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Algeria Playing a Risky Fiscal Consolidation Game, IMF Says

  • Better strategy includes foreign borrowing, boosting trade
  • Current approach risks undermining growth in the medium term
Algeria relies on oil exports for most of its foreign funds.

Algeria relies on oil exports for most of its foreign funds.

Photographer: Daniel Acker/Bloomberg

Algeria should weaken its currency, consider external financing and broaden its policy options to stimulate its economy, the International Monetary Fund said in a report.

The current focus on import restrictions and belt-tightening may encourage growth in the short-term but risk suppressing it further out by stoking inflation and further eroding foreign reserves that are already half their 2013 highs, the Washington-based lender said. It recommended a gradual exchange rate depreciation, external borrowing, more diverse financing avenues and measures to encourage private sector activity.