A War Economy in Times of Peace: Algeria’s Difficult Equation

Let’s talk about a country of great interest… A country with a fiscal deficit of nearly $40 billion in 2026… The same deficit is expected to continue in 2027… Then rise to $42 billion in 2028… Despite this, it is making huge defense purchases, exceeding countries such as Italy and Poland. If we look at its armament, we find a very strange and striking combination of Russian systems with Chinese ammunition and South African air defense.

Algeria…

What we must understand before looking at the figures is that the army in Algeria is not just a military institution. It is an essential part of the political system itself. Algeria’s history since independence is full of moments when the military was the actual ruling power or at least the ultimate guarantor of the regime’s survival.

With a direct regional rival such as Morocco (with which relations have been severed since 2021), military spending has become both internal and external. In other words, weapons here are not just a means of strategic deterrence, but also a means of purchasing internal stability and consolidating alliances within the ruling elite.

Morocco is not just a neighbor to Algeria. It can be seen as a military and political mirror for Algeria. Any arms deal concluded by Algeria is interpreted in Morocco as an intention to deter it, and vice versa, especially with the Western Sahara issue remaining open without a final solution.

This has created a kind of silent arms race. Algeria is upgrading its air and defense capabilities, prompting Morocco to consider strengthening its capabilities in the areas of drones, air defense, and American armaments, even if some of this is still under discussion. This puts us in a vicious cycle. Once you enter it, you find yourself forced to continue even if both sides lose.

Algeria has doubled its defense spending as a percentage of GDP from about 4% in 2022 to nearly 9% in 2025. This expenditure exceeds that of Russia itself during wartime, which spends about 7.2% of its GDP on defense.

The defense budget reached about $25 billion in 2025, up from $21 billion previously, and there is no indication that it will decrease anytime soon.

If calculated according to purchasing power parity (PPP), this defense spending is equivalent to about $75 billion in domestic purchasing power, a figure that puts Algeria at a higher purchasing level than countries such as Italy and Poland, for example.

Well, let’s take a look at the Algerian army.

The army has about 110,000 conscripts, about 1,500 tanks, 1,000 infantry fighting vehicles (IFVs), more than 1,000 armored personnel carriers (APCs), 180 rocket launchers, and more than 600 artillery pieces.

The main tank in service is the T-90SA, alongside updated versions of the T-72. Interestingly, there are approximately 270 older T-55 tanks still in service, but they are now used in fire support roles and are no longer part of the modern tank force.

We can see from this that Algeria has a clear tendency to purchase, or at least prefer, specialized Russian designs that are somewhat unusual compared to the traditional armament lines of other countries, such as the TOS-1A and BMPT Terminator, which, incidentally, are not common systems even among traditional customers of Russian weapons.

This gives the impression that Algerian military thinking is not limited to mere displays of force, but focuses on equipping forces capable of delivering heavy firepower in complex ground engagements. In other words, we are dealing with an army that is thinking in terms of scenarios involving combat between regular forces, and not just counterinsurgency missions.

Algeria is not just an important customer for weapons, but also has local innovations that are worth mentioning.

Interestingly, they have begun converting old tank chassis such as the T-62 into fire support armored vehicles and engineering vehicles, some of which have been fitted with a BMP-2 Berezhok turret equipped with a 30 mm cannon, grenade launchers, and anti-tank missiles.

This means that there is a practical approach based on the principle of maximizing the use of resources. Instead of leaving old equipment in storage, it is reused at minimal cost to increase firepower on the ground.

Although Russia is the main supplier, there is diversity among suppliers, which is no small matter.

For example, Algeria has around 600 German Fuchs transporters, and some sources indicate that there is an agreement to assemble or manufacture them locally in cooperation with Rheinmetall, with a clear condition that they cannot be resold, meaning that what is assembled in Algeria remains exclusively for the Algerian forces and cannot be exported.

In the field of artillery, we see a combination of old Soviet heritage and modern Chinese 155 mm systems.

The Algerian navy includes German frigates with hybrid armament: Swedish missiles, South African air defense, and Chinese ships equipped with European radars.

Air defense is a completely different story.

The Algerian system is extremely heavy, including S-300, Buk, Tor, Osa, and Strela systems, as well as an upgraded version of the Pantsir system that arrived in Algeria before it entered service in Russia itself.

The addition of the S-400 system means that Algerian airspace is one of the most heavily guarded in Africa, and perhaps even in the entire Mediterranean region.

Algeria is one of the very few countries in the world to possess modern Iskander tactical ballistic missiles, the export version of which has a range of approximately 280 kilometers. Estimates indicate that Algeria has at least 12 launchers and approximately 75 missiles.

The Algerian Navy has the capability to carry out long-range attacks from under the sea, as its upgraded Kilo submarines are capable of launching Klub-S cruise missiles, opening the door to precision strikes beyond the coastline.

Although Algeria is not a major amphibious power, it does have the capacity to conduct limited amphibious operations. It has an Italian San Giorgio-class amphibious ship that entered service in 2015, in addition to two older ships, which can transport a battalion-sized force including tanks and combat support vehicles.

The air force is the backbone of the Algerian army, with around 60 Su-30 aircraft, as well as very strong air-to-air refueling capabilities, thanks to its six Il-78 aircraft, a number that exceeds that of some major European countries. Its air transport capabilities are also diverse, ranging from Russian Il-76 aircraft to American C-130s.

In 2024, Russia announced that the first export contract for the Su-57E aircraft had been signed with Algeria, and Algerian reports indicate that pilot training is underway and that delivery of the aircraft is likely to take place at the end of 2025. If this indeed happens, Algeria will be the first African country to possess a fifth-generation fighter jet.

Incidentally, there are indications that the Su-35 aircraft, which were intended for Egypt before the deal was canceled, have arrived in Algeria. These reports are based on satellite images and indications from the Algerian Air Force itself.

With all that said, the question remains: what is Algeria’s fundamental problem?

The answer is one word: sustainability.

Algeria’s nominal gross domestic product (GDP) will reach approximately $288 billion in 2025, while its purchasing power parity (PPP) will reach $874 billion. When the primary source of funding is energy revenues, and with youth unemployment at around 30%, very high defense spending becomes an open bet on gas and oil prices.

Any significant fluctuation in these prices could create a gap between the size of the military and the economy’s ability to maintain, operate, and continuously modernize it. At that point, the danger is not only that the military will be weakened, but that it will become an advanced fleet that is expensive to operate and politically difficult for any government to downsize.

Most of this spending leaks abroad because local manufacturing remains limited. Countries that build their defense industries recoup some of the money in the form of jobs, expertise, and technology, while Algeria has so far paid a heavy price for armament without commensurate industrial gains.

This simply means that each modernization cycle must be financed anew and in hard currency, with the risk of sanctions, restrictions, or supply disruptions.

We cannot ignore another highly sensitive point: Russia itself is at war, and any advanced aircraft or system it exports to Algeria is one that does not enter the Russian army’s warehouses, which have enormous needs. This means there is a risk of delays in delivery, or the possibility that Russian domestic priorities will suddenly take precedence over the customer. Therefore, diversifying sources of armament in the future is not a luxury, but a strategic necessity.

It is noteworthy that Algeria did not enter 2022 as a weak army in need of urgent development, but was already one of the best-equipped armies in Africa: modern tanks, multi-layered air defense, Kilo submarines armed with cruise missiles, and a powerful air force with extended range thanks to its air-to-air refueling capabilities.

So what happened after 2022 was not the beginning of armament, but rather an acceleration of an already high pace, an acceleration closer in speed to the logic of a war economy in peacetime.

Therefore, the difficult question that Algeria needs to answer remains:

Can the economy continue with this approach? Or will there come a moment when the commitments become greater than the capacity to bear them? And what is the plan then?