Algeria Approves Its Largest-Ever Budget: $135 Billion for 2026 Amid Ambitious Economic Plans

Algiers – EcoPulse24

In December 2025, Algerian President Abdelmadjid Tebboune signed off on the country’s largest budget in history, allocating $135 billion for 2026. This marks a sharp increase from $128 billion in 2025 and a dramatic jump from $113 billion in 2024, signaling the government’s commitment to public spending and economic diversification.

Key Highlights:
- Economic growth is projected at 4.1% in 2026, rising to 4.4% in 2027 and 4.5% in 2028, based on a reference oil price of $60 per barrel, despite a 2% expected drop in hydrocarbon exports.
- Algeria’s GDP is forecast at $322 billion in 2026 and $308 billion in 2027.
- Over a third of the budget goes to public sector wages (5.9 trillion dinars), with increased allocations for social programs and direct subsidies.
- Capital investment exceeds $31 billion, with $50 billion earmarked for major infrastructure projects, including railways in remote areas, desalination plants, and renewable energy initiatives.
- Defense spending is set at a record $24.6–27 billion, about 20% of total government expenditure, making it the largest defense budget in the Maghreb region.
- Debt servicing will total $20 billion ($10 billion each for external and domestic debt).

Fiscal Deficit:
Despite substantial hydrocarbon revenues, Algeria anticipates a budget deficit of 5.2 trillion dinars ($40 billion, 12.4% of GDP) in 2026, following a $61 billion deficit (21% of GDP) in 2025. This stems from sustained high spending on social and infrastructure programs amid declining global natural gas prices.

Tax Reforms and Economic Incentives:
The budget introduces temporary tax exemptions on select essential imports, reduced taxes on dividends, and incentives for investment-related imports and startups. Measures against tax evasion, anti-corruption initiatives, and streamlined tax procedures are also included, alongside adjustments to fuel and luxury goods taxes and stricter rules on foreign currency declarations.

Informal Economy:
The informal sector is estimated at $50–60 billion (about a quarter of GDP). The budget aims to integrate this sector by regulating small undeclared importers, tightening customs controls, and enacting new settlement laws.

Strategic Projects and Partnerships:
Major international partnerships include $3.5 billion in Qatari investments in dairy and food, $6 billion from Turkey in textiles, mining, and other sectors, and Italian ventures in automotive and agriculture. Algeria continues to export gas to Europe and invest in renewable energy and the SouthH2 hydrogen corridor.

Entrepreneurship and Youth:
Startup numbers have risen from 200 in 2019 to 700 in 2024, with nearly $1 billion in funding. The government aims for 20,000 startups by the end of Tebboune’s term, supported by legislative reforms, preferential tax regimes, and simplified online business registration.

Ongoing Challenges:
- Hydrocarbons still account for 96% of exports and over 60% of government revenue. FX reserves have fallen from $200 billion a decade ago to $72 billion in 2024.
- Inflation is expected to reach 5.5% in 2025, with food prices particularly affected.
- Unemployment remains high: 12.3% overall, 21.5% for women, and 31.3% for youth (15–24).
- Public debt is projected to reach 53.9% of GDP by 2026, although it has declined from 62.1% in 2021.

Regional and International Context:
Algeria faces diplomatic tensions with France, Morocco, and Sahel countries, while strengthening ties with Europe (as a key gas supplier), the US, China, Russia, Turkey, and Qatar.

Outlook:
The 2026 budget reflects Algeria’s ambition to diversify income, create jobs, upgrade infrastructure, and attract foreign investment. However, success hinges on managing the large deficit, navigating bureaucratic obstacles, and maintaining geopolitical balance amid ongoing economic and demographic pressures.