Economy of Algeria

The fossil fuels energy sector is the backbone of Algeria's economy, accounting for roughly 60% of budget revenues, 30% of GDP, and over 95% of export earnings. The country ranks 14th in petroleum reserves, containing 11.8 billion barrels (1.88×10 m) of proven oil reserves with estimates suggesting that the actual amount is even more. The U.S. Energy Information Administration reported that in 2005, Algeria had 160 trillion cubic feet (4.5×10 m) of proven natural-gas reserves, the tenth largest in the world. Average annual non-hydrocarbon GDP growth averaged 6% between 2003 and 2007, with total GDP growing at an average of 4.5% during the same period due to less-buoyant oil production during 2006 and 2007. External debt has been virtually eliminated, and the government has accumulated large savings in the oil-stabilization fund (FRR). Inflation, the lowest in the region, has remained stable at 4% on average between 2003 and 2007.
Algeria's financial and economic indicators improved during the mid-1990s, in part because of policy reforms supported by the International Monetary Fund and debt rescheduling from the Paris Club. Algeria's finances in 2000 and 2001 benefited from an increase in oil prices and the government's tight fiscal policy, leading to a large increase in the trade surplus, record highs in foreign exchange reserves, and reduction in foreign debt.
The government's continued efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector have had little success in reducing high unemployment and improving living standards, however. In 2001, the government signed an Association Treaty with the European Union that will eventually lower tariffs and increase trade. In March 2006, Russia agreed to erase $4.74 billion of Algeria's Soviet-era debt during a visit by Russian President Vladimir Putin to the country, the first by a Russian leader in half a century. In return, Algerian President