Algeria is preparing to take a major step in its financial reforms by issuing its first-ever sovereign sukuk or Islamic bond, valued at 297 billion dinars (about $2.3 billion).
The move comes as the country faces rising fiscal pressures and seeks to reduce its heavy dependence on oil and gas revenues.
The sukuk, announced by the Ministry of Finance, will run for seven years and offer investors a fixed annual return of six percent. Instead of interest payments, which are prohibited under Islamic finance principles, investors will receive returns in the form of rental income generated from real estate assets. These assets, owned by the state, will serve as the guarantee for the sukuk, making it both Sharia-compliant and backed by tangible value.
Subscriptions will officially open on November 2, 2025, and run for two months. The government has made it clear that the offer is exclusively for Algerian nationals, whether living in the country or abroad. Foreign investors will not be allowed to participate in this initial phase, as authorities aim to tap into Algeria’s own domestic wealth before turning outward.
One of the main goals of this initiative is to attract money from Algeria’s vast informal economy. Estimates suggest that nearly 10 trillion dinars are currently circulating outside the formal banking system. By offering a safe, government-backed and Sharia-compliant investment product, officials hope to encourage citizens to move their savings into the official economy, strengthening the financial system and providing funds for public needs.
This issuance is also part of the broader National Reform Agenda, which emphasizes diversifying the economy and expanding financing tools. For decades, Algeria has relied on hydrocarbons,oil and natural gas for the majority of its revenue. While this sector remains vital, it has left the economy vulnerable to fluctuating global energy prices. By broadening its financial products to include sukuk, Algeria is taking steps to modernize its capital market and align with international trends.
Globally, sukuk are already widely used. The market is worth over $800 billion, with Gulf states like Saudi Arabia and the United Arab Emirates, as well as Malaysia, leading the way. Neighboring countries such as Morocco and Egypt have also launched similar instruments in recent years. Algeria’s entry into this market not only places it among reform-driven economies but also signals a shift toward long-term planning and resilience.
The timing of the sukuk issuance is critical. Algeria recorded a budget deficit equal to 13.9 percent of its GDP in 2024, and the International Monetary Fund (IMF) projects another large deficit of more than 11 percent in 2025. With fiscal reserves already depleted and the Revenue Regulation Fund exhausted, the government urgently needs new sources of funding to cover its budget.
Public debt is also on the rise, currently standing at 48.5 percent of GDP and expected to surpass 60 percent by 2026 if corrective measures are not taken. The IMF has urged Algeria to implement deeper reforms, including reducing costly energy subsidies and improving non-oil tax revenues. While these reforms may take time to implement, the sukuk offers a more immediate solution to inject liquidity into the economy.
Beyond addressing fiscal gaps, this debut sukuk is symbolic. It reflects a balancing act between tradition and modernity, drawing on Islamic finance principles while aligning with global financial practices. It also provides Algerians with an opportunity to directly support their country’s development while earning steady, predictable returns.
If the sukuk proves successful, Algeria could consider larger issuances in the future, possibly denominated in foreign currencies and open to international investors. This would not only diversify its funding options but also enhance the country’s visibility in global financial markets.
For now, the government is focused on making the local launch a success. By engaging its citizens, building trust in financial products and ensuring transparency, Algeria hopes to lay the foundation for a stronger, more inclusive financial system.
This $2.3 billion sukuk is more than a financial instrument, it is a step toward reshaping Algeria’s economic future, reducing reliance on hydrocarbons and providing citizens with a greater role in the nation’s financial stability.
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