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Algeria
Score Rank
Financial Standards Index 14.17 out of 100 84
Business Indicator Index 4.49 out of 12 85

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Overall Standards Summary

Algeria achieves very low overall compliance with international standards and codes, with a score of 14.17 out of 100 in our Standards Compliance Index. Algeria’s compliance is poor in all three broad categories. The highest level of compliance reached under any category is "Intent Declared." Further, there are many standards for which it achieves a "No Compliance" rating or for which independent assessments are lacking. Algeria does not subscribe to the International Monetary Fund's (IMF) Special Data Dissemination Standard, however, in 2009 it became a participant in the less rigorous General Data Dissemination System. Algeria's monetary and fiscal policy transparency practices were found to be deficient in several respects. However, Algeria passed a new ordinance that superseded the 1990 Law on Money and Credit, which the International Monetary Fund found to be flawed as well, primarily due to its failure to establish clear independence for Algeria's central bank. Nevertheless, Algeria has drafted (but not yet passed) its first organic law on public finances and has developed a budget classification system that comports with the guidelines set forth in the IMF's Government Finance Statistics Manual. The Algerian Stock Exchange, which became operational in 1999, remains nascent after ten years of operation. However, the Algerian Code of Corporate Governance was launched in March 2009. The new accounting system, based on International Financial Reporting Standards (IFRSs), was adopted in 2007. However, although the new guidelines will be very similar to IFRSs, certain differences still exist. Auditing practices in Algeria are not on par with the international standards, and the local standards are not enforced effectively. With the help of the World Bank, a new real-time gross settlement system became operational in 2006, which according to the World Bank was implemented according to international standards, although no evaluation of it is yet available. Algeria has also enacted the "Law for the Prevention and the Fight against Money Laundering and Terrorism Financing" in order to bring itself closer to compliance with international regulations, and has undertaken to implement the Financial Action Task Force recommendations.

Choose a standard for a detailed compliance report:
12 Key Standards for Sound Financial Systems

Compliance Level
Special Data Dissemination Standard
NC
Code of Good Practices on Transparency in Monetary Policy
NC
Code of Good Practices on Transparency in Fiscal Policy
ID
Effective Insolvency and Creditor Rights Systems
NC
International Financial Reporting Standards
NC
Principles of Corporate Governance
II
International Standards on Auditing
NC
Anti-Money Laundering/Combating Terrorist Financing Standard
ID
Core Principles for Systemically Important Payment Systems
ID
Core Principles for Effective Banking Supervision
ID
Objectives and Principles of Securities Regulation
II
Insurance Core Principles
II
II = Insufficient Information | NC = No Compliance | ID = Intent Declared | EN = Enacted | CP = Compliance in Process | FC = Full Compliance

Macroeconomic Policy and Data Transparency

NCSpecial Data Dissemination Standard

Algeria is not a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard. The IMF issued a press release in 2009 announcing that the country has become a participant in the less rigorous General Data Dissemination System (GDDS). The IMF's 2008 Article IV Consultation report was published in 2009, but was written prior to GDDS entry. According to the report, data reporting by Algeria to the IMF was broadly adequate for surveillance, but nonetheless deficient. Problems existed in terms of timeliness, coverage, and data quality. The GDDS website contains a series of postings by Algeria's primary data producing agencies – the Bank of Algeria, Ministry of Finance, and the National Office of Statistics – in which plans for improvement are set forth. These plans aim to directly address specific areas where the IMF found the Algerian statistics regime to be deficient.

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NCCode of Good Practices on Transparency in Monetary Policy

In 2004, the IMF published the results of a Financial System Stability Assessment (FSSA) of Algeria's monetary policy based on the country's 1990 Law on Money and Credit. The report stated that Algeria's monetary policy transparency practices were deficient in several respects. The IMF suggested that Algeria reform its legislation to clarify the responsibilities of the central bank and strengthen the process by which monetary policy was formulated and announced. Furthermore, the Fund called for Algeria to publicly disclose its internal management procedures and the codes of conduct and ethical behavior to which its staff is subject. A 2005 report from the IMF on Algeria’s fiscal transparency noted the passage of a new ordinance that superseded the 1990 Law on Money and Credit. However, the Fund found this new law to be flawed as well, primarily due to its failure to establish clear independence for Algeria’s central bank. Algeria’s current exchange rate regime is a managed float, of which the IMF approves. Algeria does not subscribe to the IMF's Special Data Dissemination Standard but began participation in the less stringent General Data Dissemination System in April 2009.

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IDCode of Good Practices on Transparency in Fiscal Policy

In 2005, the IMF published the results of its most recent Report on the Observance of Standards and Codes (ROSC) on 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 noted that Algeria was preparing to undertake significant steps to modernize its budget management process and strengthen fiscal governance. It has drafted (but not yet passed) its first organic law on public finances and has developed a budget classification system that comports with the guidelines set forth in the IMF’s Government Finance Statistics Manual. However, the final draft of this law was still being written as of late 2008, when IMF staff members were finalizing discussions with Algerian authorities for the Fund’s 2008 Article IV Consultation. The 2008 report adds that budget management and fiscal governance are being modernized and strengthened. Algeria does not subscribe to the IMF’s Special Data Dissemination Standard, but has participated in the IMF’s General Data Dissemination System since April 2009.

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Institutional and Market Infrastructure

NCEffective Insolvency and Creditor Rights Systems

The IMF and the World Bank in their 2004 FSSA concluded that the legislative framework for insolvency in Algeria is in need of modernization. Bankruptcy legislation, procedures, and enforcement were found to be deficient, and Algeria's failure to promulgate a modern legal framework surrounding its bankruptcy regime was identified as the most significant shortcoming. A 2004 World Bank report, based on the findings of the joint assessment, asserted the laws and regulations are not in line with the international standards. The IMF and the World Bank also note that, although Algeria has been active in legal reforms since the late 1980s, these reforms have not included the modernization of its bankruptcy regime. The lack of a modern bankruptcy framework is combined with a court system in which proceedings tend to be long, and enforcement is problematic, due to high costs. The IMF further found that in terms of Algeria’s adherence to the rule of law, the quality of its regulatory practice, and its control of corruption, the country ranked among the bottom 40% of all countries included.

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NCInternational Financial Reporting Standards

According to the 2004 FSSA conducted by the IMF, Algerian accounting principles were found to be “overly vague” and financial statements deemed unreliable for information on company performance. Furthermore, companies were not required to prepare consolidated financial statements, and accounting guidelines for the treatment of a number of important transactions did not exist. As noted on the Deloitte IAS Plus website, Algerian accounting standards, the Plan Comptable National or PCN, are established by the Conseil National de la Comptabilite within the Ministry of Finance (MoF). All Algerian business enterprises, except for small entities which have simplified reporting requirements, must prepare financial statements in line with the PCN requirements. However, according to a 2009 KPMG Investment in Algeria Guide, in 2006, the MoF embarked upon a program to revise the PCN and align the local standards with International Financial Reporting Standards (IFRSs) effective January 1, 2010. The KPMG Guide notes that the new accounting system is based on IFRSs and was adopted by legislation on November 25, 2007. However, although the new guidelines will be very similar to IFRSs, certain differences still exist. For instance, unlike IFRS, the new accounting system does not stipulate guidance in cases where reliable estimates are not possible.

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IIPrinciples of Corporate Governance

In 2003, the World Bank launched a Country Assistance Strategy in Algeria for Fiscal Years 2004 -2006 aimed at increasing the state's capacity to regulate the market and encourage the private sector to adopt good corporate governance practices through technical assistance. In a subsequent 2004 Financial Sector Assessment (FSA), the World Bank noted that, since the end of the 1980s, Algerian authorities have embarked upon a wide-ranging and credible modernization of laws and regulations governing financial intermediation. Significant deficiencies remain, however, with regards to laws and regulations, and Algeria lacks a modern corporate governance framework. Furthermore, although shareholders' rights seem to be well-protected, the absence of regulation on corporate governance weakens the protection of minority shareholders. A 2007 African Peer Review Mechanism report under the New Partnership for Africa’s Development initiative recommends that transparency and shareholder rights be improved in Algeria, management instruments be streamlined, private enterprises be encouraged to become joint stock companies and list on the stock exchange, a code of ethics be developed for companies at all levels, and corruption be curbed. The Algerian Stock Exchange, which became operational in 1999, remains nascent after ten years of operation, with only three listed companies as of 2009. Initiated by the business community and supported by several government authorities, the Algerian Code of Corporate Governance was launched in March 2009. Despite the information provided above, there is insufficient publicly available information regarding Algeria's compliance with the Principles on Corporate Governance developed by the Organization for Economic Co-operation and Development.

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NCInternational Standards on Auditing

In the FSSA conducted by the IMF in 2004, the IMF observed that, in general, auditing practices in Algeria are not at par with the international standards, and the local standards are not enforced effectively. The IMF pointed out that audit partnerships are "highly fragmented" and training is limited. As mentioned in a 2005 World Bank report, in the spring of 2003 the Bank completed a Report on the Observance of Standards and Codes on accounting and auditing in Algeria, using the International Financial Reporting Standards and International Standards on Auditing (ISAs) as the benchmarks for assessing national standards. However, this report has not yet been made publicly available. A 2007 New Partnership for Africa’s Development African Peer Review report recommended that Algeria adopt ISAs and the Code of Ethics issued by the International Federation of Accountants.

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IDAnti-Money Laundering/Combating Terrorist Financing Standard

Algeria is a founding member of the Middle East and North Africa Financial Action Task Force (MENAFATF) which is an associate member of the Financial Action Task Force (FATF). Members of the MENAFATF signed a Memorandum of Understanding (MoU) in 2004 whereby they pledged to adopt and implement the FATF's recommendations on Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT). The FATF's 2008-2009 Annual Report names Algeria as one of the jurisdictions that has undertaken to implement the FATF's 40 plus 9 recommendations. In its 2009 International Narcotics Control Strategy Report, the U.S. Department of State (DoS) acknowledges that the government of Algeria has taken significant steps to improve its statutory regime against AML/CFT. For instance, in 2005, Algeria enacted a new Law on the Prevention and Fight against Money Laundering and Financing of Terrorism, replacing the 1994 Ordinance No. 95/11, to bring Algerian law into conformity with international standards and conventions. Also, an independent Financial Intelligence Unit - the Cellule du Traitement du Renseignement Financier (CTRF) - was established in April 2002. Overall, the U.S. DoS report notes that Algeria must strengthen implementation of these laws.

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IDCore Principles for Systemically Important Payment Systems

The Financial System Infrastructure Modernization Project, per the 2007 World Bank report, focused on improving the financial system infrastructure, with a particular emphasis on modernizing the country's payments system. The Project aimed to establish a well-functioning real time gross settlement (RTGS) system along with regulations and guidelines governing future low-value payment systems, and effective and well functioning telecommunications links connecting the country's payments systems. The Project was completed in June 2006 and a new, automated, RTGS system became operational in February 2006. The 2007 World Bank report noted that the RTGS system was implemented according to international standards. However, there is no recent assessment of the RTGS system's compliance with the Committee on Payment and Settlement Systems' (CPSS) Core Principles for Systemically Important Payment Systems (CPSIPS) and there is no report clearly identifying all the systemically important systems in the country. The Bank of Algeria is in charge of the new systems' oversight and supervision, and has installed and tested all back-ups and security for its smooth and efficient functioning. The system was due to be evaluated by a joint World Bank/International Monetary Fund Financial Sector Assessment Program mission to Algeria during the first semester of 2007. Based on the results of a 2008 World Bank Global Payment Systems Survey, Cirasino and Garcia’s 2008 report evaluates a country's compliance with four distinct sub components which are broadly based on the CPSS' CPSIPS. Algeria achieves a “high level of development” for the component, "large value payment systems," and “medium-high levels of development” for both “legal and regulatory framework” and “payment system oversight” components.

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Financial Regulation and Supervision

IDCore Principles for Effective Banking Supervision

The IMF's 2004 FSSA notes that, since the end of the 1980s, Algerian authorities have embarked upon a wide-ranging and creditable modernization of laws and regulations governing financial intermediation. The FSSA also found Algeria's banking supervisory framework to be compliant or largely compliant with 11 of the 25 Basel Core Principles (BCPs) for effective banking supervision. The 2004 IMF assessment points to several major shortcomings, notably the lack of effective implementation of prudential regulations. However, the report notes substantial reforms in this area since 2000, so much so that, by 2004, only one of the BCPs (relating to prudential regulations) was not observed. Clear improvements have also been made in the area of on-site and off-site supervision with technical assistance from the IMF. As part of a World Bank Country Assistance Strategy for Fiscal Years 2004 -2006 in Algeria, launched in 2003, efforts are on to improve the operational efficiency of banks in credit and financial risk management, credit monitoring, and loan recovery; enhance corporate governance; and ensure "arm's length" relations between business groups and the government. A 2009 KPMG Guide attests that Algerian prudential regulations and ownership criteria are “in compliance” with Basel I recommendations. In its 2007 Financial Stability Assessment Program Update, the IMF also commends Algeria for making progress in financial regulation and supervision and encourages it to continue strengthening the areas of non-performing loans, risk and liquidity management, and governance. The IMF also advises Algeria to privatize the banking sector and promote non-bank financing. The Algerian authorities have expressed their intention to implement these IMF recommendations.

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IIObjectives and Principles of Securities Regulation

The 2004 World Bank's FSA reports that there is practically no activity on Algeria's securities markets, despite efforts to establish a regulatory framework to license and supervise market participants and build an infrastructure. This is in part caused by high transaction costs and low investor confidence in the markets. The FSA indicates that significant improvements must be made to the regulatory framework, disclosure of financial information, and settlement systems before the securities markets grow. In its effort to modernize the financial system’s legal framework, the government addressed securities markets and financial market participants. It also reformed the Code of Commerce, including provisions on shareholders and creditors' rights protection. However, per the FSA, the laws and regulations still needed significant improvement, and many provisions did not follow international standards. A more recent (2007) IMF's Working Paper also reveals that supervision of nonbank financial institutions is at an “embryonic stage” due to the underdevelopment of the sector. Apart from the foregoing, there is insufficient publicly available information regarding Algeria's compliance with the International Organization of Securities Commissions' Principles of Securities Regulation.

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IIInsurance Core Principles

There is insufficient information publicly available regarding Algeria's compliance with the revised Insurance Core Principles issued by the International Association of Insurance Supervisors in October 2003. Nevertheless, since the end of the 1980s, according to the 2004 IMF's FSSA, the Algerian authorities have embarked upon a “wide-ranging and creditable” modernization of laws and regulations governing financial intermediation. This program applies to banks, insurance companies, securities, and financial markets. It, however, excluded the life insurance sector. As noted in the FSSA, the insurance sector in Algeria was liberalized in 1995 under the Insurance Ordinance No. 95-07, but remained insignificant. A 2007 IMF Working Paper also reveals that supervision of nonbank financial institutions is at an “embryonic stage” due to the underdevelopment of the sector. However, more recent reports (of 2009) do point to considerable growth in the sector, making Algeria the second largest insurance market in the North African region. The 1995 Ordinance was amended in 2006 by the Insurance Law No. 06-04, which according to a 2009 KPMG report, has resulted in the strengthening of the regulation as well as the regulatory bodies in the insurance market. The National Insurance Council (CNA), which was established under the 1995 Insurance Ordinance, is the supervisory and regulatory authority for the insurance sector in Algeria. The Minister of Finance presides over the CNA.

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Business Indicators

With an overall score of 4.49/12, Algeria is below standard on the economic, legal, and political indicators that make up our Business Index. Algeria is a market-based, but statist economy in which the public sector is dominant. Algeria does not have a fully diversified economy, but most sectors are open to foreign investment, with some limitations. Both resident and nonresident ownership of foreign exchange is permitted, with some restrictions applied. The control of foreign exchange is held by the Banque d'Algerie and that tight control is exercised. Repatriation of profits is permitted for foreign investors. Foreign and domestic investors are viewed equally under the law. However, foreign investors are limited to participation in joint ventures with domestic firms in some sectors. A commercial code was adopted in 2005, which reduced the amount of paperwork needed to form a new company, but entrepreneurs face many bureaucratic obstacles in starting up a business in Algeria. Political influence is still perceived to be a fact of life, and shari'a law is recognized, given that Islam is constitutionally recognized as the state religion. Secured property interests are generally recognized, but court protection is problematic, and in Algeria, the government owns most real property. Although Algeria wants to attract foreign and domestic investment to diversify its economy, 2008 saw the announcement of new plans to maintain and strengthen government control over investments. Privatizations have come to a virtual standstill and restrictions are being reintroduced. Although the country’s security situation has seen improvement, political turmoil continues and corruption is perceived to be extensive.

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Global Indices & Quick Facts

Algeria is ranked between the 3rd and 5th quintiles in the global indices benchmarking political, economic, business, and human capital climates, as shown below. Despite the establishment of a bicameral parliament in 1996 and a relatively clean presidential election in 2004, Freedom House does not consider Algeria an electoral democracy, largely due to the influence the government and military continue to exert over the electoral process. Algeria's progress towards a democratic market economy from a socialist-based economy has been slow. Although benefiting from greater macroeconomic stability and high oil revenues, Algeria's business environment is still obstructed by bureaucratic inefficiencies and slow privatization efforts, especially in the banking and finance sectors. Algeria is also perceived to be highly corrupt, as reflected by its low ranking in the Transparency International Corruption Perceptions Index.

Name Year Rank Score Quintile
Bertelsmann Transformation Status Index 2010 85/128 4.86/10 4
Heritage Foundation Economic Freedom Index 2010 105/179 56.9% 3
Economic Freedom of the World Index 2009 57/141 7.06/10 3
World Economic Forum Global Competitiveness Index 2009 83/133 3.95/7 4
Milken Institute Capital Access Index 2009
World Bank Ease of Doing Business Index 2009 136/183 N/A 4
UNDP Human Development Index 2009 104/177 0.75/1 3
Transparency International Corruption Perceptions Index 2009 111/180 2.8/12 4
Freedom House Index 2009 Not Free 5.5/7

Credit Ratings

Not rated Fitch

Not rated Moody's

Not rated Standard & Poor's

Macroeconomic Data

2009 GDP (Current Prices): 128.6 billion USD (IMF)

2009 GDP (Per Capita): 3,640.46 USD (IMF)

2010 GDP (Growth Forecast): 3.7% (IMF)


2009 Inflation (CPI): 4.6% (IMF)

2008 Unemployment: 12.5% (CIA)


2008 Foreign Direct Investment

FDI (Inward): 2.6 billion USD (UNCTAD)

FDI (Outward): 0.30 billion USD (UNCTAD)


2007 Official Development Assistance

ODA (Received): 390 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)

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