Oil price surge offers Algeria temporary fiscal relief

Rising global oil prices, triggered by escalating tensions and the US-Israeli strikes on Iran, may provide the cash-strapped Algeria with short-term financial relief, according to a report published by Asharq Business on March 13.  

The development revives hopes of a windfall similar to that experienced after Russia invaded Ukraine in 2022. Higher oil prices could ease the country’s funding pressures and potentially help balance the budget if they approach $120 per barrel.

The North African country, with a population of around 47mn, relies heavily on its vast oil and gas reserves to finance public spending and social subsidies. However, since the sharp drop in energy prices in 2014, Algeria has faced growing difficulty balancing its budget.

To fund public spending expected to reach DZD 7.69 trillion ($58.5bn) in 2026, around 5% higher than in 2025, the government has introduced its first domestic Islamic sovereign sukuk and sought financing from the African Development Bank (AfDB) for infrastructure projects.

Oil prices briefly climbed above $100 per barrel days earlier, the first time they have reached that level since the start of the war in Ukraine. Although prices have since fluctuated, they remain significantly higher amid concerns that Middle East tensions could disrupt global energy supplies.

Algeria’s budget is based on an oil price of $70 per barrel, which Energy Minister Mohamed Arkab described as a balanced level for public finances.

However, Algeria's continued reliance on energy revenues remains a structural risk. With the country importing goods worth about $50bn annually, rising global prices could offset some of the financial gains from higher oil revenues.