Current economic system in Algeria ‘fragile’ and ‘unsustainable’

Algeria has warned of the unsustainability of its current subsidies system.

In the government’s new growth model study for its 2030 vision for economic development, it has also called for greater economic diversification to reduce its dependency on hydrocarbons.

In all sectors of public service (electricity, gas, water, rail transport, telecommunications), tariffs are kept at levels lower than the cost of operations for more than a decade for social considerations…this financial support is no longer sustainable for the state.

The 2017 appropriation bill to curb subsidies is a “start of the end of this dependence”, the document explained.

The slump in oil prices has unveiled the “fragility” of the Algerian economy and its vulnerability to international oil and gas price volatility. Algeria will now need to advocate for developing a non-oil economy, agriculture and industry, according to the document.

Due to regime opacity, bureaucracy, widespread corruption and vested economic interest amid the Algerian ruling elite implementing these reforms will be difficult. For some analysts, the superficial nature of the reforms suggested in the document is a way of polishing the regime’s democratic façade and maintaining the authoritarian status quo.

Cuts to public spending, raised revenue through VAT and taxes on electricity, fuel and tobacco in the 2017 Finance Bill provoked unrest earlier this year when rioters in the eastern city of Bejaia clashed with police.