The Sustainability of the Algerian Debt: What Budgetary Trajectory?

Abstract

The Covide-19 pandemic and the accompanying drop in oil prices have plunged Algeria into an economic crisis of unprecedented magnitude. To this end, the public authorities have taken unprecedented budgetary measures which have resulted in the bursting of the public debt ratio. This paper examines the  sustainability of Algerian public debt. It first explains the notion of public debt sustainability and its implications for the conduct of fiscal policy. It then proves the unsustainability of the Algerian public debt at the threshold of 50% of GDP under the budgetary constraint of the State.

Finally, it suggests a sustainable fiscal trajectory from 2027 by respecting the proposed fiscal rule that sets the threshold of the public debt/GDP ratio at 80% with a maximum budget deficit tolerance of 4% per year.