IMF Forecasts Algeria Reserves Drop to $19.8 Billion by 2031
Algeria's foreign exchange reserves are projected to fall 61.2% by 2031 due to persistent fiscal deficits and reduced hydrocarbon exports.
Key points
- IMF forecasts Algeria's foreign exchange reserves will drop to $19.8 billion by 2031.
- Import coverage will decrease from 8.6 months to 3.3 months due to reserve losses.
- The IMF recommends fiscal consolidation and energy subsidy reform to stabilize the economy.
The International Monetary Fund projects Algeria's foreign exchange reserves will fall to $19.8 billion by 2031. This represents a 61.2% contraction from the current $51 billion level, signaling a severe reduction in external financial capacity.
Import coverage will shrink from 8.6 months to just 3.3 months under this scenario. The decline stems from large fiscal deficits that have depleted fiscal buffers and eroded the country's external resilience.
Fiscal Deficits Drive Reserve Erosion
The North Africa Post reports that the IMF attributes the reserve loss to sustained fiscal deficits. Although the deficit narrowed slightly in 2025, it remained very large due to reliance on one-off dividend payments from state-owned enterprises.
Public debt has increased as the government relies more heavily on central-bank financing. The current account deficit widened sharply because imports surged while hydrocarbon exports declined, accelerating the loss of reserves.
Inflation Risks and Growth Moderation
Inflation is projected to rise temporarily as the fiscal deficit remains high with continued monetary financing. Over the medium term, economic growth is expected to moderate while public debt continues to accumulate.
Key downside risks include a sharp drop in hydrocarbon prices and intensified sovereign-bank linkages. Continued reliance on monetary financing could undermine price stability and damage the credibility of economic policy.
IMF Demands Structural Fiscal Reforms
The Fund calls for credible and gradual fiscal consolidation to address sustainability risks. Authorities must strengthen nonhydrocarbon revenue mobilization and improve the efficiency of public investment spending.
Energy subsidy reform should proceed gradually with targeted support for vulnerable households. Monetary policy must tighten if inflationary pressures intensify, establishing low inflation as a clear nominal anchor.
The IMF urges deeper reforms to support private sector-led growth and resilience. Improving the business climate and reducing regulatory barriers are essential for long-term economic stability.
