The Impact of Oil Price Fluctuations on the Public Budget and Fiscal Sustainability in Algeria during the Period 1990–2023

Abstract

This study examines the impact of oil price fluctuations on Algeria's public budget and fiscal sustainability from 1990 to 2023, employing the Autoregressive Distributed Lag (ARDL) model. It aims to assess the dynamic relationship between oil prices (PP), budget balance (OBB), and non-oil revenues (NORY), focusing on transmission mechanisms of oil shocks to public finances. Results reveal that oil prices are the primary determinant of budget balance, with a 1% increase in oil prices raising the budget surplus by 0.18% in the short term. Conversely, non-oil revenues decline by 15.26 units per unit increase in oil prices, supporting the "Dutch Disease" hypothesis. The findings also highlight pro-cyclical fiscal policies in Algeria, where public spending expands during oil booms and contracts sharply during downturns, exacerbating economic volatility.