Algeria presents the largest budget in its history for the year 2023.. Does it support the country's economy?

ALGIERS

- The Algerian government presented the largest budget in the country's history to the 407-member parliament, hoping to obtain $100 billion for 2023.

Since last October 24, the Finance Committee of the Algerian Parliament has begun discussing the Finance Bill 2023 submitted by Finance Minister Ibrahim Jamal Kassali, amid expectations that the draft will go down to public discussion sessions by the deputies of “The Dome of Zigoud Youssef” (the name of the second chamber). to the Algerian Parliament) during the next week.

Big budget

According to the text of Algeria's draft budget for 2023 - of which Al Jazeera Net obtained a copy - the Algerian government has allocated the largest budget since its independence - 6 decades ago - with a value of 13 billion and 918 million and 40 thousand Algerian dinars, (about $98.5 billion), an increase of 24.5 billion dollars for the 2022 budget ($74 billion) and $36.5 billion for the 2021 budget ($62 billion).

Not only was the value allocated to the budget huge, but the project carried a great “dose of optimism” through the indicators it presented and predicted for the next three years for the Algerian economy, unlike the past two years, while it was free of new taxes on consumer or energy materials.

In its budget, the Algerian government relied on a reference oil price estimated at $60 a barrel, $15 a barrel higher than the 2022 budget ($45), which means that Algeria’s budget remains dependent on oil rents, which this year benefits from the record rise in oil and gas prices in global markets as a result of the conflict. What is going on in Ukraine, according to analyzes of two Algerian experts who spoke to Al Jazeera Net.

Among the indicators presented by Ayman bin Abdul Rahman’s government budget for the year 2023, it expected a growth rate of 4.1%, compared to 3.3% to 3.8% in the 2022 budget. It also expected the growth rate to continue to rise in 2023 to 4.1% and 4.4% in 2024.

However, the inflation rate expected by the Algerian government for the next year was greater, at a rate of 5.1%, compared to 4.9% in the 2022 budget.

The figures contained in the draft budget showed a “historic” increase in the budget of the Ministry of Defense, which topped the rest of the sectors with $22.7 billion, then the Ministry of Finance with $22.4 billion, and the Interior by about $7.1 billion, while the education sector ranked fourth in the financial allocations for the year 2023, about $8.3 billion.

Also prominent was the increase in the budget of the Ministry of Labor and Employment to about $ 7.2 billion, and the text of the project attributed this to the creation of the unemployment grant approved by the Algerian President last February, estimated at about $ 85, from which 1.839 thousand benefit, according to a statement by the Minister of Labour, Employment and Social Security. Youssef balcony in front of parliamentarians, last Friday.

The health sector benefited from an additional budget of $4.2 billion in the 2023 draft budget.

The budget of the Ministry of Labor and Employment increased to about $7.2 billion (Algerian Press)

What is the relationship with oil prices?

The government of the Algerian president did not wait to raise questions about the relationship of the rise in oil and gas prices in global markets during 2022, which is the main financial resource for Algeria’s treasury, amid expectations that the country’s income from hydrocarbon revenues by the end of this year will reach 50 billion dollars, according to figures presented by Tawfiq Hakkar. Chairman and General Manager of the state oil company Sonatrach, last June.

The text of the project pointed out that the preparation of the budget came "in light of a national economic situation characterized by a marked improvement in the health situation, the enhancement of hydrocarbon revenues and the consolidation of the main macroeconomic aggregates."

On the other hand, he acknowledged the negative impact of the ongoing geopolitical tensions on the global prices of raw materials, especially food prices, highlighting (the project) that this requires an increasingly important intervention by the state.

Mr. Abu Bakr Salam, the financial expert, indicated - in a statement to Al Jazeera Net - that the resources necessary to cover the large increase in public expenditures in Algeria are mainly due to the country benefiting from the significant rise in fuel prices, which he also said that "the treasury generates a large part of fiscal income and supports Exchange reserves to cover import needs.

But he saw - on the other hand - that this situation may "be vulnerable to tremors at any time", considering that this prompted the Algerian government to develop a plan to raise the level of participation in exports outside hydrocarbons from year to year to make the Algerian economy, including Algeria's income, diversified, to gradually exit from the rentier nature of income The country to the diverse character.

The financial expert believes that the budget proposed by the Algerian government for the year 2023 comes in the context of “other efforts related to diversifying and strengthening exports and raising tax incomes with a quick and strong push for investment,” and he expected that this would “positively” affect the general living situation of Algerians, while providing a better environment for the activity of institutions. And its spread, especially after tightening the screws on corruption and the bad phenomena of monopoly, speculation, transfer of privileges, tax evasion and others.

The Algerian government relied in its budget on a reference price of oil, estimated at $60 a barrel (Reuters)

Reasons for the increase in the budget

Abu Bakr Salam believes that among the reasons behind Algeria's monitoring of the largest budget in its history is the expenditures of social support, which represents a large part of the state's expenditures pending the gradual transition from comprehensive support to targeted support, in addition to the expenses of accompanying the small and emerging enterprises that Algeria is betting on. To build a base network and a strong institutional fabric to support small, medium and large enterprises, especially in the field of handling, digital economy and informatics.

On the other hand, economist Jaloul Salameh presented another analytical reading of Algeria's expected huge budget for 2023, the conclusion of which was that the next budget came to fortify the purchasing power of Algerians.

In an interview with Al Jazeera Net, he explained that this huge budget compared to the size of the Algerian economy is "semi-regular", citing the growth rates since 2020, the year that witnessed an economic stagnation due to the Corona pandemic.

He believes that Algeria's general budget "has been living in an accumulated deficit since almost 2017," and compared the next draft budget with what he said was a report by the International Fund, "in which he claimed that Algeria needs the price of a barrel of oil at $150, in order to be able to build a balance in its budget."

Salama points out that the reasons for the rise in Algeria’s budget for 2023 are primarily due to social determinants, and he said that this budget was expected and natural and indicates a return to the previous consumption pattern before the pandemic, as well as a return to the Algerian state document related to social transfers (social support), where The difference in food and energy prices in general has also become very costly and has risen a lot in the government’s balance, and its choice to stabilize prices so that the economy does not collapse, especially in order to preserve the purchasing power of Algerians, which is weak - originally - compared with developing countries.

Salameh also believes that Algeria's budget for 2023 is a "political decision" aimed at confronting the high prices of imported materials in global markets, as well as not imposing new taxes that affect workers' wages.