The IMF estimated that Algeria’s economy grew by 3.9% in 2025, up from 3.7% in 2024, supported by strong public investment.
Growth is projected at 3.8% in 2026, with higher hydrocarbon prices expected to increase export earnings and government revenue.
However, inflation rose from -2% in September 2025 to 5.2% in April 2026 as food-price declines ended and jewellery prices increased alongside higher gold prices.
The IMF said Algeria’s fiscal deficit remained exceptionally high despite narrowing in 2025. One-off dividend payments from state-owned enterprises and the Bank of Algeria helped reduce the shortfall.
With fiscal reserves depleted, continuing financing requirements increased public debt and reliance on central-bank financing.
Algeria’s current-account deficit also widened sharply as imports increased and hydrocarbon exports declined, contributing to significant foreign-exchange reserve losses.
The IMF Executive Board said large fiscal deficits had “eroded fiscal and external buffers and increased financing pressures”.
Directors called for gradual fiscal consolidation, stronger non-hydrocarbon revenue collection and more efficient public investment.
The current hydrocarbon windfall offered Algeria an opportunity to rebuild fiscal reserves, according to the Fund.
The IMF recommended gradual energy subsidy reform supported by targeted assistance for vulnerable households. Stronger public financial management and a rules-based fiscal framework could also improve expenditure control.
Monetary policy should be tightened if inflationary pressures become more widespread.
The Fund called for low inflation to become a clear monetary-policy anchor, greater operational independence for the Bank of Algeria and strict limits on monetary financing.
Greater exchange-rate flexibility could help absorb external shocks and reduce the widening difference between official and parallel-market rates.
Algerian banks remained liquid, profitable and well capitalised, but high levels of non-performing loans and links among the government, state-owned enterprises and public banks presented risks.
The IMF said deeper structural reforms were needed to improve the business environment, reduce informality and establish fairer competition between public and private companies.
Improved governance, transparency, climate resilience and stronger trade and energy links with Africa and Europe could support diversification and private-sector-led growth.
–IMF/ChannelAfrica–
