After almost 10 years of austerity, is the Algerian government returning to generosity? The measures taken in 2022 and the figures contained in the Amending Finance Law for 2023 suggest this.
After several years of austerity dictated by the fall in oil prices from 2014 and the erosion of foreign exchange reserves, the government is starting to spend again, particularly on salaries and social transfers, but also on major infrastructure projects.
Already in 2022, thanks to the improvement in the main economic indicators, driven by the increase in revenues from hydrocarbon exports (nearly 60 billion dollars, the highest level in several years), the government has taken out the checkbook to finance, among others, increase in salaries and pensions, unemployment benefit and maintenance of subsidies for the main basic food products.
Pending the real growth of other sectors, oil prices and their impact on state budgetary revenues and foreign exchange reserves remain the sole factor determining state social policy.
In the hard years of low-price oil, there was even talk of revising the system of public subsidies. Today, we no longer talk about it.
And, it seems, it is even better forecasts for the hydrocarbon industry that have enabled the development of a supplementary finance law, more “ optimistic ” and more “ generous ” than the initial finance law for this exercise.
In its draft Amended Finance Law 2023, the government revised the forecast revenues from oil and gas exports, brought to 47.5 billion dollars compared to 38.8 billion in the current Finance Act. He explains that he took into account Sonatrach’s optimistic forecasts.
In 2022, the 60 billion in oil and gas exports (compared to 34 billion in 2021 and 22 billion in 2020) had already generated a sharp increase in operating expenses and the explosion in current transfers (+98%), at because of the social measures decided by the President of the Republic, including the reduction of the IRG for low incomes, wage increases, the institution of unemployment benefit and continued support for the prices of basic products, energy and water.
The year 2022 was the year of the return of financial improvement and the improvement of macroeconomic indicators for Algeria.
In addition to the oil kitty, foreign exchange reserves closed the year at 61 billion dollars and the trade balance showed a surplus of more than 26 billion dollars and more than 18 billion for that of payments. Non-hydrocarbon exports also saw a sharp increase to nearly $7 billion.
Social transfers and infrastructure in Algeria: the government takes out the checkbook
For this 2023 financial year, expenses should be even more substantial. Overall spending is expected to increase by nearly 1,000 billion dinars compared to the initial Finance Law (from 13,700 to 14,700 billion).
The development of a supplementary finance law is intended to take charge of the additional expenditure induced by the decisions of the public authorities, most of which are of a social nature, such as the continuation of the progressive increase in the salaries of civil servants, the increase grain storage capacities, the revaluation of the solidarity bonus (AFS) for the benefit of disabled people, the improvement of the supply of drinking water, the strengthening of certain public works projects, the Covid bonus for nursing staff, the payment of charges induced by international arbitrations…
There is also the consolidation of the debts of the OAIC (Cereal Office) for 155.5 billion dinars and public EPICs, support for the National Milk Office (ONIL), strengthening of school canteens with the support for the catering of primary school students from the start of the 2023-2024 school year for more than 5 billion dinars, compensation for sugar and oil producers (35 billion dinars), support for fertilizers, revaluation of mujahideen pensions, compensation for research professors, support for the recruitment of 4,800 doctorate holders, the Ramadan solidarity bonus, etc.
In the draft Amending Finance Law 2023, it is also provided for the application of customs duties at a reduced rate (5%) on meat import operations (instead of 30%) and the extension of compensation for importers of crude soybean oils.
For staff expenses, the increase established by the LFC is more than 93 billion dinars or +2.6%. The government is talking about a possible revision of the specific statuses of civil servants in certain sectors.
Investment spending also increases significantly, by more than 591 billion dinars (more than 27% compared to the 2023 FL).
The main projects that will be supported are the Béchar – Tindouf railway line, the extension of the port of Annaba for 17 billion dinars, a large water transfer to Béchar, sections of the Trans-Saharan road, the securing the southern borders, AEP projects across several wilayas, the creation of the Algiers media city, etc.
For the Béchar – Tindouf railway line which is intended to transport iron ore from the Gara Djebilet deposit, the government proposes to mobilize an envelope of 430 billion dinars for the construction of a first section of 575 km.
In addition, the government reserves nearly a billion dinars to support the organization of CHAN 2022 which took place in Algeria last January.
