AlgeriaThe Algerian government is preparing to implement the largest financial budget in the country’s history, following its recent approval by the Council of Ministers, headed by Abdelmadjid Tebboune, which aims mainly to improve the living situation and encourage investment.
The overall indicators of the 2025 draft finance law reveal the allocation of public expenditures of approximately 16.8 trillion dinars ($126 billion), an increase of 9.9% over the 2024 budget.
Within this unprecedented financial envelope, the government decided to pump an additional 600 billion dinars ($4.5 billion) into the wage pool to cover the burdens of salary increases in a group of sectors and new job positions, while its total size represents 5.34 trillion dinars ($40 billion), or 34% of the total. State budget.
Among the striking numbers, we note the continued increase in funds directed to social transfers (price supports and grants to vulnerable groups and those with rights), reaching 5.9 trillion dinars ($44 billion), which represents 36% of the general budget.
In this context, the government expects to record a deficit level of 8.3 trillion dinars ($62 billion), which is roughly equivalent to the expected revenues of 8.5 trillion dinars ($64 billion).
Meanwhile, the authorities are betting on economic growth of 4.5%, with the gross domestic product reaching $278.71 billion next year, in light of commodity exports amounting to $50.90 billion and the exchange reserve rising to $72.95 billion.
Measures to support purchasing power
In a presentation before Parliament, the Minister of Finance, Laziz Fayed, announced the creation of nearly 100,000 job positions during 2025.
The Minister also revealed, within the framework of measures to support purchasing power, that “the treasury will guarantee the interest during the postponement period and reduce the interest rate on loans granted by public banks by 100%, to complete housing with various roads and networks.”
According to the Minister’s proposal, the Finance Project included extending the license granted to banks to grant consumer loans to families for the purpose of purchasing goods, to include granting consumer loans for the purchase of services (such as health, travel, etc.).
The government also exempted imports of frozen white meat from the value-added tax, while extending the temporary exemption from the same tax on the sale of dry legumes and rice, imported or produced nationally, fresh fruits and vegetables, consumer eggs, and locally produced broilers and turkeys.
Implementing electoral obligations
In an interpretive reading of the numbers, Professor Gadi Abdel Majeed, Director of the Globalization and Economic Policies Laboratory at the University of Algiers 03, said that the 2025 Finance Law comes in a distinct political and economic context.
Qaddi explained to Al Jazeera Net that President Tebboune has established the financial framework to implement his electoral commitments for the second term, in parallel with the preparation to announce a new government that will present its plan of action.
From an economic standpoint, the speaker believes that a growth level of 4.3% is considered one of the best rates on the African continent, with inflation falling to 4.9%, in addition to a surplus in the trade balance and balance of payments.
The expert stressed that allocating 19% of public expenditures to direct investment is a positive element in the 2025 budget.
He pointed to the authorities’ focus on the basic structures of major agricultural agricultural projects in the south, with the expansion of rural electricity in 14 governorates and the rehabilitation of the Green Dam and drinking and industrial water distribution networks, in addition to desalination projects.
The budget also included, adds the analyst, incentive measures for productive activity, the promotion of the knowledge economy and the energy transition, including raising the social capital of the National Investment Fund, and extending the reduction of taxes on income and profits by 50% for the benefit of institutions and individuals working in the Greater South, while continuing the exemption from taxes on companies. Incubator for two years.
The financial expert valued the reduction of 30% of the accounting profit within the limits of 200 million dinars for expenses related to research and development in institutions, with exemption from taxes on income and profits for sovereign sukuk products for a period of 5 years.
There is another positive element in the 2025 general budget, which is the increase in employee expenditures by reviewing the wage network and the compensation system for employees of higher education, education, health and religious affairs, which are sectors closely related to human development and constitute the largest component of the middle class, which makes their spending an essential driver of economic growth. As he put it.
However, the financial analyst stops at the “major imbalance” in the rise in transfer expenses with the justification of preserving the purchasing power of the citizen and stabilizing the prices of essential materials (grains, milk, energy, desalinated water, oil, sugar). Expert Qaddi considers the method of implementing a large portion of these expenditures inappropriate, because they are based on subsidizing prices, which is “a method that has shown its unfairness and encouragement of waste and extravagance, which makes reforming the subsidy system one of the government’s priorities.”
New financing tools
On the other hand, Professor Saleh Salehi, Director of the Partnership and Investment Laboratory at the University of Setif 1, explained that the draft tripartite budget plan for the years 2025-2027 is based on a deficit financing policy.
Accordingly, Salehi told Al Jazeera Net that the current stage calls for a gradual transition from debt-based financing methods associated with inflationary financing and loan financing, to new financing tools based on ownership and the real economy, and attracting parallel savings.
In this context, the expert mentioned financing through sovereign and corporate sukuks, to support real investments from outside the state’s general budget, by mobilizing an important part of the parallel market’s resources.
He pointed out the importance of attracting a share of the volume of Islamic investment sukuks in regional and international markets, as “their value exceeded $850 billion in 2023, and they are diversified in activities and linked to the real economy.”
The analyst also suggests financing by attracting the resources of Islamic investment funds in the international market, which is close to $300 billion, as well as investment funds based on bringing local financial resources into the official market and the parallel market.
The speaker proposes investment through “third sector” resources, by activating the role of the National Bureau of Endowments and Zakat Foundation, which is not less than $20 billion in the short term, noting that the draft finance law has encouraged it with the new exemption, contained in Article 189, for endowment properties. From all taxes, rights and fees.
Professor Salehi focuses on developing state property revenues through Islamic financing formulas, especially those linked to the concession system on agricultural lands and replacing it with sharecropping contracts with the actual farmer.
He alerts the authorities to the use of farm bonds to finance the agricultural seasons related to the crops produced, as the state deducts its share from the source when the crops are delivered to the National Grains Office.
The expert expects that this will increase the state’s income from agricultural activity by more than 30 times, enabling it to be recycled into aid to the agricultural sector from outside the general budget and reducing the cost of investment.
The analyst concludes his proposals by emphasizing the investment movement of financial resources in social security institutions, insurance funds, and private treasury accounts, to invest in short-term financing tools, to finance the state’s needs and purchases, through short-term Murabaha sukuk, or Istisna’ sukuk, and other products.
