Algerian Budget Deficit faced dangerous increase since 2010

Statistics by the Finance Ministry show that the Fund of Setting Resources recorded a high level of deduction in 2012, to pay off the budget deficit, which was estimated at the equivalent of 22.8 billion euros, which is the highest deduction rate since the establishment of the fund in 2000, up from 17.61 billion Euros in 2011.

Budget deficit noticed a significant increase since 2010 due to the application of countervailing systems, the basic laws and the expansion of public expenditure, as the overall deficit of the Treasury reached 25% compared to the Gross Domestic Product (GDP).

Fund of Setting Resources is expected to decline during the current year as a result of the low rate of oil prices in the global markets and the exported quantities, as well as the large decline in the trade balance surplus of Algeria that was recorded during the first 10 months of the current year.

Given the funding of more than 65% of the five-year programs in hard currency, the decline will not only include resources of the fund, but it will extend to Algeria reserves of hard currency, which amounted to 189 billion dollars by mid-2014, marking the first negative growth since about 10 years.

Algeria reserves of hard currency will decline because Algeria is resorting to import the raw materials that go into the implementation of the five-years program as well as importing means of achievement, labor and technical studies that accompany projects and even pay interests of foreign companies which are operating in Algeria, given the limited exports outside the hydrocarbon sector and total dependence on one source for currency which is oil.

The fund, which was established in 2000 based on the difference between the petroleum collection under the budget, and that is determined on the basis of $ 37 a barrel and the price of the real collection which is recorded for sales of petroleum, and which is calculated based on the average price of oil in international markets.

Total fund balance of last year reached, after the settlement of the budget deficit, 56.3 billion Euros compared with 53.8 billion Euros at end of 2011.

External public debt of Algeria was paid in advance in 2007 thanks to the resources of the Fund, and then the nature of the fund has been transformed and becomes used only to ensure the financing of public investment programs and financing the budget deficit which is worsening from year to year.

Government faced critics asking it to adopt a real budget and stop adopting theoretical and real price in the petroleum collection for more transparency in the conduct of public spending, and reducing the suspicions that hover about the conduct of public money which is marked by the presence of more than 70 special funds. 

Experts and Judges of the Accounting Council criticized this policy despite the fact that their decisions are not binding on the government.

In its latest report on law concerning the settlement of the budget for 2011, the council criticized the weakness of the control on accounts and the absence of strong internal control of mechanisms. 

In theory, the fund is available on financial capacities to cover the budget deficit until 2016 to ensure the completion of the five-year programs in the pace of the current spending.