Legislative reforms expected to enhance Algeria's budget planning

One of the most important budgetary reforms to be introduced in Algeria in recent years was the promulgation of the Organic Finance Law on Finance Laws in August 2018. Annual finance laws from 2021 will be prepared under procedures and parameters set out in the new Organic Law. Requiring several years before it is fully implemented, the legislation represents the first such fundamental change to the budgetary process since the 1985 Organic Law was implemented. While this is essentially an exercise in legislative housekeeping, it is expected to lead to important long-term improvements in how the budget is planned, structured and delivered.

Multi-year Advantage

The new Organic Finance Law relative to Finance Laws heralds two instrumental changes to the budget process: expenditure will be planned around specific programmes rather than ministries, as was previously the case; and income and expenditure will be set out on a multi-year basis. The organisation of spending on programmes should better align expenditure with policy objectives and outcomes, thereby improving flexibility and accountability. This new structure will also facilitate mid-year restructuring of government ministries and agencies, which has been difficult under the current structure of the annual budget laws.

The move towards multi-annual budgeting should provide greater predictability, not only for government agencies, but also for the private sector, by allowing them to extend the horizon of their tax planning and have better visibility of future revenue streams. Short-term government budgeting has been a source of constant frustration, particularly for foreign firms operating in the country; now, according to Article 5 of the new law, the medium-term budgetary framework will publish, during the preparation stages, a forecast of government receipts, expenditures, balance and debt for the year being budgeted as well as the two following years. The multi-annual budget can then be updated during the annual budgetary process as new information becomes available. In addition, under Article 36 of the new law, up to 5% of unspent capital funding allocation can be carried forward to the subsequent budgetary period upon joint approval by the minister of finance and relevant department minister. Transfers of spending allocations between programmes will also be possible, albeit requiring a presidential decree.

A further degree of flexibility is to be introduced in cases of extreme urgency. Under Article 27 the government will be permitted to make appropriations above and beyond those foreseen in the annual budget law, up to a limit of 3% of total budgeted spending, so long as this is ratified by the Parliament in the next annual budget law.

Innovation

To facilitate implementation of the new budgetary regime, a new programme commissioner is to be appointed for ministries and state-owned enterprises, which will be tasked with structuring the budget around programmes, sub-programmes and actions through the integration of operational and capital budgets under a single account. In another move likely to improve accountability, the Court of Accounts will be required in the future not only to report on fiscal outturns each year, but also to formally endorse the state accounts.

Implementation

While the Organic Finance Law relative to Finance Laws is a welcome development in the budgeting process, its impact will not be felt for some time since the new regime will be phased in gradually over a number of years, beginning with the 2021 budget. The Organic Law will mostly come into full effect for the budget years 2023, 2024 and 2025, albeit prepared on the basis of the fiscal out-turn in the year prior to the budget’s preparation. From budget year 2026 onwards the new regime will be in full force and prepared on the basis of the fiscal outturn of the year prior to the budget year.

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The Report: Algeria 2018

Economy chapter from The Report: Algeria 2018

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