Rabat - The decline of oil prices to less than half their original price for about two years thus far has had a dramatic effect on the Algerian economy.
Rabat – The decline of oil prices to less than half their original price for about two years thus far has had a dramatic effect on the Algerian economy.
Algeria, which traditionally depended basically on oil and gas export without a clear economic diversification policy, is now paying the heavy price.
According to official numbers cited by Algerian news website Tout sur l’Algérie, the deficit in the Algerian Treasury has arrived to alarming levels. In the first two months of the year, the deficit was about 1404 billion dinars (approximately 14 billion dollars) according to the figures revealed by the Ministry of Finance in a press release on Saturday, May 7th, via the official news agency APS.
The deficit reported this year is alarmingly higher than that in 2015. It represents an increase of 240 per cent in comparison to the same period of 2015, the source said. At this rate, the annual deficit would amount to $78 billion.
Paradoxically, budgetary expenditures of Algeria are skyrocketing. In the first two months of 2016, Algerian expenses reached 2040 billion dinars while in the same period of 2015 the amount didn’t exceed 1222.6 billion dinars. According to the Ministry of Finance, the increase of expenditures has thus amounted to 66,85% in 2016 compared to the year before.
The policy of austerity Algeria adopted to cope with the drop of oil prices has only added insult to injury since it was faced with severe social discontent. Freezing employment in the public sector, postponing infrastructure projects, and reducing the budget of investments were some of the measures taken to reduce public expenditures, yet they provoked various protests across the country. Observers believe that Algeria is indeed on the verge of bankruptcy.
In a statement to the Algerian press on Tuesday, Minister delegate to the budget, Hadji Baba Ami, said his government would cut its spending in the coming months, and focus on the projects that are underway.
The Algerian official did not rule out the possibility that the country resort to foreign loans.
In case the government chooses this path, “we will maintain a sustainable debt that will be intended only to finance investment,” he said.