Algeria has passed a budget for 2003 which projects total revenues of AD1,451bn ($18.19bn) and total expenditure of AD1,711bn ($21.44bn) with a resultant deficit of AD259.7bn ($3.25bn). Revenue and expenditure projections see a rise across the board compared to last year’s budget figures, except for petroleum revenues which are forecast to fall to AD836bn ($10.5bn) – the 2002 budget was based on an oil price assumption of $22/B while the 2003 budget is based on a price of only $19/B (MEES, 16 September 2002). The projected fall in petroleum revenue also brings about a marginal decline in total revenues compared to last year’s budget. Closed accounts for the 2002 budget are not available, but according to MEES estimates the actual average oil price achieved in 2002 was $24.40/B, boosting oil revenues above 2002 budget projections. The outlook for oil revenues for 2003 also seems set to outperform budget forecasts, according to JP Morgan, which notes that Algeria’s benchmark crude Saharan Blend has averaged $32.50/B so far this year after averaging $24.90/B in 2002. While these high prices are not expected to be maintained for the majority of 2003, external and fiscal accounts are expected to produce results well above budget forecasts.

As noted in the IMF’s 2002 Article IV consultations with Algeria, the fiscal stimulus represented by the 2003 and recent budgets forms part of the country’s Economic Recovery Plan (ERP) for 2001-04. This period has seen budgeted real expenditure increase sharply, with nominal expenditure rising steeply while inflation measured by the consumer price index has remained below 5% since 1998. From a level of AD1,252bn ($16.39bn) in 2001 (MEES, 12 March 2001), budgeted expenditure rose to AD1,560bn ($20.21bn) in 2002 (MEES, 4 March 2002) and up to the projected AD1,711bn ($21.44bn) for this year’s budget – a rise of almost 37% between 2001 and 2003, although this does not take account of figures for closed accounts. Over the same period, revenue has increased from AD1,234bn ($15.5bn) in 2001 to AD1,451 ($18.2bn) in 2003, a rise of 17.6%. However, it is worth noting that despite projected deficits of some AD220bn ($3.17bn) and AD17.4bn ($228mn) in 2000 and 2001 respectively, the realized budget balance (according to IMF figures) came to a surplus of 9.8% and 3.4% of GDP respectively, due in large part to higher than expected oil revenues.

Algerian Budgets: 2001-03

(AD’000s)

Source: Algeria’s Official Gazette , No 86, 25 December 2002.

The Algerian economy has posted reasonable but unremarkable growth of around 2-3% since 1999, according to IMF figures, but unemployment remains a chronic problem with levels hovering at just below the 30% mark. Algeria’s Economic Recovery Plan (ERP) is a capital expenditure program to disburse a total of AD525bn ($6.58bn) over the 2001-04 period, in addition to regularly budgeted capital outlays, with the aim of boosting aggregate demand; encouraging labor-intensive activities through increased support to agricultural production and small and medium-sized enterprises; rehabilitating public infrastructure; and developing human resources. With the relatively stable macroeconomic position of the Algerian economy noted by the IMF, including a controlled inflation rate, a healthy balance of payments position (the current account balance stood at 12.9% of GDP in 2001), and an improvement in external debt indicators (down from over 60% of GDP in the 1990s under 40% at the end of 2002), the ERP is seen as a way of boosting struggling sectors of the economy such as agriculture and employment. According to the IMF, “available information shows that project implementation in these areas has been brisk in the first half of 2002.” However, as the IMF also noted, fiscal stimulus and the ERP are no substitute for fundamental structural reforms.

© Copyright MEES 2003.