EXECUTIVE SUMMARY 3.28 Coordination is about improving the flow of information to citizens. Even if one cannot talk of decentralisation, if the dearth of information available locally about major projects is anything to go by, it is possible at least to talk about effective devolution under the auspices of the Wali. Challenges noted related to insufficient capacity for planning, budget preparation and execution. These deficiencies are exacerbated by the exceptionally high number and scale of projects on the ground. 3.29 Algeria‟s budget performance over the past few years has been exceptional and the country has taken remarkable initiatives to reduce the impact of fluctuations in the oil price on its budget and its public external debt. These encouraging initiatives notwithstanding, Algeria is vulnerable to external shocks (especially from the oil sector) and there are some shortcomings in the mechanisms put in place to guarantee transparency, the involvement of the citizenry, and control and accountability in public finance management. The CRM also took note of the extensive budgetary modernisation programme, in particular the adoption of results-based budgeting and reform of local taxation. 3.30 There have been exceptional budget performances. The state has seen its coffers considerably swollen as a result of the escalation in oil prices. The overall treasury balance reached a surplus averaging over 9 per cent of GDP in 2002–2005, whereas it was just about even in 2002. There was an increase in the current account surplus in excess of 18 per cent of GDP, enabling the country to accumulate additional foreign exchange reserves. In 2006, foreign exchange reserves amounted to US$80 billion, much like the US$10 billion in revenue in 2000 (for 4.6 months of imports). These reserves are projected to reach US$100 billion in 2007/2008 if oil prices continue their upward spiral. This excellent budget performance enabled Algeria to reconstitute its foreign exchange reserves and implement public investment programmes to boost growth. The first support programme of this kind was implemented in 2001– 2004 and was followed by a Growth Consolidation Plan for 2005–2009 for almost US$120 billion. 3.31 There is excessive dependence of the economy on the petroleum sector. As stated earlier, the hydrocarbons sector is the growth engine of the Algerian economy, accounting for 70 per cent of government revenue, 45 per cent of GDP, 97 per cent of export revenue and over 30 per cent of growth recorded each year. The predominance of this sector has profoundly affected the structure and management of the Algerian economy. It has dampened any incentives to adopt an active policy to diversify the economy and promote production of tradable goods and services outside the hydrocarbons sector. This has led to a weakness in the internal taxation system. The structure of budgetary revenue clearly shows the vulnerability of public finance to external shocks. 3.32 Although corruption is widely acknowledged, there are no reliable figures to show the scale of the problem. Corruption emerged largely as a result of the administration‟s reluctance to introduce economic liberalisation. The benefits derived from positions emerged overnight and the tax and customs authorities 13