Analyzing the Dynamics of the Budget Deficit in Algeria and Forecasting the Resort to Domestic and External Borrowing Using the ARDL Model for the Period 2000–2030

Abstract

This study aims to analyze the dynamics of the budget deficit in Algeria and forecast the reliance on domestic and external borrowing during the period 2000–2030 using the ARDL model. The study is based on annual data for government expenditure, real GDP, and oil prices, assessing both short- and long-term relationships between the deficit and key economic variables. Empirical results reveal a stable long-term equilibrium relationship and dynamic behavior of the variables over time, with the error correction model demonstrating a rapid adjustment mechanism following short-term shocks. Future forecasts indicate that the trajectory of the deficit varies according to economic scenarios: under the optimistic scenario, financing can largely rely on domestic resources, whereas moderate and pessimistic scenarios require increased external borrowing. The study underscores the importance of efficient fiscal and monetary policy management to ensure deficit stability and strengthen the state's ability to cope with future economic fluctuations.