Algeria Runs 12.4% Deficit in Record $136bn Budget
Algeria has approved a historic $135.6 billion budget for 2026 that funds a $25 billion military expansion and vast welfare spending, offering short-term demand upside but leaving the economy acutely exposed to energy price shocks.
Algeria has approved a record DZD 17,636 billion ($135.6 billion) budget for 2026, combining a $25 billion military expansion with extensive welfare outlays. Signed by President Abdelmadjid Tebboune on October 5, the finance law results in a projected fiscal deficit of 12.4% of GDP.
State revenues are forecast at only $61.6 billion, creating an effective shortfall of roughly $40 billion. The government intends to finance this massive gap almost entirely through hydrocarbon tax receipts, projected at $20.7 billion, bolstered by Algeria's role as a key gas supplier to Italy and Spain.
For international investors, the budget presents a bifurcated risk profile. Heavy state outlays are projected to drive domestic GDP growth to around 5% in 2026, generating immediate demand for defence, security, and public-sector supply chains. However, the structural reliance on energy revenues leaves the macroeconomic outlook highly vulnerable to any correction in global oil and gas prices.
The spending plan highlights the slow pace of economic diversification outside the oil and gas sector. While military allocations have grown at an annual rate of 16% over the past decade to outpace regional rival Morocco, capital directed toward future non-hydrocarbon revenue streams remains minimal. The state has earmarked just $1.03 billion for energy and renewables, alongside $6.8 billion for agriculture.
The fiscal math is further complicated by rigid current expenditure. The public-sector wage bill consumes $44.5 billion, representing roughly a third of total spending. Direct social transfers add another $21.1 billion, subsidising essential goods and supporting over 2.18 million unemployed citizens, leaving no margin for error if global energy markets decline.
President Tebboune has instructed his government to avoid new taxes and instead narrow the deficit by fighting evasion. For foreign corporations operating in Algeria, this directive signals a likely increase in audit frequency and stricter enforcement of existing fiscal obligations as the state attempts to balance its books.
