Algeria’s social protection system aims to support vulnerable households, empower the population and promote equity. However, without funding reforms and a comprehensive strategy, the system risks becoming unsustainable.
Defining social protection in the Algerian context
Since it won independence from France in 1962, Algeria has developed and maintained an active social protection system. However, this arrangement is under severe strain and, without reforms to its funding model, is at risk of becoming unsustainable. While there is no single, widely accepted definition of social protection, this term usually consists of social assistance and social insurance programmes. These programmes are used differently depending on the nature of the welfare state in each country.
According to the World Bank, ‘Social protection and labor systems, policies, and programs help individuals and societies manage risk and volatility and protect them from poverty and destitution – through instruments that improve resilience, equity, and opportunity’. For the United Nations Development Programme (UNDP), ‘social protection is defined as a set of nationally owned policies and instruments that are organized around systems providing income or in-kind support and facilitate access to goods and services to all households and individuals at least at minimally accepted levels’. The goal of these policies is to protect vulnerable households, and to provide fairer opportunities across society. Social protection systems are there to assist vulnerable individuals in case of shocks or periods of insufficient income, incapacity or inability to work. These systems aim to empower citizens by increasing their productive capacities and enhancing their capabilities. More broadly, social protection has the potential to transform society by promoting the principles of equity, equality and social cohesion.
In accordance with the UNDP, this paper defines social protection as a set of policies, programmes or instruments that provide a population with social services. At the programmatic level, social protection consists of social assistance, social insurance and labour policies.
Today, Algeria’s social protection system is composed of both social assistance and social insurance. The Algerian constitution, which contains the fundamental texts defining the country’s essential values, emphasizes the role of social protection for improving population welfare and strengthening resilience.
It is worth noting that Article 25 of the UN Universal Declaration of Human Rights enshrines social protection as a fundamental human right. The Algerian constitution declared the country to be a ‘social state’, as reaffirmed in each of the country’s constitutional texts. In its most recent constitutional reform, Algeria further underlined its social commitments as the country responded to popular protests by the ‘Hirak’ movement, which sparked a political and social crisis in 2019 continuing through to the first quarter of 2020.
Poor management of public finances – through the misallocation of funds, inefficient spending and insufficient revenue generation – has impacted the country’s fiscal capacity and capability in recent decades. Despite these challenges, social protection interventions have continued, although they cannot be maintained at the current levels on a long-term basis without further jeopardizing the sustainability of national budgets. Accordingly, some political parties and economic actors have highlighted the need for reform of social protection and subsidies. As this paper demonstrates, social protection in Algeria is made up of a complicated web of various government institutions, the benevolent Zakat fund (see Chapter 3) as well as the services offered by charities (see Chapter 3).
Key social protection challenges in Algeria
The current worldwide economic and political context, in part due to the COVID-19 pandemic, inflationary pressures and the war in Ukraine, has had an impact on the Algerian welfare state and limited its fiscal space. As a result, it is imperative that the Algerian government re-examine the configuration of its social protection policies and, for the first time, implement a strategy to adapt to the country’s current socio-economic situation. The formal system of social protection cannot continue without innovative new sources of funding and far-reaching reforms. In order to avoid hampering job creation efforts, a new model is unlikely to increase social security contributions from employers, as this would impact businesses that are already struggling with high labour costs. Employers in the formal sector complain of unfair competition from the informal sector, which neither pays taxes nor social security contributions (and in turn is able to significantly undercut those in the formal sector).
The current worldwide economic and political context, in part due to the COVID-19 pandemic, inflationary pressures and the war in Ukraine, has had an impact on the Algerian welfare state and limited its fiscal space.
The combination of a welfare state and the existence of universal and non-contributory benefits can potentially encourage the expansion of the informal economy, as workers and businesses in the informal sector can continue to receive social benefits even if they do not pay contributions and taxes. Research shows that a large proportion of informal workers in Algeria receive non-contributory or universal social benefits. Partly as a result of the relative ease of access, limited efficiency of targeting mechanisms and a high presence of informality. In Algeria, in 2019, 42 per cent of workers were employed informally and did not contribute to social insurance funds. If they were to contribute, such workers may be a viable source of funding for future social insurance programmes.
Algeria has faced numerous macroeconomic challenges in recent years. For instance, the country’s current account balance decreased from 26 per cent of GDP in 2006 to -12.5 per cent in 2020 and -2.8 per cent in 2021. Caught between the growing social needs of the population and the constraints of limited fiscal space available for the social protection system, the government has been unable to carry out essential reforms. Furthermore, the government has tried to solve its internal debt problem through quantitative easing and the use of foreign exchange reserves to manage its external debt and address the exponential growth of its negative balance of payments.
In 2017, public authorities embarked on a quantitative easing programme. However, at the time, experts highlighted the temporary nature of the measure and the imperative to devote this currency to the recovery of the economy and investment. This operation was repeated for two years in order to repay the internal debts of the public treasury, such as salaries owed to civil servants.
While Algeria’s finances have been constrained in recent years, the increase in oil and gas prices has boosted the government’s budget and social protection programmes have benefited as a consequence. Moreover, in 2023, the government increased unemployment allowance benefits as well as pensions and civil servant wages. Despite the short-term improvement of the financial situation, it is still necessary to explore other options to ensure the long-term sustainability of social protection. In 2019, the International Labour Organization and UN Women provided a handbook for achieving additional fiscal space for social protection and the Sustainable Development Goals (SDGs). This tool could provide useful guidance for the Algerian government. Additional fiscal space would help solve Algeria’s two other main social protection challenges: the expansion of coverage and improved social protection benefits.
