In 2005, the International Monetary Fund (IMF) published the results of its most recent Report on the Observance of Standards and Codes (ROSC) to focus specifically on issues of fiscal policy transparency. The ROSC found that Algeria remains deficient in meeting the standards of fiscal transparency, even though several recent structural reforms have yielded some improvements. The IMF ROSC specifically cited the need to expand the amount of information communicated to the parliament and the public at large, to reform the legislative framework underlying fiscal policy and the budget process, and to improve the coverage and clarity of the annual draft budget document. The IMF also called for more regular and less restricted dissemination of information on budget execution and the state of public finances. The IMF's 2006 Article IV Consultation notes that Algeria is currently preparing to undertake significant steps to modernize the budget management process and strengthen fiscal governance. It had drafted (but not yet passed) its first organic law on public finances. Modernization of its accounting procedures and standards will also help improve fiscal transparency. Algeria participates in neither the IMF Special Data Dissemination Standard nor the IMF General Dissemination System, and does not produce advance release calendars announcing the upcoming publication of any of its data.

General Overview

In 2005, the International Monetary Fund (IMF) published a Report on the Observance of Standards and Codes (ROSC) that focused on Algeria's fiscal policy transparency. According to this report, Algeria began transitioning from a centrally planned economy to greater economic liberalization beginning in the late 1980s. In so doing, it instituted a series of "major structural reforms that have had a positive impact on transparency in the public sector and in public finance" (p. 26). Reforms were undertaken in the legal framework, tax regime, and the investment code, and new procurement legislation and a law governing competition were adopted. Algeria's reliance on quasi-fiscal activities was also reduced, primarily through the state's divestiture of its interests in the steel industry. At the time of the ROSC's publication, Algeria was exploring the possibility of entering into an association agreement with the European Union (EU). According to the ROSC, "these reforms have been accompanied by noticeably more robust macroeconomic stability and a stronger financial position of the Algerian government" (p. 26).

However, the ROSC found that there are yet many deficiencies remaining. For instance, data reporting, not only to parliament but also to the general public, remains inadequate. Even where existing law establishes transparency requirements, enforcement is lacking. Budget documents and their supplementary materials are "incomplete and sometimes difficult to understand" (p. 26). Much fiscal data, including information on the execution of the budget and the public finance situation, is restricted from public access. Statistics are often incomplete. For instance, "the budget and financial data available are essentially restricted to the central government budget, even though local governments, public institutions, and social security agencies account for a significant share of public expenditure and maintain sometimes complex financial relations with central government" (p. 26). Despite the state's divestiture of its steel-sector interests, it still participates in a significant number of quasi-fiscal activities. Finally, the IMF ROSC noted that the accounting system employed for fiscal data is faulty and there are inadequate accounting and audit procedures in place.

The IMF's 2006 Article IV Consultation (published in 2007) reported that Algeria was "poised to modernize budget management and strengthen fiscal governance" (p. 14). To this end, it has drafted an organic law on public finances and has developed a budget classification system that comports with the guidelines set forth in the Government Finance Statistics Manual. Attached to the 2006 Article IV report is a statement by Abbas Mirakhor, who holds the position of Executive Director for Algeria. In this statement, Director Mirakhor reported that efforts were ongoing to strengthen fiscal transparency. In addition to the new budget classification and draft law mentioned in the body of the IMF report, the Director added that he envisaged the adoption of a medium-term budget framework by the year 2009.

In the Statistical Issues appendix to the 2006 Article IV report, the IMF disclosed that Algeria's reporting of government finance statistics remains incomplete. The IMF reiterated a longstanding (since 2002) recommendation that the government designate a team with at least one economist to work specifically on the compilation of government finance data. It also suggested the creation of "an automated bridge table between the detailed monthly Treasury ledger (Balance générale), regularly produced by the latter, and the government finance statistics table (Situation Résumée des Opérations du Trésor--SROT) in order to ensure a more timely production of quarterly and monthly GFS, as well as a more timely report to the Fund of quarterly data that fully reconcile the SROT presentation of government finances with the budget presentation" (p. 35-36). The IMF also called for a reconsideration of the way that the Algerian Oil Stabilization Fund is presented in the accounts, suggesting that it would be better designated as revenue than as financing. Finally, the IMF called for greater detail in the presentation of government finance data.

Algeria has not made a formal commitment to the regular, broad dissemination system of fiscal data, according to the ROSC. It does not produce advance release calendars. Algeria does not subscribe to the IMF's Special Data Dissemination Standard (SDDS) or even to the less stringent General Data Dissemination System (GDDS). However, the 2007 IMF report asserted that, in February of 2006, Algeria announced its decision to participate in the GDDS. Yet, Algeria has not met GDDS subscription requirements. By law, the only disclosure of fiscal data required is contained in the annual budget and its associated documents. These documents include a review of the budget for the third year prior to the current budget year, which is intended to permit an assessment of budget outcomes. Even this requirement, however, is unobserved. The Summary Statement of Treasury Operations is circulated within the government but not disseminated publicly. There is no published data on local government and public institution fiscal data.

The Principles

Clarity of roles and responsibilities.

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According to the 2005 ROSC , the Constitution provides a clear and distinct allocation of fiscal roles among the executive, legislative, and judicial branches of the government. The executive budget document must be submitted to both houses of the parliament, which must in turn adopt a budget law within 75 days. Should parliament fail to do so, Article 120 of the Constitution provides that the executive may enact his draft budget by presidential order. During the course of the budget year, the executive must report to parliament on the actual use of budget appropriations. The Constitution also contains a provision (Article 170) that empowers the National Audit Court to audit the central and local governments' fiscal accounts, as well as the accounts of the state services agencies.

The ROSC reports that, in Algeria, the general government consists of the central government (comprising the executive, cabinet, and line ministries, and associated central and decentralized agencies and authorities), the parliament, the National Audit Court, several councils, and national public institutions such as universities and hospitals. In addition, it includes the social security funds, local governments, and local public institutions. This definition of general government complies with the definition employed by the Government Finance System . Although Algerian law clearly allocates fiscal roles and responsibilities across the various levels of government, the ROSC notes that local autonomy is "limited by internal funding constraints" (p. 8). Provincial governments and municipalities are subject to their own codes, which set forth their spending authority and share of tax revenues. These codes also specify the central government oversight to which they are subject. Additional revenue to the provinces and municipalities -- indeed, the majority of their funding -- is paid out to the local levels through the Local Governments Common Fund (FCCL), which is itself financed through budget appropriations and receives a set percentage of the government's tax revenues as well. FCCL funding is applied to initiatives that are mandated at the central government level but carried out locally. It is also used to help balance the budgets of local governments that are running at a deficit. As the ROSC observes, this latter activity has led to active central government interference in the municipal budget process.

The Law on Money and Credit of 1990 confers significant operational autonomy on the Algerian central bank, Banque d'Algerie or BoA. This legislation was replaced by Order No. 03/11 of 2003, which provided for increased coordination between the Ministry of Finance and the Banque d'Algerie. The Order places limits on the amount of credit available to the government through the central bank. It permitd the bank to extend credit to the Treasury in order to manage the external public debt, but only in exceptional circumstances. The Order also prohibits the Banque from participating in quasi-fiscal activities. Articles 49 and 50 of the Order stipulate the operations that the Banque may perform on behalf of the general government and local governments and public institutions, respectively. However, the 2005 ROSC found that the new legislation is deficient in providing for optimal central bank independence. An example of this, according to the ROSC, is that the Banque's governor and vice-governors no longer have a fixed-term mandate. There is, generally, a clear distinction between the activities of the government and those carried out by public financial and nonfinancial enterprises. Nonetheless, quasi-fiscal activities are engaged in by some nonfinancial public enterprises. "In addition," states the 2005 ROSC, "the use of administered prices for certain goods and services leads to implicit subsidization by public enterprises" (p. 5).

The 2005 ROSC finds that the legal and administrative framework underpinning Algeria's fiscal policy is "relatively clear" (p. 9). The preparation, content, and presentation of the budget are governed by Budget Framework Law No. 84/17 of 1984. The law also specifies the schedule of the budget process and establishes the limitations set on in-year modifications thereto. The ROSC notes that this law is not organic, however, leaving it susceptible to alteration. The ROSC adds that the provisions of the law are not always observed. The Law on Government Accounting No. 90/21, of 1990 allocates the roles of those involved in budget execution, and sets forth recording and reporting requirements. According to the ROSC, the law "specifically provides for strict demarcation between officials responsible for commitment, verification, and payment authorization operations... and those officials in charge of revenue collection, payment of expenses, and management of funds" (p. 9).

The Algerian tax regime is based on explicit law. The Constitution specifies that taxes and duties can only be imposed through the legislative process, which also has the nominally exclusive right to define tax exemptions. The Constitution also establishes the principle that all citizens must be accorded equal treatment under the tax laws. However, according to the 2005 ROSC, there are special situations in which the National Investment Promotion Agency is permitted to involve itself in negotiations for tax breaks or subsidies for investors in sectors under the aegis of the National Investment Council. Complexities in the tax law contribute to non-transparency and enable a certain degree of administrative discretion in the application of tax laws. The Directorate General of Taxes provides annually updated publications explaining the current tax code and tax collection procedures. However, the ROSC found that newly introduced tax measures "are inadequately publicized, and consultation with social partners continues to be relatively limited" (p. 10). Transparency of the tax regime is further compromised by the existence of parafiscal taxes, and taxes imposed at the local level are not publicly disclosed or explained. The equitable application of the tax code is impaired by differences in interpretation of the tax law among the tax bureaus. While the tax administration does possess an internal audit system overseen by the Director General and there is recourse to administrative and judicial appeals processes, the ROSC reports that "procedures are so slow as to diminish the effectiveness of this remedy" (p. 11).

Decree No. 85/59 of 1985 establishes a code of conduct to which civil servants must comply. However, the 2005 ROSC argued that this should be replaced by formal legislation. Personnel working within the tax administration are subject to a code of ethics first imposed in 2002, the provisions of which are published on the website of the Algerian Tax Authority . Beginning in 2003, government officials have been required to make a public declaration of their assets. The ROSC cautions, however, that it is difficult to ascertain the degree to which these provisions are observed or enforced.

Open budget processes

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The 2005 ROSC reports that, in Algeria, "budget preparation is an internal government affair" (p. 16). The Minister of Finance leads the project, according to an established schedule. The Budget Directorate coordinates the series of budget discussions that must take place across the central government. The Economic Studies and Projections Directorate determines the macroeconomic framework to be used. The ROSC finds that the budget classifications used are poorly chosen and inconsistent. Sub-classifications are also inappropriate and inconsistent with the classification system employed by the Government Finance Statistics Manual. The information included is not comprehensive, excluding data relating to the budget's overall financial equilibrium. There is no specification of the fiscal rules followed in the budget. The ROSC states that "the budget presentation in the 'draft budget' document is particularly difficult to follow" (p. 17). On passage, the budget is published in the Official Gazette, which is purportedly available to everyone. However, the Gazette presentation is highly abbreviated.

The macroeconomic framework, drawn up at the outset of the budget process, is subject to modification throughout the budget preparation period. The ROSC finds that "the consistency of the framework model is impaired by the conventional nature of the assumptions used regarding the price of a barrel of oil... [which] do not reflect the short- and medium-term projections currently used in the markets" (p. 18). There is discussion of medium-term fiscal policy objectives in the budget documents. The ROSC adds that "clear fiscal targets are not set and fiscal policy is not conducted according to predefined policy rules, with the exception of the ceiling on central bank advances" (p. 18). While the budget does include 3-year forecasts, these do not constitute a true medium-term framework. The budget omits any sustainability analysis. It also omits reference to the budget balance. There is a partial accounting of the general budget and special Treasury accounts balances, but its incompleteness limits its utility. The National Office of Statistics does produce a calculation of the overall general government balance, but this appears only after a two-year lag. The ROSC adds that "despite the extensive range of quasi-fiscal activities and deficits in financial and nonfinancial public enterprises, the public sector balance is unknown" (p. 18).

Although the draft budget provides a clear statement of the rationale behind changes in appropriations for current expenditures, it does not clearly enumerate authorized programs that are under way and those that have yet to be implemented. The budget does not include a consideration of its underlying objectives or results to be achieved. However, the ROSC notes that "a move toward program budgeting is envisaged in the medium term" (p. 19). On the other hand, there is no sensitivity analysis, nor is there an assessment of fiscal risks. The ROSC also reports that Algeria lacks any mechanism with which to monitor fiscal arrearages. While it does possess a comprehensive internal audit system, there is little follow-up. According to the ROSC, the audit supervisory staff and agencies are ostensibly under the direction and oversight of the Inspectorate General of Finance. However, the ROSC staff found that "more often than not, this is a matter of verifying the conformity to legal procedure (rather than making a more substantive judgment) of operations," adding that "there is no monitoring of the findings and of recommended control activities, which limits the effectiveness of the supervision" (p. 19). The ROSC further notes that "the accounting system would allow for the preparation of reports on the fiscal and financial execution of government operations, based on current classifications, but these statements are not disclosed" (p. 20). Such reports as are generated do not circulate beyond the Ministry of Finance. Although Law 84/17 requires the production of a budget review law that would ostensibly bring the fiscal year to a close, the ROSC points out that "no budget review law has been submitted to Parliament since the 1982 final accounts" (p. 21). Finally, the ROSC states that there is no mid-year review conducted by parliament.

Public availability of information.

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The 2005 ROSC reported that Algeria's budget documents cover the bulk of the central government's fiscal activities and include all general budget revenues, broken out into major categories. However, certain "special" Treasury accounts are omitted (violating the provisions of [Budget Framework] Law No. 84/17) and coverage of the rest of the general government is incomplete. Accompanying the annual budget are booklets that explain the ministry breakdown of appropriations. Also included is a summary of the macroeconomic context and underlying budgetary assumptions. According to the ROSC, "a list of accounts for specific appropriations is provided to the budget committees of the Assemblies when they are working on the budget law. However, that list is not published" (p. 13). The documents do not include local governments' fiscal activities or the activities of public corporations. They also exclude mentioning social security funds. Also excluded from the budget is that portion of the tax revenue that is not specifically allocated to the general budget. On the other hand, the budget does include reference to current defense expenditures. However, defense investment spending is lumped together with civilian investments. The budget also includes fiscal aggregates covering the prior two budget years and forecast data for the two years following the current budget year. The ROSC states that this aggregate data is "reportedly " provided in greater detail to the parliament's Finance Committee. Fiscal activities not included in the budget include statements of contingent liabilities, estimates of tax expenditures, or the cost of quasi-fiscal activities. However, the ROSC reports that "internal government documents on the external public debt include guarantees and identify them separately" (p. 14). There appears to be no public accounting of tax expenditures or quasi-fiscal activities, even though, according to the ROSC the former are "not negligible" and the latter are "extensive (p. 14).

According to the ROSC, debt and financial assets data are reported in several venues. Informations Trimestrielles -- Marche des Valeurs d'Etat is a quarterly bulletin that reports on the primary market, interest rate trends, auction amounts and volume, and other such data, along with some information on the secondary market. This publication is issued by the Directorate of the Treasury (DGT). In addition, the DGT puts out an annual publication titled L'Evolution du Marche des Valeurs d'Etat, in which the quarterly data is combined with a retrospective and prospective summary. Also published by the DGT is an annual report that specifically reviews the domestic and external debt and contingent liabilities. Because the DGT has no website on which to disseminate these publications broadly, they are produced in paper form and disseminated via the offices of the Minister of Finance. The BoA produces an internal journal, Media Bank, which also includes public debt data.

Algeria has not made a formal commitment to the regular, broad dissemination of fiscal data, according to the IMF's 2005 ROSC . It does not produce advance release calendars. Algeria does not subscribe to the IMF's SDDS or even to the less stringent GDDS. The only disclosure of fiscal data required by law is the annual budget and its associated documents. These documents include a review of the budget for the third year prior to the current budget year, which is intended to permit an assessment of budget outcomes. Even this requirement, however, is unobserved. The Summary Statement of Treasury Operations is circulated within the government but not disseminated publicly. There is no published data on local government and public institution fiscal data.

Independent assurances of integrity.

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As is evident on the websites of the IMF's SDDS and GDDS, Algeria participates in neither program. Although the 2005 ROSC reports that Algeria had announced its intention to participate in the GDDS by 2006, this has not yet been achieved. According to the 2007 IMF report, in February of 2006, Algeria reiterated its decision to participate in the GDDS. The 2005 ROSC reports that operational transparency is impaired by the fact that two different methods are used to record ongoing operations and end-of-year budget execution operations. Algeria employs a double-entry accounting system, but this is the subject of current reform efforts which aim to harmonize the government's chart of accounts with the national chart of accounts. The ultimate goal is to move to accrual-based accounting. The ROSC also notes that, at present, "accounting procedures allow for reconciliation of fiscal, accounting, and monetary data, but the fact that these data are not reported and non-publication of the methodology underlying them makes it difficult to vouch for their reliability" (p. 23). Data reconciliation is not done systematically. Rather, it is undertaken only when major discrepancies are discovered.

The Constitution confers independence upon the National Audit Court in its role as overseer of the central and local governments and state services. Order No. 95/20 of 1995 enumerates the Court's mission, organizational structure, and permissible procedures. Order No. 95/23 of 1995 defines the status of the Court's members. By law, the Court is free to determine who to audit and when. In addition, the president, the head of parliament, and the chairpersons of parliamentary committees can file an audit request with the Court. Order No. 95/20 requires that the Court prepare an annual report that, upon presentation to the executive and legislative branches, must be published in the Official Gazette, the ROSC reports that this was only done in 1996 and 1997. The ROSC urged that Algeria strengthen its auditing capacity, stating that it lacks the wherewithal to fulfill its mandate.

With regard to the independent evaluation of the macroeconomic assumptions and fiscal projections underlying the budget, the ROSC reports that this is compromised by weak data and "the lack of genuine expertise in nongovernment circles" (p. 25). The ROSC finds that the National Office of Statistics enjoys adequate independence, deriving from Legislative Decree No. 94/01 of 1994 and Executive Decree No. 95/159 of 1995. Based on these laws, the Office is mandated to conduct statistical studies and to monitor the ethics codes and statistical standards employed in compiling and disseminating statistics. The ROSC notes, however, that the legislation does not specifically task the Office with validating fiscal data quality. Source data is generally weak and highly aggregated, compromising the economic accounts upon which it is based. This is especially true for the accounts of local governments and public institutions. Finally, the ROSC notes that there is inadequate staff available for the production of the national accounts.