new Prime Minister's program hampered by declining oil and gas revenues

Algeria is again registering a large deficit in its balance of payments this year and is making great strides towards the depletion of its foreign exchange reserves.

The new Algerian Prime Minister Abdelaziz Djerad submitted on February 13, 2020 to the National People's Assembly (APN) his “action plan”, focused “on food security, energy transition and the digital economy”. But this action plan outlined in broad outline is, according to the Prime Minister, already already limited by the fall in the receipts of hydrocarbons, principal resource of the country. Djerad says falling exports and oil prices have “worsen” the budget deficit while the trade balance showed at the end of 2019, a deficit of 10 billion dollars.

The country currently produces around one million barrels of oil per day, compared to more than 1.4 million in 2005, according to official figures. With the fall in prices, this corresponds to a 50% drop in oil revenues between 2012 and 2019, while hydrocarbons represent 92% of Algeria's exports.

Equally worrying, the domestic public debt rose from 26% of GDP in 2017 to 45% of GDP in 2019, said the Prime Minister, appointed on December 28 by President Abdelmadjid Tebboune, before the hemicycle.

The Central Bank announced in early February that the country's foreign exchange reserves had dropped to $ 62 billion at the end of 2019 from 79.88 billion at the end of 2018 and 97.22 billion at the end of 2017. These reserves should continue to decrease to reach 51.6 billion dollars at the end of 2020, according to the forecasts of the last finance law, and could at this rate, eventually run out by 2024.

The new Prime Minister has promised to clean up “the catastrophic legacy” and put an end to “excesses that characterized the management of state affairs” during the twenty years in power of deposed president Abdelaziz Bouteflika. Decades characterized by the capture and diversion of oil revenues.

Djerad has promised to break with “all the past practices in political and socio-economic governance”, having led, according to him, to a “methodical destruction of economic enterprises and the marginalization of skills”.

Pending possible “structural reforms”, which will take time to take effect, the draft budget 2020 still projects a large deficit. The expected ordinary tax revenue, ie 3,000 billion dinars (23 billion euros), will barely cover the public service wage bill, which is around 2,900 billion dinars each year.

Not to mention other accumulated deficits, such as that of the National Pension Fund (CNR) which would amount to 700 billion dinars (5.3 billion euros). A real economic and budgetary impasse which risks leading Algeria towards painful adjustments, under the caudine forks of the IMF.


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