Global: Algeria – Public Finance, Public Debt, Balance of Payment and Money Supply

Global Investment House - Egypt - Algeria Economic & Strategic Outlook – Public Finance December 2008- In 2008, the government surplus is expected to represent 14.3% of GDP, reaching AD1,694.5bn, implying a remarkable growth rate of 61.0% over 2007. This is attributable to the expected boost in revenues by 34.0%, compared to a 23.6% rise in expenses. The revenues’ acceleration is spurred by the 35.5% expected surge in hydrocarbons proceeds, reaching AD4,029.0bn. Meanwhile, the African Development Bank (AfDB) and the Organization for Economic Co-operation and Development (OECD) estimated that the fiscal surplus would reach AD1,052.5bn in 2007, decreasing by 11.3%, compared to 2006, and representing 11.4% of GDP. The reason behind such decline is attributed to the slowdown of government revenues, as they were estimated to grow at 4.5% y-o-y, compared to a growth rate of 12.2% in expenses. Such slowdown resulted from the lower increase in the proceeds generated from hydrocarbons, as they rose by only 6.2% in 2007, compared to a growth rate of 19.0% in the previous year.

Government Finances

* Excluding privatization receipts, classified under nonbank financing

**Including dividends on current profits paid by Sonatrach

***Due to lack of available data in 2007 and 2008, these items represent the difference between totals and available data

****This item covers expenditures for public services, food subsidies, agricultural price support, and cash transfers for the poor

*****Including special accounts, net lending and operations of the Rehabilitation Fund

Source: IMF, AfDB, OECD and Global Research

The total public debt provisional figure represents 18% of GDP in 2007, that is approximately US$24.2bn, implying a y-o-y decline of 17.1%. Algeria was successful in dropping its total government debt, between 2003 and 2007, at a CAGR of 8.5%, mainly through the decline of its external debt.

Public Debt

*Estimated

Source: IMF, AfDB, CIA World Factbook and Global Research

Preliminary results of June 2008 indicate that the current account surplus was ameliorated by 68.0% y-o-y, reaching US$22.3bn in June 2008, compared to US$13.3bn in June 2007. This was a result of many factors. Exports rose by 61.6%, compensating for the 81.8% jump in imports, leading to an acceleration of 45.2% in the trade balance, as it rose from US$15.2bn in June 2007 to US$22.0bn in June 2008. Meanwhile, the deficit in the services and income account dropped by 61.0%, reaching US$1.1bn, compared to US$2.8bn the previous year. Also, the transfers account was ameliorated by 54.0%, reaching US$1.3bn. The amelioration of the current account balance has offset the increase in the capital account deficit, which became US$2.5bn, up from US$0.7bn, and led to an enhancement in the overall balance of the balance of payment by 57.1% over the same period, as it reached US$19.8bn, up from US$12.6bn.

Balance of Payment

*Provisional

Source: IMF and Banque d’Algerie

Concerning liquidity, over the period from June 2007 to June 2008, domestic liquidity (M2) in Algeria grew by 22.1%, reaching AD6,602.1bn, which was mainly a result of the 27.5% rise in Money Supply (M1), amounting to AD4,732.7bn, compared to AD3,712.2bn in June 2007. In addition, Quasi money accelerated by 10.4% over the same period, reaching AD1,869.3bn. Net foreign assets witnessed a y-o-y increase of 29.1%, as they stood at AD8,290.4bn, a higher balance than that of domestic liquidity, indicating that these assets are a principal source of funds for the country.

Money Supply