Algeria Cashless Reform Tightens Fiscal Discipline

Algeria’s 2028 cashless economy target marks a structural turn in fiscal and monetary governance. With nominal GDP projected at USD 288 billion in 2025 and hydrocarbons providing roughly 83 percent of exports, the central bank’s strategy aims to compress the cash economy—still near 30 percent of GDP—into formal, traceable channels. The plan, driven by the Bank of Algeria, positions digitalization as a fiscal stabilizer rather than a technological upgrade.

Financial inclusion remains moderate, with about 44 percent of adults holding bank accounts, but infrastructure is expanding: active POS terminals rose from about 68 000 at end-2024 to roughly 77 500 by mid-2025, and 20.7 million cards, including Edahabia postal instruments, are in circulation. The roadmap seeks to move the cash-to-deposit ratio from 44 percent to below 20 percent by 2028, aligning Algeria with peers that have digitized to reinforce macro control.

The monetary channel is central. As payments migrate onto electronic rails, deposits deepen, tightening the link between policy rates and retail lending. This strengthens transmission, allowing the central bank to modulate liquidity more effectively without relying solely on reserve adjustments. Inflation, averaging 5.2 percent in 2025 with volatile food components, remains sensitive to liquidity shocks; digital payments can help flatten transmission lags and stabilize CPI expectations. Treasury operations also benefit as salary and subsidy payments move to direct transfer, reducing float and leakages. Historical evidence from Egypt and Morocco shows e-invoice and digital VAT adoption lifted non-oil revenue by 1–2 percentage points of GDP within three years; if replicated, Algeria’s fiscal ratio could rise from about 15 percent to 16–17 percent of GDP by 2028 without higher tax rates.

Banking performance is expected to improve as transaction fees replace cash logistics. Public lenders, which hold roughly 80 percent of system assets, dominate early adoption, but private PSPs and fintech entrants will drive market share in merchant acquisition. POS throughput of about 5.5 million transactions in 2024—equivalent to 220 per 1 000 adults—remains low versus Morocco’s 600 and Egypt’s 500, indicating room for scaling. Reaching 120 000 active POS by end-2026 and capturing at least 35 percent of retail transactions electronically would mark a structural break in payment behavior. Beyond operational efficiency, a wider digital trail enhances AML compliance and capital-flow monitoring, allowing the central bank to calibrate FX interventions more precisely.

The macro backdrop supports execution. Reserves of USD 70–73 billion, about 25 percent of GDP, shield the external account while FDI inflows, roughly USD 1.6 billion in 2024, signal cautious investor re-entry. Transparent digital tax flows could compress sovereign risk premiums by 50–70 basis points, narrowing the gap between local-currency and Eurobond yields. A more traceable liquidity base may also stabilize the dinar (DZD=X), where the parallel-market premium—near 8 percent in 2023—could converge below 5 percent for three consecutive quarters if credibility holds. Benchmark Brent (BZ=F) near USD 85 a barrel still dictates fiscal breathing room, yet improved liquidity oversight should temper pass-through from oil volatility into domestic inflation.

The forward path depends on institutional execution. Success will be visible in measurable metrics: retail e-payment share above 35 percent by December 2026, informal-sector share reduced to 25 percent of GDP, and CPI within a 3–4 percent band by 2028. Failure to meet these thresholds would expose policy inertia and extend Algeria’s dependence on cash-based fiscal float. A disciplined digital rollout could reposition the country within global frontier indices, aligning monetary predictability with fiscal transparency.

For investors tracking sovereign credibility through currency and commodity linkages, sustained narrowing of DZD spreads and fiscal capture gains will be the clearest proof that Algeria’s shift from cash to data has transformed liquidity management into a credible macro policy instrument.