: 5.8 percent (y-o-y) in September 2009 driven by a 25 percent surge in fresh food prices; excluding fresh food, inflation declined to 1.4 percent.
- External balances and reserves:
  - Current account surplus: 20 percent of GDP in 2008; projected 1 percent of GDP in 2009.
  - Official reserves grew by $3 billion since end-2008, reaching $146 billion at end-September 2009 (3 years of imports). SDR allocation of SDR 0.9 billion also increased BA’s net international reserves.
  - Nominal and real effective exchange rates depreciated on average by 7.7 percent and 5 percent, respectively, during January–September 2009 versus the same period last year.
- Fiscal and nonhydrocarbon balances:
  - Overall fiscal balance: surplus of 8 percent of GDP in 2008; projected overall fiscal deficit of 8 percent of GDP in 2009.
  - NH primary fiscal balance: NH fiscal deficit expected to decline from 52 percent of NHGDP in 2008 to 48 percent in 2009.
  - NH revenues grew by 20 percent in 2009.
  - Current expenditure projected to grow by 15 percent in 2009; capital expenditures to remain constant in real terms.
- Financial intermediation and liquidity:
  - Credit averaged 19 percent (y-o-y) in June 2009.
  - Bank of Algeria absorbing abundant liquidity from the PIP and SONATRACH revenues; reduced uptake rates in March 2009 to support domestic demand.

### Short- and medium-term outlook and scenarios
- Short-term projections:
  - NHGDP could grow by 5½ percent in 2010, supported by ongoing PIP and acceleration of SONATRACH’s investment program.
  - Real GDP growth could reach around 4½ percent in 2010 as hydrocarbon sector improves.
  - Inflation should come below 5 percent if fresh food prices stabilize.
- Oil price assumptions and baseline projections (authorities and staff estimates):
  - International oil price (US$/bbl): 99.06 (2008), 61.57 (2009), 76.57 (2010), 79.58 (2011), 81.08 (2012), 83.08 (2013), 84.8 (2014).
  - Overall budget balance (percent of GDP): 8.1 (2008), -8.4 (2009), -6.6 (2010), -5.4 (2011), -3.9 (2012), -2.4 (2013), -1.4 (2014).
  - FRR (percent of GDP): 38.8 (2008), 39.2 (2009), 31.5 (2010), 26.5 (2011), 23.0 (2012), 21.2 (2013), 20.2 (2014).
  - Reserves (US$ billion): 143.1 (2008), 149.1 (2009), 157.2 (2010), 168.3 (2011), 181.7 (2012), 197.4 (2013), 215.4 (2014).
  - Primary budget deficit (percent of NHGDP): -51.9 (2008), -48.0 (2009), -47.0 (2010), -44.7 (2011), -41.3 (2012), -38.0 (2013), -35.3 (2014).
  - Current account balance (percent of GDP): 20.1 (2008), 0.9 (2009), 3.9 (2010), 5.3 (2011), 6.2 (2012), 7.0 (2013), 7.7 (2014).
  - Government net assets (percent of GDP) [FRR minus government debt]: 31.4 (2008), 25.7 (2009), 17.1 (2010), 11.1 (2011), 7.2 (2012), 5.0 (2013), 4.1 (2014).
- Downside scenario:
  - If oil prices remain at $45/bbl until 2014, FRR resources would be insufficient to finance the budget deficit and public debt would increase significantly.
  - Legal requirement: FRR resources should be kept above 740 billion DA, which under low oil prices would lead to higher public debt to finance deficits.
  - Fiscal adjustment (scaling down the PIP) would be required to avoid large debt accumulation, implying slower NH growth and higher unemployment.

### Staff appraisal — macro outlook and policy priorities
- Recovery in oil prices improved medium-term outlook but vulnerability to oil price volatility remains high.
- Maintaining medium-term fiscal sustainability under alternative oil price scenarios requires significant fiscal adjustment.
- NH private sector mainly inward-oriented; productivity and business climate lag trading partners.
- Long-term sustainable growth requires:
  - Continued macroeconomic stability.
  - Better infrastructure, human capital, and public services.
  - Decisive reforms to develop the private sector and achieve productivity gains to reduce unemployment.

### Fiscal policy — authorities’ intent and staff recommendations
- Authorities intend to maintain the fiscal stance in 2010 to sustain aggregate demand and growth potential, drawing on FRR reserves.
- Planned fiscal supports:
  - Hiring additional civil servants; raising scholarships; extending tax incentives to stimulate private investment; implement the PIP as planned.
  - National investment fund capital: 150 billion DA.
  - New public investment fund for youth SMEs: 48 billion DA.
  - Government guaranty cap for SME loans increased from 50 million DA to 250 million DA.
- Staff recommendations:
  - Anchor fiscal policy using permanent-income-type rules to preserve long-term wealth per capita.
  - Rationalize expenditure: contain growth in the wage bill; reassess targeting of subsidies and transfers; address investment cost overruns.
  - Continue improving NH tax collection and revenue administration; caution against excessive proliferation of tax exemptions.
  - Improve fiscal management and budget systems: implement a medium-term budget programming system by end-2012; better assess and reduce medium-term fiscal risks linked to PPP contract renegotiations.
  - Overhaul current and capital spending to free up budgetary resources and preserve hydrocarbon wealth.

### Monetary and exchange rate policy
- Monetary policy context and staff advice:
  - Revenues from hydrocarbon exports and fiscal policy have boosted liquidity and should be sterilized to fend off inflationary pressures.
  - SONATRACH’s deposit growth has slowed; non-SONATRACH liquidity absorbed by the central bank has grown significantly.
  - Abundant liquidity complicates transmission of monetary policy; forecasts could be improved by better information exchange with the Ministry of Finance.
  - Authorities could envisage increasing the policy interest rate back to its pre-cut level of March 2009, or higher if inflationary pressures materialize.
  - Staff suggests increasing policy rates back to March 2009 levels to control potential inflationary pressures and adopting new instruments to improve liquidity monitoring and management.
- Exchange rate:
  - BA operates a managed float; real effective exchange rate of the dinar estimated near equilibrium.
  - Staff encourages BA to continue exchange rate policy consistent with external stability and closely monitor developments to minimize misalignment risk.

### Financial sector intermediation and soundness
- Key points:
  - More effective financial intermediation needed to channel large savings to private investment outside oil sector.
  - Despite robust credit growth, intermediation levels low by regional standards; banking sector very liquid with relatively low lending due to high credit risks.
- Measures taken and planned:
  - Increase minimum capital requirements for banks and insurance companies.
  - Raise banks' limits to invest in participated businesses.
  - Promote mortgage and SME lending with government incentives.
  - Ban on consumer lending except mortgages; plan to adopt a household credit registry.
  - Plan to improve banking supervision, transparency and financial reporting; adopt accounting plan based on IAS/IFS.
- Financial Soundness Indicators (select figures as reported; preserve numbers as in source):
  - Capital adequacy ratio: 12 15 13 17
  - Classified loans/total loans: 36 35 36 28
  - NPLs/total loans: 3/19 18 22 18
  - Provisions/classified loans: 49 54 56 62
  - Return on equity: 8 19 25 25
- Staff appraisal:
  - Speed up financial sector reform; implement 2007 FSAP Update recommendations; clarify role and governance of public banks; encourage nonbank financing.
  - Continue efforts to reduce NPLs; monitor new measures to ensure they do not undermine long-term bank solvency.
  - Consider removing ban on consumer lending once household credit registry operational; ensure mortgage and SME incentives do not weaken credit risk assessment.
  - Explore resuming privatization of major public banks, subject to safeguards.

### Structural reforms, FDI, trade liberalization, and investment promotion measures
- Concerns and constraints:
  - Slow structural reforms risk weighing on future growth.
  - 2009 Supplementary Budget Law (2009 SBL) introduces FDI reforms: majority stake (51 percent) must belong to a domestic partner(s) for new FDI; approval of the national council of investments required for new investments; government and public enterprises have pre-emptive purchase right for sales by or to foreign investors.
  - New FDI rules could deter foreign subsidiaries, limit technology transfer, and hamper export-oriented diversification.
  - Slow pace of regional and multilateral trade negotiations; limited benefits so far from the 2005 EU Association Agreement.
- Measures to promote domestic investment (selected):
  - New tax deductions for leasing purchases (“credit bail”).
  - National investment fund capital: 150 billion DA.
  - Government guaranty cap for SME loans increased from 50 million DA to 250 million DA.
  - Public investment fund for youth SMEs: 48 billion DA.
  - Tax incentives on public debt transactions and stocks; requirement that new FDI projects seek additional financing through domestic financial institutions.
  - Banks authorized to lend up to 25 percent of their equity to a business in which they hold an equity interest.
  - All import operations must be paid through a letter of credit; mandatory tax identification number for foreign trade operations.
  - Housing measures: tax exemptions to homeowners renting to low income families; mortgages to public servants at subsidized interest rates (one percent); subsidies (down payment and interests) to low income households for housing acquisition.
- Policy implications:
  - Fiscal incentives and direct capital injections used to stimulate private investment, SME financing, and housing access.
  - Measures aim to deepen domestic financial intermediation but may constrain FDI inflows.

### Selected fiscal, external and macro indicators (preserve series as reported)
- GDP at constant prices (annual percent change): 2.0; 3.0; 2.4; 2.1; 4.6; 4.1; 4.3; 4.1; 4.1 (2006–2014 series in Table 3).
- Consumer price index (end of period): 4.4; 3.9; 5.8; 5.4; 4.9; 4.7; 4.4; 4.2; 4.0 (2006–2014 series in Table 3).
- Total revenue (in percent of GDP): 42.8; 39.2; 47.0; 36.9; 36.6; 36.4; 36.0; 35.6; 35.2 (2006–2014 series in Table 3).
- Total expenditure (in percent of GDP): 29.2; 34.7; 38.9; 45.4; 43.2; 41.8; 39.9; 38.1; 36.6 (2006–2014 series in Table 3).
- Nonhydrocarbon primary balance (percent of nonhydrocarbon GDP): -34.1; -43.2; -51.9; -48.0; -47.0; -44.7; -41.3; -38.0; -35.3 (2006–2014 series).
- Current account balance (percent of GDP): 24.7; 22.5; 20.1; 0.9; 3.9; 5.3; 6.2; 7.0; 7.7 (2006–2014 series).
- Money and quasi-money (M2) (in billions of dinars, end of period): 4,828; 5,648; 6,540; 6,820; 7,789 (2006–2010 series).
- Net foreign assets (in billions of dinars, end of period): 5,515; 7,416; 10,247; 10,770; 11,842 (2006–2010 series).
- Selected 2005–2009 indicators (prel. proj. extracts):
  - Real GDP (annual percent change): 5.1 2.0 3.0 2.4 2.1
  - Hydrocarbon sector: 5.8 -2.5 -0.9 -2.3 -6.6
  - Other sectors: 4.7 5.6 6.3 6.1 9.2
  - Consumer price index (average): 1.6 2.5 3.9 5.8 5.4
  - Gross national savings (percent of GDP): 51.8 54.9 56.6 57.8 49.9
  - Gross national investment (percent of GDP): 31.2 29.7 34.1 37.7 49.0
  - Exports, f.o.b. (US$ billion): 46.3 54.7 60.6 78.2 44.9
  - Imports, f.o.b. (US$ billion): 19.9 20.7 26.4 36.3 37.5
  - Gross official reserves (US$ billion): 56.2 77.8 110.2 143.1 149.1
  - External debt (percent of GDP): 16.7 4.8 4.1 3.3 3.6
  - Central bank rediscount rate (percent): 4.0 4.0 4.0 4.0 4.0

### Data quality, statistics, and World Bank engagement
- Data adequacy: "Data provision has some shortcomings, but is broadly adequate for surveillance."
- Key statistical shortcomings: government finance statistics, national accounts (outdated base year, long lags), price statistics published with about 3 months delay, monetary statistics inconsistency, limited FDI data in balance of payments.
- Algeria began participation in the General Data Dissemination System (GDDS) on April 21, 2009.
- World Bank financial relations (as of December 1, 2009):
  - IBRD lending operations: Total Net Commitments 4,299.6 (US$ millions).
  - 1 active loan: Budget System Modernization: Total Net Commitments 18.4; Undisbursed Balance 11.9.
  - Debt outstanding: 106.8 (US$ millions).

### Executive Board assessment — key messages (Draft PIN No. 10/29)
- Directors welcomed strong recent performance: solid NH growth and low inflation; commended large fiscal savings and reduction in public and external debts.
- Urged sustained efforts to improve productivity, diversify the economy, and reduce high youth unemployment.
- Supported maintaining fiscal stance in 2010 but urged reversion to a sustainable fiscal path over the medium term and overhaul of current and capital spending to preserve hydrocarbon wealth.
- Emphasized ensuring quality and efficiency of public spending; welcomed modernization of budget systems and the projects evaluating agency.
- Urged vigilance on abundant liquidity and readiness to tighten monetary policy if excess liquidity generates inflationary pressures.
- Encouraged accelerating structural reforms, financial sector reforms, and considering privatization of major public banks to increase efficiency; recommended reducing NPLs and revisiting ban on consumer lending once credit registry operational.
- Next Article IV consultation expected on the standard 12-month cycle.

_Source: IMF staff executive summary and excerpts contained in document _cr1057._

### Executive Summary ......................................................................................................

### Executive Summary

### Overview and main assessment
- Algeria has experienced several years of strong economic performance driven by public spending and entered the global slowdown from a position of relative strength.
- Nonhydrocarbon (NH) growth has been robust, inflation low, and the government accumulated large savings in the oil stabilization fund (FRR) to finance a sizeable public infrastructure program (PIP).
- The fall in global hydrocarbon demand exposed vulnerabilities: the economy remains too dependent on hydrocarbon exports; youth unemployment is high; productivity and business climate lag regional partners.
- Public spending has been the main engine of NH growth and job creation, underlining the need to accelerate structural reforms to diversify the economy and develop a competitive outward-oriented private sector.

### Background and recent developments
- Political and security context: President Bouteflika elected for a third term in April 2009; Al-Qaeda in the Maghreb continues to pose a threat.
- Growth and inflation:
  - Over the last decade, annual overall GDP growth averaged close to 4 percent and NH GDP growth averaged close to 5 percent.
  - Inflation was subdued at around 3 percent over the decade.
- Reserves and debt:
  - External and public debt were drastically reduced; large shares of hydrocarbon export revenues were saved in reserves and the FRR.
- Labor market:
  - Youth unemployment remains at 24 percent.
- Key challenge: adopt policies to ensure long-term macroeconomic stability and promote economic diversification through productivity gains and private investment.
- IMF surveillance priority areas: financial sector, tax policy and revenue administration, and further regional and global economic integration.

### Nonhydrocarbon performance and fiscal/external effects of lower hydrocarbon prices
- Growth and sectoral developments:
  - NHGDP growth reached 6.1 percent in 2008, mainly driven by the PIP.
  - NH growth expected in 2009 possibly above 9 percent, reflecting an excellent cereal harvest and continued PIP-led strength in service and construction sectors.
  - Hydrocarbon production projected to decline by 6–7 percent in 2009, bringing overall growth down to about 2 percent.
- Inflation dynamics:
  - Headline inflation reached 5.8 percent (y-o-y) in September 2009 due to a 25 percent surge in fresh food prices.
  - Excluding fresh food, inflation declined to 1.4 percent.
- External balances and reserves:
  - Current account surplus projected to decline from 20 percent of GDP in 2008 to 1 percent in 2009.
  - Official reserves grew by $3 billion since end-2008, reaching $146 billion at end-September 2009 (3 years of imports).  (Note: SDR allocation of SDR 0.9 billion also increased BA’s net international reserves.)
  - Nominal and real effective exchange rates depreciated on average by 7.7 percent and 5 percent, respectively, during January–September 2009 versus the same period last year.
- Fiscal position:
  - Overall fiscal balance: surplus of 8 percent of GDP in 2008; projected overall fiscal deficit of 8 percent of GDP in 2009 (first overall deficit in a decade).
  - NH primary fiscal balance: NH fiscal deficit expected to decline from 52 percent of NHGDP in 2008 to 48 percent in 2009.
  - NH revenue growth: growth in NH revenues by 20 percent in 2009, reflecting revenue administration modernization and higher income tax collections linked to the 2008 wage increase.
  - Current expenditure projected to grow by 15 percent in 2009; capital expenditures to remain constant in real terms.
- Financial intermediation and liquidity:
  - Growth in deposits and credit robust; credit averaged 19 percent (y-o-y) in June 2009.
  - Bank of Algeria has been absorbing abundant liquidity generated by the PIP and SONATRACH revenues, and reduced uptake rates in March 2009 to support domestic demand.

### International environment, outlook and risks
- Short-term outlook:
  - NHGDP could grow by 5½ percent in 2010, supported by ongoing PIP and acceleration of SONATRACH’s investment program.
  - Hydrocarbon sector expected to improve with international recovery; real GDP growth could reach around 4½ percent in 2010.
  - Inflation should come below 5 percent if fresh food prices stabilize.
- Oil price assumptions and impacts:
  - WEO projection: international oil price of $76/bbl in 2010 should improve external and fiscal balances.
  - Under WEO oil price path, current account surplus projected to increase to 4 percent of GDP in 2010; fiscal deficit could be near 6½ percent of GDP in 2010.
- Medium-term outlook:
  - A 5 percent NHGDP growth rate would be supported by a new 2010–14 PIP announced at US$150 billion and SONATRACH investments, with hydrocarbon production contributing a 2 percent hydrocarbon growth in the medium term.
  - Baseline projections (authorities and staff estimates) include:
    - International oil price (US$/bbl): 99.06 (2008), 61.57 (2009), 76.57 (2010), 79.58 (2011), 81.08 (2012), 83.08 (2013), 84.8 (2014).
    - Overall budget balance (percent of GDP): 8.1 (2008), -8.4 (2009), -6.6 (2010), -5.4 (2011), -3.9 (2012), -2.4 (2013), -1.4 (2014).
    - FRR (percent of GDP): 38.8 (2008), 39.2 (2009), 31.5 (2010), 26.5 (2011), 23.0 (2012), 21.2 (2013), 20.2 (2014).
    - Reserves (US$ billion): 143.1 (2008), 149.1 (2009), 157.2 (2010), 168.3 (2011), 181.7 (2012), 197.4 (2013), 215.4 (2014).
    - Primary budget deficit (percent of NHGDP): -51.9 (2008), -48.0 (2009), -47.0 (2010), -44.7 (2011), -41.3 (2012), -38.0 (2013), -35.3 (2014).
    - Current account balance (percent of GDP): 20.1 (2008), 0.9 (2009), 3.9 (2010), 5.3 (2011), 6.2 (2012), 7.0 (2013), 7.7 (2014).
    - Government net assets (percent of GDP) [FRR minus government debt]: 31.4 (2008), 25.7 (2009), 17.1 (2010), 11.1 (2011), 7.2 (2012), 5.0 (2013), 4.1 (2014).
- Downside scenario and fiscal vulnerability:
  - Under an alternative scenario with oil prices at $45/bbl until 2014, FRR resources would not be sufficient to finance the budget deficit and public debt would have to increase significantly.
  - Legal requirement: FRR resources should be kept above 740 billion DA, which would result in higher levels of public debt to finance public deficits.
  - Fiscal adjustment to avoid large debt accumulation would require scaling down the PIP, implying slower NH growth and higher unemployment.

### Staff appraisal of macro outlook
- The recovery in oil prices has improved the medium-term financial outlook, but vulnerability to oil price volatility remains high.
- Maintaining medium-term fiscal sustainability under alternative oil price scenarios would require significant fiscal adjustment.
- NH private sector remains mainly inward-oriented; productivity and business climate lag trading partners.
- Long-term sustainable growth requires: continued macroeconomic stability; better infrastructure, human capital, and public services; and decisive reforms to develop the private sector and achieve productivity gains that reduce unemployment.

### Policy discussions — Fiscal policy
- Authorities intend to maintain the current fiscal stance to support the PIP, drawing on ample FRR reserves; staff supports this stance in the short run but advises a swift return to medium-term sustainability to preserve fiscal space.
- Fiscal policy options and recommendations:
  - Anchor fiscal policy using permanent-income-type rules to preserve long-term wealth per capita.
  - Rationalize expenditure through improved targeting and controls:
    - Contain growth in the wage bill.
    - Reassess targeting of subsidies and transfers.
    - Address investment cost overruns (March 2009 decree reinforces financial controls on public spending).
  - Continue improving NH tax collection and revenue administration:
    - Measures already taken include making clean tax records a prerequisite for bank transactions and simplifying revenue administration.
    - Draft 2010 budget law provides for further efficiency improvements in revenue collection.
    - Caution against excessive proliferation of tax exemptions, which divert resources and undermine revenue administration.
  - Improve fiscal management and budget systems:
    - Continue World Bank-assisted reforms to assess medium-term impact of the PIP on current spending, develop program performance tools, and better control spending.
    - Aim for full implementation of a medium-term budget programming system by end-2012.
    - Better assess and reduce medium-term fiscal risks linked to potential PPP contract renegotiations.

### Policy discussions — Monetary and exchange rate policy
- Monetary policy:
  - The Bank of Algeria has successfully absorbed excess liquidity from oil revenues and the PIP.
  - Staff encourages adoption of new instruments to improve liquidity monitoring and management.
  - Staff suggests increasing policy rates back to their levels of March 2009 to control potential inflationary pressures.
- Exchange rate:
  - Algeria’s policies have been consistent with external stability.
  - Staff estimates concur with the central bank’s analysis that the real exchange rate of the dinar is near its equilibrium level.

### Policy discussions — Financial intermediation and structural reforms
- Financial intermediation:
  - Growth in deposits and credit has been robust; more ambitious reforms are needed for more effective intermediation.
  - Staff recommends adoption of new instruments for liquidity management and measures to improve intermediation performance.
- Structural reforms and private sector development:
  - Successful diversification requires sustained macro stability and improvements in infrastructure, human capital, and public services.
  - Structural reforms to promote private sector development, improve financial intermediation, and enhance business climate and trade integration have been slow and need acceleration.
  - Concerns include new rules limiting stakeholding and financing of foreign direct investment and slow pace of regional and multilateral trade negotiations, which could hamper efforts to achieve sustainable export-oriented diversified growth.

*Source: IMF staff executive summary contained in document _cr1057 - Executive Summary.*

### 15. The authorities intend to

### 15. The authorities intend to

### Fiscal policy stance and plans
- Authorities intend to maintain the current fiscal stance in 2010 to sustain aggregate demand and enhance growth potential.
- Rationale: Low public debt and high savings in the FRR provide sufficient leeway.
- Planned fiscal supports:
  - Support private consumption through hiring additional civil servants and raising scholarships.
  - Stimulate private investment—including in infant industries competing with imports—by extending tax incentives.
  - Implement the current PIP as planned.
  - Priorities and composition of the new PIP for 2010–14 are under preparation.

### Commitment to fiscal sustainability and revenue policy
- Authorities remain committed to preserving long-term fiscal sustainability.
- Noted projected decline in the NH deficit in 2009–10.
- Post-reform wage policy: After completing the broad civil service reform, future wage increases should be linked to productivity and economic performance, in line with the National and Social Pact.
- Subsidies: Work is ongoing to streamline subsidies, guided by political and economic efficiency considerations.
- PIP execution: Execution of the current and future PIPs will be prioritized and based on the fiscal outlook.
- Revenue-side reforms:
  - Tax and customs administration reforms, already credited with an increased NH revenue performance, will be pursued actively for additional revenue gains in the medium term.
  - Granting of tax incentives to stimulate NH growth will continue while monitoring their impact on revenue administration.

### Public spending quality and budget management
- Authorities attach high importance to the quality and efficiency of public spending.
- Institutional and procedural measures:
  - The projects evaluating agency (Caisse Nationale d’Équipements et de Développement, CNED) is now fully operational and will stay focused on large non-PPP projects.
  - Reform of budget management is progressing, in particular to establish a medium-term expenditure framework.
  - The role of financial comptrollers was broadened.

### Staff appraisal — fiscal
- Staff supports maintaining the current fiscal stance in 2010 but encourages the authorities to swiftly return to a sustainable fiscal path once global recovery takes hold.
- Staff recommendations and observations:
  - Continued implementation of the infrastructure component of the PIP and support to the SMEs is desirable.
  - The sizable savings accumulated in the FRR can be used to support PIP and SME-related spending.
  - A thorough overhaul of the current and capital spending would free up budgetary resources, better preserve hydrocarbon wealth in the medium-term and maintain fiscal space in case of adverse shock on oil prices.
  - Current expenditure, in particular the wage bill, should be firmly contained in the medium term to make room for additional maintenance costs related to the new infrastructure built with the PIP.
  - Ongoing advances to reform the revenue administration should boost NH revenue over the medium term, provided that growth in tax incentives is contained.
  - Given that public spending is key for the economy, ensuring its quality and efficiency is critical.
  - The authorities’ program to modernize budget systems will likely be very helpful in that respect.

### Medium- and long-term fiscal sustainability (Box 1)
- Key vulnerability: High and growing dependence of Algeria’s budget on hydrocarbon revenue given volatile global prices and nonrenewable reserves.
- Permanent income approach:
  - Hydrocarbon resources should be allocated to budget spending on a permanent income basis to ensure long-term fiscal sustainability with some equalization of consumption across generations.
  - Real hydrocarbon wealth is preserved by substituting geological hydrocarbon assets by financial ones to preserve real wealth.
- Possible NH primary deficit criteria:
  - Maintain a constant real wealth over the medium term.
  - Maintain a constant real wealth per capita over the medium term (more restrictive for initial years; implies future generations benefit more).
- Precautionary considerations:
  - Future hydrocarbon revenues are highly uncertain, mainly because of large price fluctuations.
  - Additional budgetary savings out of hydrocarbon resources are needed to cushion the budget against uncertainty.
  - The required additional savings are lower when initial financial reserves are high.
- References cited in Box 1:
  - BP Statistical Review of World Energy, June 2009.
  - IMF Country Report 05/52.
  - IMF Working Paper WP/09/33.

### Monetary policy: background, authorities’ views, and staff appraisal
- Background and staff analysis:
  - Revenues from hydrocarbon exports and fiscal policy have boosted liquidity in recent years, which should be adequately sterilized to fend off inflationary pressures.
  - SONATRACH’s deposits growth has slowed and even turned negative in the past year, while non-SONATRACH liquidity absorbed by the central bank has grown significantly.
  - The changing nature of the system’s liquidity should be closely monitored.
  - Forecasting could be improved by exchanging more information with the Ministry of Finance on government spending combined with an econometric analysis of liquidity needs.
  - Abundant liquidity poses significant challenges for the transmission of monetary policy, amid higher domestic food prices, uncertain import prices and limited activity on the interbank market.
  - With still robust money and credit growth, the authorities could envisage increasing the policy interest rate back to its pre-cut level of March 2009, or higher if inflationary pressures were to materialize.
  - To maximize the effects of its actions, the BA should clearly state its goals and instruments at each intervention.
- Exchange rate:
  - The real effective exchange rate of the dinar has remained near its equilibrium level.
  - The BA is the de-facto sole seller of foreign exchange and operates a managed float, whereby the nominal exchange rate is gradually adjusted towards a long-term real equilibrium target.
  - Staff calculations suggest that the current level of the real effective exchange rate is in line with its fundamentals implied by the Equilibrium Real Exchange Rate and Macroeconomic Balance approach (see Box 2).
- Authorities’ views and policy intentions:
  - Stand ready to adjust monetary policy instruments based on close monitoring of excess liquidity and inflation underlying trends.
  - Consider overall inflation under control notwithstanding sharp increase in fresh food prices.
  - Consider liquidity management effective, based on two short-term liquidity facilities; receptive to adding facilities with longer maturities.
  - Considering use of required reserves as an additional instrument for liquidity absorption; ready to include BA’s refinancing rate in future potential policy moves if needed.
  - Believe flexible exchange rate management has kept the dinar near its equilibrium level; note equilibrium estimates are inherently uncertain.
- Staff appraisal:
  - BA has been able to contain inflationary pressures, but these could become a concern if liquidity continues to grow; authorities should stand ready to tighten monetary policy to regulate excess liquidity.
  - Rate cuts of early 2009 could be reversed to control potential inflationary pressures, and the refinancing rate could be included in future policy moves if a stronger signal is needed.
  - Policy moves should be disseminated widely to strengthen their signaling effects.
  - Staff encourages authorities to refine instruments for monitoring, assessing and absorbing abundant liquidity.
  - BA should continue to pursue an exchange rate policy consistent with external stability and closely monitor developments to minimize the risk of misalignment.

### Financial sector intermediation and soundness
- Context and challenges:
  - More effective financial intermediation would help channel Algeria’s large savings to private sector investment, which remains low outside the oil sector.
  - Despite robust credit growth, intermediation levels are low by regional standards.
  - The banking sector remains very liquid with relatively low lending due to high credit risks.
- Measures taken by authorities:
  - Increasing minimum capital requirement for banks and insurance companies.
  - Raising banks limits to invest in participated businesses.
  - Promoting mortgage and loans to SMEs financing with government incentives.
  - New consumer lending restrictions (ban on consumer lending except for mortgages).
- Financial Soundness Indicators (select figures as reported):
  - Capital adequacy ratio: 12 15 13 17 (table headings imply trend but preserve numbers as in source).
  - Classified loans/total loans: 36 35 36 28
  - NPLs/total loans: 3/19 18 22 18
  - Provisions/classified loans: 49 54 56 62
  - Return on equity: 8 19 25 25
  - (Notes: 1/ 90% of system assets. 2/ Non-public banks are all foreign. 3/ Loans in arrears (100% provisioning requirement). 4/ Loans performing but at risk (30% or 50% provisioning).)
- Progress and weaknesses:
  - NPLs improved in 2008 but remain high; loans requiring 100 percent provisioning fell from 22 percent in 2007 to 18 percent in 2008, due to continued government’s NPLs purchases plan for state-owned enterprises (SOEs).
  - Banking system does not pose short-term macroeconomic risk: adequately capitalized, profitable, satisfactory provisioning, and does not rely on foreign lending for market funding.
- Authorities’ views and intentions:
  - Financial sector remains at the core of reform strategy; initiatives aim to increase system’s lending capacity.
  - Additional government funding for increasing public banks capital and restructuring public enterprises.
  - High level of NPLs largely related to old claims and being addressed through government purchase plan of SOEs’ loans; estimated overall ratio of classified loans brought down to around 15 percent in June 2009.
  - Plan to adopt a household credit registry.
  - Consider ban on consumer lending (except for mortgages) as limiting household indebtedness (a small part of total bank lending).
  - Plan to improve banking supervision, transparency and financial reporting; create a financial reporting tool and adopt an accounting plan based on IAS/IFS.
- Staff appraisal — financial sector:
  - Authorities should speed up financial sector reform to strengthen and improve efficiency of financial institutions.
  - Implement recommendations of the 2007 FSAP Update forcefully, clarify role of public banks and strengthen their governance, improve operational environment, and encourage nonbank financing.
  - Continue efforts to reduce NPLs to bring levels closer to comparable countries.
  - Monitor closely effects of new measures to ensure they do not undermine long-term bank solvency.
  - The ban on consumer lending (except for mortgages) is a potential hurdle to financial sector development and could be removed when household credit registry is operational.
  - Incentives for mortgages and SMEs financing should not weaken credit risk assessment.
  - Explore possibilities for resuming privatization of major public banks suspended two years ago, without ruling out exempting the financial sector from new restrictions on FDI.

### Structural reforms, FDI, and trade liberalization
- Concerns:
  - Slow progress in structural reforms will weigh on future growth.
  - Measures to boost domestic private investment could hamper much needed foreign direct investment (FDI): new FDI regime establishes a 49 percent ceiling for foreign stakeholding, forcing association with domestic partners as majority stakeholders.
  - Surge in imports illustrates growing openness, but trade with Maghreb partners remains marginal.
  - Benefits from the 2005 EU Association Agreement appear limited so far, notably concerning development of NH exports.
  - Negotiations for WTO entry are continuing.
- Authorities’ views:
  - Concerned about international business climate rankings but stress measures aimed to boost private investment.
  - Emphasize enhanced infrastructure and streamlining customs processes to facilitate trade.
  - Insist new FDI restrictions allow foreign investors to retain management despite minority stake; 49 percent participation intended to bring more domestic investors to foreign-sponsored projects.
  - Welcome staff’s analysis on export diversification strategies in Chile and Malaysia and will explore lessons.
  - Committed to promote regional and multilateral trade but recognize difficulties in trade negotiations.
- Staff appraisal — structural reforms:
  - Urges authorities to accelerate structural reforms to improve the business climate.
  - Commends efforts to improve infrastructure but stresses these are insufficient to improve investment climate.
  - Considers some measures in the 2009 Supplementary Budget Law and slow pace of trade liberalization could be detrimental to diversification.
  - New regulations for FDI projects could deter foreign investors from opening subsidiaries, preventing technology transfer.
  - Diversification strategy should balance domestic and foreign investment and financing.
  - Encourages authorities to seek greater benefit from the Association Agreement with the EU and to join the WTO, and expedite Algeria’s participation as a creditor in the Enhanced HIPC Initiative.
- Box 3 — Relevant measures adopted by the 2009 Supplementary Budget Law (2009 SBL):
  - Reform of FDI regime:
    - For all new FDI, the majority stake (51 percent) must belong to a domestic partner(s).
    - All new investments require the approval of the national council of investments.
    - The government and public enterprises have a pre-emptive purchase right for all sales by or to foreign investors.
  - New consumer lending rules: all consumers lending is banned, except for mortgages.

*IMF staff report excerpt (content unit: _cr1057 - 15. The authorities intend to).*

### 3. Promotion of domestic investment: (a) new tax deductions for leasing purchases

### 3. Promotion of domestic investment: (a) new tax deductions for leasing purchases

### Major measures to promote domestic investment
- New tax deductions for leasing purchases (i.e. “credit bail”).
- National investment fund provided with a capital of 150 billion DA.
- New cap for government guaranties to SMEs loans increased from 50 million DA to 250 million DA.
- Creation of a 48 billion DA public investment fund to invest in SMEs created by young entrepreneurs.

### Support to domestic financial markets development (related measures)
- Tax incentives on public debt transactions and stocks.
- Requirement that all new FDI projects should seek additional financing through domestic financial institutions.
- Banks authorized to lend up to 25 percent of their equity to a business in which they hold an equity interest.

### External trade operations (regulatory measures affecting investment and finance)
- All import operations must be only paid through a letter of credit (i.e. “crédit documentaire”).
- Mandatory tax identification number for foreign trade operations.

### Promotion of the real estate market (measures with fiscal/subsidy components)
- Tax exemptions to homeowners renting to low income families.
- Mortgages to public servants granted at subsidized interest rates (one percent).
- Subsidies (down payment and interests) to low income households for housing acquisition.

### Key fiscal and macroeconomic figures from the accompanying tables (selected)
- National investment fund capital: 150 billion DA.
- Government guaranty cap for SME loans: increased from 50 million DA to 250 million DA.
- Public investment fund for youth SMEs: 48 billion DA.
- Oil stabilization fund (in billions of Algerian dinars) projections include: 29, 31.1, 3215.5, 4280.0, 3998.3, 3658.7, 3395.4, 3231.7, 3244.5, 3347.7 (as reported in the table).
- Budget revenue and grants (in billions of dinars): 3,640; 3,688; 5,191; 3,772; 4,255; 4,669; 5,054; 5,443; 5,833 (2006–2014 series in Table 3).
- Total revenue (in percent of GDP): 42.8; 39.2; 47.0; 36.9; 36.6; 36.4; 36.0; 35.6; 35.2 (2006–2014 series in Table 3).
- Total expenditure (in percent of GDP): 29.2; 34.7; 38.9; 45.4; 43.2; 41.8; 39.9; 38.1; 36.6 (2006–2014 series in Table 3).
- Nonhydrocarbon primary balance (in percent of nonhydrocarbon GDP): -34.1; -43.2; -51.9; -48.0; -47.0; -44.7; -41.3; -38.0; -35.3 (2006–2014 series).
- Current account balance (in percent of GDP): 24.7; 22.5; 20.1; 0.9; 3.9; 5.3; 6.2; 7.0; 7.7 (2006–2014 series in Table 1).
- GDP at constant prices (annual percent change): 2.0; 3.0; 2.4; 2.1; 4.6; 4.1; 4.3; 4.1; 4.1 (2006–2014 series).
- Consumer price index (end of period): 4.4; 3.9; 5.8; 5.4; 4.9; 4.7; 4.4; 4.2; 4.0 (2006–2014 series).
- Money and quasi-money (M2) (in billions of dinars, end of period): 4,828; 5,648; 6,540; 6,820; 7,789 (2006–2010 series in Table 4).
- Net foreign assets (in billions of dinars, end of period): 5,515; 7,416; 10,247; 10,770; 11,842 (2006–2010 series in Table 4).

### Policy implications (implicit in measures)
- Fiscal incentives (tax deductions, tax exemptions, subsidized mortgage rates, direct capital injections) are being used to stimulate private investment, SME financing, and housing access for low income households.
- Measures to channel financing through domestic institutions (FDI financing requirement; bank lending limits tied to equity stakes) aim to deepen domestic financial intermediation.
- Trade and payment measures (mandatory letters of credit; tax identification for foreign trade) strengthen formal control over import financing and trade taxation.

*Source: _cr1057 - 3. Promotion of domestic investment: (a) new tax deductions for leasing purchases (PDF).*

### 1. Economic diversification and support to economic growth, to include strategic

### 1. Economic diversification and support to economic growth, to include strategic support on economic diversification, pilot centers for competitiveness, agriculture and rural development, ecotourism, strengthening of the Central Bank functions, support to the Ministry of Finance on governance of public banks; and support to the Telecom regulator.

### Major planned activities and instruments
- Strategic support on economic diversification, including pilot centers for competitiveness, agriculture and rural development, and ecotourism.
- Strengthening of the Central Bank functions.
- Support to the Ministry of Finance on governance of public banks.
- Support to the Telecom regulator.
- Support to the development and implementation of economic policies and their evaluation, including:
  - Impact evaluation of public policies and analysis of key product subsidies.
  - Technical assistance for preparation of the new household survey.
- Sustainable Development initiatives, including improvement in solid waste management and a study with the Ministry of energy.
- Note: "The specific activities under each of this pillar can change and remain to be defined in later years of the CPS."
- Main instruments of cooperation under the new CAS:
  - Reimbursable technical assistance (primary instrument).
  - Trust funds to selectively support TA or studies.
  - Bank budget to support identification of RTAs, policy dialogues in priority areas, and technical assistance for capacity building.

### Implementation caveat
- Activities and specific measures remain to be defined in later years of the Country Partnership Strategy (CPS).

---

### Algeria: Financial Relations with the World Bank (As of December 1, 2009)

### Portfolio summary (in millions of U.S. dollars)
- IBRD lending operations: Total Net Commitments 4,299.6.
- 72 loans closed.
- 1 active loan:
  - Budget System Modernization: Total Net Commitments 18.4; Undisbursed Balance 11.9.
- Total active loans: 18.4; Undisbursed Balance: 11.9.
- Repayments: 4,163.0.
- Debt outstanding: 106.8.

### Net lending by the World Bank (by fiscal year) notes
- Commitments: 0 0 0 0 0 0
- Disbursements: 51 27 29 7 6 0
- Debt service: 270 224 789 18 22 3
  - Principal: 197 174 748 11 16 3
  - Interest 4/: 73 50 41 6 6 0
- Net transfer 5/: -219 -197 -760 -11 -16 -3

- Footnotes:
  - 1/ IDA has no operations in Algeria.
  - 2/ Less cancellations, includes adjustment lending.
  - 3/ Fiscal years start July 1 and end June 30.
  - 4/ Includes charges.
  - 5/ Equal to disbursements minus debt service.

---

### Algeria—Statistical Issues Appendix

### I. Assessment of Data Adequacy for Surveillance
- General: "Data provision has some shortcomings, but is broadly adequate for surveillance."
- Key sectors with shortcomings:
  - Government finance statistics, national accounts, and prices have several shortcomings that hamper analysis.
- National Accounts:
  - Key shortcomings include an outdated base year for constant price GDP estimates, long lags for publication of data, and incomplete application of the 1993 System of National Accounts.
  - STA recommendation: give priority to compiling GDP at constant prices (including quarterly accounts) and to rebasing the GDP series.
- Price Statistics:
  - Data are published with a delay of about 3 months.
- Government finance statistics:
  - Insufficient institutional coverage (coverage limited to Budgetary Central Government, including the general budget, the annexed budget, and the special treasury accounts).
  - Classification problems, long lags for production of statistics, and lack of reconciliation of financing with the monetary accounts.
  - Key factors behind weaknesses: lack of financial resources for compilation of statistics, insufficient interagency coordination, and concerns about accuracy leading to reluctance to publish provisional data.
- Monetary statistics:
  - Need to ensure data consistency with the methodology in the Monetary and Financial Statistics Manual, 2000.
  - Timely reporting of balance sheet data by some state-owned commercial banks remains problematic.
  - Most commercial banks do not report all data needed to compile the monetary survey.
  - Prudential data reported by state-owned banks are unreliable and not timely.
- Balance of payments:
  - Generally good quality but could benefit from a survey for direct investment data.

### II. Data Standards and Quality
- "Algeria began participation in the General Data Dissemination System (GDDS) on April 21, 2009."
- "No data ROSC is available."

### Table of Common Indicators Required for Surveillance (as of December 7, 2009) — selected entries and dates of latest observation / date received / frequency
- Exchange Rates: 10/09 / 11/03/09 / D / M / W
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities 1: 09/09 / 11/21/09 / D / M / M
- Reserve/Base Money: 06/09 / 10/21/09 / M / M / M
- Broad Money: 06/09 / 11/21/09 / M / M / M
- Central Bank Balance Sheet: 06/09 / 10/21/09 / M / M / A
- Consolidated Balance Sheet of the Banking System: 06/09 / 10/21/09 / M / M / A
- Interest Rates 2: 08/09 / 10/21/09 / M / M / M
- Consumer Price Index: 09/09 / 11/31/09 / M / M / M
- Revenue, Expenditure, Balance and Composition of Financing – Central Government: 06/09 / 11/03/09 / Q / I / A
- Stocks of Central Government and Central Government-Guaranteed Debt 5: 06/09 / 11/03/09 / Q / I / A
- External Current Account Balance: 06/09 / 11/03/09 / Q / Q / A
- Exports and Imports of Goods and Services: 09/07 / 11/05/07 / Q / Q / A
- GDP/GNP: 2008 / 10/31/09 / A / A / A
- Gross External Debt: 09/07 / 11/05/07 / A / A / A
- International Investment Position 6: ... / ... / PA / PA / PA

- Footnotes excerpted:
  - 1 Any reserve assets that are pledged or otherwise encumbered should be specified separately.
  - 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.

---

### Draft Public Information Notice (PIN) No. 10/29 — IMF Executive Board Concludes 2009 Article IV Consultation with Algeria (FOR IMMEDIATE RELEASE February 23, 2010)

### Background — key observations
- Consultation concluded on a lapse of time basis on January 8, 2010.
- Recent performance:
  - Several years of strong economic performance driven by public spending.
  - Nonhydrocarbon growth robust, inflation low, government accumulated large savings in the oil stabilization fund (FRR).
  - Fall of global demand for hydrocarbons exposed vulnerabilities.
  - Economy remains too dependent on hydrocarbon exports.
  - Unemployment, although declining, remains relatively high.
  - Productivity and business climate lag behind main trading partners.
  - Nonhydrocarbon growth and job creation largely sustained by public spending.
  - Pressing need to accelerate structural reforms to diversify the economy and let a competitive and outward-oriented private sector emerge.

### Recent economic outcomes (selected)
- Nonhydrocarbon growth likely reached 9 percent in 2009.
- Hydrocarbon production expected to decline by 6–7 percent in 2009.
- Overall growth brought down to about 2 percent in 2009.
- Headline inflation: 5.8 percent (y-o-y) in September 2009, driven by a 25 percent surge in fresh food prices.
- Official reserves: grown by $3 billion since end-2008, reaching $146 billion at end-September 2009 (3 years of imports).
- Fiscal outcome: fiscal deficit of 8 percent of GDP in 2009 following a surplus of 8 percent in 2008.
- Financing: deficit should be largely financed with domestic nonbank resources.
- Real effective exchange rate: "continued to be close to its equilibrium level."

### Outlook and key risks
- Short-term outlook favorable but medium-term sensitive to oil prices.
- Projections:
  - Nonhydrocarbon GDP could grow by 5½ percent in 2010.
  - Overall growth around 4½ percent in 2010 as hydrocarbon output improves.
  - Inflation should come below 5 percent if fresh food prices stabilize.
- Risks:
  - Worsening world economy and a significant new decline in energy prices would weaken external and fiscal positions, force scaling back of the PIP and other investments, and imply slower growth and higher unemployment.
- Policy implication: medium-term outlook depends on decisive actions to promote private sector development and economic diversification; public spending alone cannot ensure long-term growth.

### Structural reforms and business climate
- Recent initiatives: increase minimum capital requirement for banks, reduce NPLs through financial restructuring of public enterprises, improve fiscal management and budget system.
- Concerns:
  - New regulations for foreign direct investment and slow pace of regional and multilateral trade negotiations could hamper export-oriented diversification.
  - Perception of the business climate has not improved and remains behind most regional competitors.

### Executive Board Assessment — key messages
- Directors welcomed Algeria’s strong recent performance: solid nonhydrocarbon growth and low inflation.
- Commended prudent financial policies: significant increase in reserves, reduction of public and external debts to low levels, accumulation of large fiscal savings to sustain fiscal stance in 2010.
- Noted that fall in oil prices and deterioration in financial balances underscore important medium-term challenges.
- Directors urged sustained efforts to:
  - Improve productivity.
  - Diversify the economy to reduce high dependence on the hydrocarbon sector.
  - Reduce high youth unemployment.
- Fiscal policy:
  - Supported maintaining current fiscal stance in 2010.
  - Encouraged reversion to a sustainable fiscal path over the medium term.
  - Endorsed continued implementation of the PIP and support to SMEs, noting fiscal savings can be used for that effect.
  - Advised overhaul of current and capital spending to free up budgetary resources, preserve hydrocarbon wealth, and maintain fiscal space against oil-price shocks.
  - Advised containing current expenditure, in particular the wage bill, to make room for maintenance costs related to new infrastructure.
  - Welcomed revenue administration reforms, conditional on containing growth in tax incentives.
- Public spending quality:
  - Stressed critical importance of ensuring the quality and efficiency of public spending, given its role in driving nonhydrocarbon growth.
  - Welcomed program to modernize budget systems and the projects evaluating agency.
- Monetary policy and liquidity:
  - Commended prudent monetary policy that contained inflationary pressures.
  - Warned that abundant liquidity from hydrocarbon sector and public spending requires vigilance; authorities should be ready to tighten if excess liquidity generates inflationary pressures.
- Exchange rate policy:
  - Considered consistent with medium-term external stability and broadly aligned with fundamentals.
  - Urged acceleration of structural reforms to improve external competitiveness.
- Financial sector reform:
  - Encouraged speeding up reforms to strengthen and improve efficiency of financial institutions.
  - Recommended more forceful implementation of 2007 FSAP Update recommendations, clarify role of public banks, and further strengthen governance.
  - Suggested exploring possibilities for resuming privatization of major public banks to increase efficiency based on international best practices.
  - Recommended continuing efforts to reduce NPLs toward levels in comparable countries.
  - Viewed ban on consumer lending (except mortgages) as a potential hurdle to financial sector development; suggested removal once the household credit registry becomes operational.
- Procedural note: Next Article IV consultation expected to take place on the standard 12-month cycle.

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### Selected Economic Indicators (Prel. Proj. table extracts)

- Years covered header: 2005 2006 2007 2008 2009
- Domestic Economy (Annual percentage change, unless otherwise indicated)
  - Real GDP: 5.1 2.0 3.0 2.4 2.1
  - Hydrocarbon sector: 5.8 -2.5 -0.9 -2.3 -6.6
  - Other sectors: 4.7 5.6 6.3 6.1 9.2
  - Consumer price index (average): 1.6 2.5 3.9 5.8 5.4
  - Gross national savings (in percent of GDP): 51.8 54.9 56.6 57.8 49.9
  - Gross national investment (in percent of GDP): 31.2 29.7 34.1 37.7 49.0
- External sector (In billions of US dollars; unless otherwise indicated)
  - Exports, f.o.b.: 46.3 54.7 60.6 78.2 44.9
  - Imports, f.o.b.: 19.9 20.7 26.4 36.3 37.5
  - Current account (in percent of GDP): 20.6 25.2 22.5 20.2 0.9
  - Gross official reserves: 56.2 77.8 110.2 143.1 149.1
  - Idem, in months of next year's imports: 26.5 28.0 26.9 35.4 35.2
  - External debt (in percent of GDP): 16.7 4.8 4.1 3.3 3.6
  - Debt service ratio (in percent of exports): 12.5 23.8 2.4 1.8 3.0
  - Terms of trade (deterioration -) (annual percent change): 33.0 12.4 0.8 22.5 -25.6
  - Real effective exchange rate (depreciation -) (annual percent change) 1/: -4.0 0.0 -1.1 3.2 -4.3
- Central government finance (In percent of GDP)
  - Total revenue: 40.9 43.0 39.2 47.0 36.9
  - Total expenditure and net lending: 29.0 29.4 34.7 38.9 45.4
  - Overall budget balance (deficit-): 11.9 13.6 4.4 8.1 -8.4
- Money and credit (Annual percentage change, unless otherwise indicated)
  - Net foreign assets: 34.0 31.9 34.4 38.2 5.1
  - Domestic credit: -17.8 -5.9 -13.6 -18.8 9.7
  - Credit to the government (net): -24.4 -8.9 -20.7 -26.4 4.3
  - Credit to the economy: 15.9 7.1 12.5 18.9 13.0
  - Broad money: 11.1 18.6 24.2 15.8 4.3
  - Interest rate (central bank rediscount rate, in percent): 4.0 4.0 4.0 4.0 4.0

- Sources noted in table: "Algerian authorities; and Fund staff estimates and projections."
- Footnote: 1/ For 2009, as of September.

*Source: _cr1057 - 1. Economic diversification and support to economic growth, to include strategic support on economic diversification, pilot centers for competitiveness, agriculture and rural development, ecotourism, strengthening of the Central Bank functions, support to the Ministry of Finance on governance of public banks; and support to the Telecom regulator.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr1057.pdf_