Algeria: Oil and foreign exchange crises 'opportunity for self-sufficiency'

The Algerian government is fighting to reduce the cost of imports and prevent the draining of foreign exchange, in order to offset the economic crisis which has plagued the country since 2014.

Algeria has been facing an economic crisis for five years due to the collapse of oil prices in the international market, which has caused the country’s revenues to decrease from $60 billion in 2014 to $27 billion in 2016 and $41 billion in 2018. Algeria’s economy heavily depends on oil and gas revenues, which account for 94 per cent of its foreign exchange earnings.

Since 2015, the government has initiated plans to curb imports and foreign exchange exhaustion, a measure which has imposed a prior authorisation system on a range of imported products and goods.

By early 2018, the government had prevented the entry of up to 1000 products to the country, in an attempt to protect local production and reduce the cost of imports. The government subsequently abolished the ban, replacing it with a system of protectionist tariffs ranging between 30 and 200 per cent in early 2019.

Cement producer

In the midst of this economic crisis and government efforts to curb imports, Algeria has managed to achieve self-sufficiency in cement production since late 2017.

Algeria exported its first cement shipment in December 2017 to Gambia in West Africa.

In order to protect the local production of cement, the Algerian government imposed a 200 per cent fee on cement imports under the protectionist tariffs system. According to official statistics released by the Ministry of Industry and Mines, Algeria consumes more than 25 million tons of cement per year, whereas the country’s production exceeds 30 million tons.

The Algerian government expects total cement production to reach 39 million tons by 2020, a large proportion of which will be exported.

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Iron production

In addition to cement, Algeria initiated limited exports of iron in 2019 and engaged in foreign partnerships to produce such material.

To this end, Algeria partnered with foreigners concerned with iron production, most notably the Turkish Tosyali complex, the Oran factory in west Algeria and the Bellara facility in the coastal town of Jijel, in partnership with Qatar.

The production of Turkey’s Tosyali is worth 2.9 million tons per year; this amount is expected to rise to 5 million tons after the end of expansion work.

Algeria is currently an importer of iron and steel due to insufficient local production compared to the growing demand, with an average annual import rate worth around $5 billion.

In 2017, a joint Algerian-Qatar plant entered the production stage in the region of Mablia in eastern Jijel, with a production average of 2 million tons. It is projected to produce 4 million tons as of 2020, according to the Ministry of Industry and Mines.

The ministry also noted that Algeria’s annual consumption of iron is worth 9 million tons, while its import costs exceed $5 billion.

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