The Algerian Parliament has approved the year 2001 budget with a projected total expenditure of AD1,251.79bn ($16.39bn), estimated revenues of AD1,234.38bn ($16.16bn) and a resultant deficit of AD17.41bn ($228mn – see Table below). This represents a 92% drop in the revenue shortfall when compared with the year 2000 deficit figure of AD226.7bn ($2.97bn). According to figures published in the Official Gazette on 24 December 2000, 59.3% of the government’s income is projected to come from oil export revenue, which is estimated at AD732.00bn ($9.58bn), up 39.7% from the previous year. (The budget is based on an oil price assumption of $19/B, the same as the preceding year following an upward revision – MEES, 24 April 2000). Fiscal revenue, including direct taxes (AD93.9bn – $1.23bn), stamped duties (AD17.8bn – $233mn), various fees from business transactions (AD201.41bn – $2.64bn), indirect taxes (AD600mn – $7.86mn) and customs duties (AD97.67bn – $1.27bn), is set to be the second largest earner for the government and is estimated at AD411.38bn ($5.38bn) for the year.

Total spending is expected to fall by 0.3% compared to the previous year, reflecting a more conservative fiscal policy that aims to improve the county’s main macro-economic indicators as well as GDP growth (MEES, 13 November 2000). The government plans to spend AD836.29bn ($10.95bn) on ministerial expenditure, with the bulk of this going to national defense (AD149.46bn – $1.96bn), national education (AD137.41bn – $1.79bn) and health services (AD38.32bn – $502mn). Total capital expenditure has been estimated at (AD415.5bn – $5.4bn), an increase of 43.16% from last year, with the majority going to housing (AD86.4bn – $1.13bn), basic economic and administrative utilities (AD83.87bn – $1.1bn) and farming and irrigation (AD56.77bn – $7,434mn).

Algerian Budget

AD (000s)

Source: Algeria’s Official Gazette , No. 80, 24 December 2000.

The significant increase in capital expenditure is part of the government’s policy of stimulating economic growth through reform and investment. According to the Central Bank of Algeria (CBA) Governor 'Abd al-Wahab Keramane, there has been too little investment in the agriculture and industrial sectors, and this meant that the GDP growth rate has been insufficient to create enough jobs to absorb the number of annual entrants into the labor force (MEES, 13 November 2000). GDP grew by 3.8% in 2000, compared to 3.2% in 1999 and 5% in 1998. But according to a Merrill Lynch report, a 3.8% GDP growth rate is 2-3% lower than necessary if the 28% unemployment rate is to be addressed. The National Economic and Social Council attributes the slowdown to the state of companies’ financial health and a large increase in the country’s national debt (MEES, 24 April 2000).

In particular, the state of the financial sector in Algeria has been a source of government concern and in the latest budget a total of AD10.00bn ($130mn) has been allocated for the recapitalization of the banks. According to local sources, Algeria’s publicly owned commercial banks face considerable structural problems – a view supported by Merrill Lynch in a recent Emerging Markets Daily (MEES, 12 February). The 1990 Currency and Credit Act, passed under reform-minded Prime Minister Mouloud Hamrouche, did bring about slight improvements, but Algeria still lacks a positive banking environment and the government has been slow to initiate steps toward privatization (MEES, 23 October 2000).

This could change if recent commitments made by the Algerian Minister of Privatization come to fruition. Mr Hamid Temmar has announced that two financial institutions, Credit Populaire d’Algerie and Compagne Nationale d’Assurances et Reassurances, will be privatized shortly (MEES, 12 February). Such moves, however, are likely to face opposition from entrenched political interests and the country’s unions, which have already threatened to strike if the government starts to privatize. Underlining this challenge, the Director of Cooperation and Investment at Algeria’s Ministry of Participation and Reform Coordination said the ministry was not yet ready to start the privatization of Algeria’s state-owned banks (MEES, 15 January).

© Copyright MEES 2004.