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Algeria on the verge of serious economic crisis

November 21, 2018 at 4:42 am

Algeria may face an economic crisis by 2019 in case the Algerian authorities did not undergo immediate economic reforms, after oil revenues have fallen since 2014, according to a report released by the International Crisis Group (ICG) on Monday.

According to Agence France-Presse (AFP), the report said that “In the absence of reforms (…) the economic crisis could affect Algeria by 2019, which would fuel the tension surrounding the upcoming presidential elections.”

Less than six months before the anticipated elections, the possibility of re-nominating President Abdelaziz Bouteflika for a fifth term continues to dominate the Algerian political scene.

Bouteflika, 81, who has been president since 1999 and has been exhausted by disease for years, has not announced his intention to remain in office. However, “He will easily win ” in the elections scheduled for April 2019 if he decided to run for the presidency, according to the ICG.

The comfortable financial situation in Algeria, which continued until 2014, was in Bouteflika’s favour. Yet, the decline in oil revenues which is the main resource of the Algerian economy, due to the collapse of prices worldwide, prompted the authorities to take austerity measures.

As mentioned in the report, “The Algerian authorities recognize that the current economic model is no longer valid, but find it difficult to mend it.”

The ICG expressed regretfully in the report that, “The Algerian government aims only to win more time with a series of measures to reduce budget expenditures which will not lead to an immediate recovery and a banking policy that feeds inflation.”

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Algeria decided at the end of 2017 not to resort to external loans and to borrow from the Central Bank by printing currency to fill the budget deficit over five years. Experts considered such a decision to be a direct cause for further increases in inflation rates.

The Brussels-based NGO called on the Algerian government to “develop a roadmap for economic reform” in order to avoid a new crisis, stressing that the solution is to “improve transparency in public finances.”

The government should also ” engage in an inclusive dialogue with economic actors and civil society on the challenges facing Algeria and the right means to achieve prosperity,  in addition to relying more on younger generations as 70 per cent of the population is aged of less than 30 years old”, according to the report.

After 20 years of Bouteflika’s rule, the cost-effectiveness of the Algerian economy is still insignificant. The country also relies heavily on imported goods and employs a subsidy policy that cuts a large quota of the public budget each year.

The Algerian parliament approved on Thursday the government budget for 2019, which, like last year, allocated about 20 per cent of government expenditures to finance social assistance programs and support essential commodities, namely, fuel, cereals, sugar, oil, and milk.