Overview
  • Algeria's debt burden has increased steadily since the 1970s due to the world financial crisis and lower oil prices in the late 1990s. In 1995, Algeria signed a three-year program for debt rescheduling with the International Monetary Fund (IMF), and rescheduled $13 billion of debt with the Paris Club. These programs resulted in an improved balance of trade, lowered government expenditures, and a government surplus. The government did not renew its programs with the IMF in 1998, saddling the economy with a total debt in 1998 that amounted to $31 million, and capital expenditures reaching almost 10% of the GDP.
  • ​Trade surpluses in the early 2000s led to improvements in Algeria's level of foreign debt. The stock of debt was reduced to $22.5 billion, or 43% of GDP, by the end of 2001. However, a reduction in oil revenues and increased domestic spending in 2001–02 led to a budget deficit in 2002. The government adopted afiscal stimulus plan covering the period 2001–04. In 2002, Algeria entered into an Association Agreement with the European Union (EU). Continuing privatization and economic and trade liberalization have been key structural reforms. Terrorism has hindered foreign investment in recent years[1].
  • In the years leading up to the global financial crisis, Algeria repaid most of its debt and accumulated large fiscal savings, mainly thanks to rising oil prices. Since the crisis, debt levels have remained low, but fiscal savings have been nearly depleted to finance consecutive fiscal deficits. The increase in public spending in the wake of the Arab Spring and more recently the collapse in oil prices have exacerbated the country’s fiscal position and prompted the government to begin undertaking fiscal consolidation in 2016. To meet large financing needs over the medium term, the government will need to increase domestic debt issuance and likely resort to external financing. Under the baseline scenario that assumes steady and sustained fiscal consolidation over the medium term, debt levels are projected to remain at manageable levels. Stress tests, however, suggest that financing needs pose risks.
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External Debt
  • External debt has continued to decline while domestic debt has started to increase. Algeria has not borrowed externally since it received its last disbursement from the IMF in 1999. Remaining external debt is mostly on concessional terms and owed to official bilateral creditors. At end-2015, public external debt represented less than 1 percent of GDP. Domestic debt increased from 7.2 percent of GDP in 2014 to 8.2 percent in 2015. Domestic debt consists of Treasury bills and bonds, as well as debt purchased from state-owned enterprises. About half of outstanding Treasury securities have maturities ranging from 5 to 15 years.[2]
source: IMF 2016 Report on Algeria 
Debt Levels Are Projected to Remain Manageable in The Baseline Scenario
  • The baseline scenario assumes steady fiscal consolidation over the projection period, with the nonhydrocarbon deficit declining from 37.8 percent of nonhydrocarbon GDP in 2015 to 22.3 percent in 2021. The largest single-year adjustment occurs in 2016, in line with the budget. Thereafter, current spending falls gradually (as a share of GDP), as the wage bill approaches pre-Arab Spring levels, capital spending falls back to 2006 levels, and nonhydrocarbon revenues increase modestly on the assumption of continued subsidy reform and improvements in tax administration.
  • The government is also assumed to benefit from a small rebound in hydrocarbon revenues due to further depreciation of the dinar and a gradual recovery in oil prices[2]. Nevertheless, gross financing needs are large, averaging 15.5 percent of GDP over the period. The government is assumed to draw from the FRR until savings fall to the statutory floor of 740 billion in 2016; thereafter, financing needs are met by domestic and external borrowing. In this scenario, the ratio of debt to GDP increases from 9.0 percent in 2015 to 43.3 percent in 2021.

[1] Nation Encyclopedia: Algeria
[2] IMF, 2016 Report on Algeria 

Algeria Public Sector Debt Sustainability Analysis (DSA) - Baseline Scenario (IMF 2016)