Algeria: Selected Issues

This Selected Issues paper examines the macroeconomic and fiscal implications of climate change in Algeria. It highlights a range of risks associated with the projected shifts in weather patterns and Algeria’s own hydrocarbon-reliant growth model in the context of the global energy transition. The projected shift in climate patterns over the coming decades poses risks to prosperity, food security, and social development in the region, with most of its population already living under challenging climate conditions. The paper also discusses fiscal policy options to achieve Algeria’s climate goals. An analysis based on the joint IMF-World Bank Climate Policy Assessment Tool suggests that even partial elimination of existing energy subsidies would help Algeria achieve its greenhouse gases emission reduction goals, boost fiscal revenue, encourage the expansion of renewable energy, and generate considerable environmental and public health benefits. Those reforms would create fiscal space for priority budget spending including on targeted social transfers and investment in adaptation to climate change. Strengthening public finance management would enable Algeria to maximize the growth and green dividend of public spending.