On May 1, President Abdelmajid Tebboune said Algeria would not accept a loan from the IMF, arguing “accumulating debt harms national sovereignty.”
The Algerian government has slashed the national budget by 50% as international oil prices plummet, hitting the country’s economy and population with more financial woes and a fresh wave of fear for the future.
In a statement on May 3, the office of Algerian President Abdelmajid Tebboune announced a series of measures aiming to mitigate the effects of the oil price slump and the COVID-19 pandemic on the Algerian economy.
Algeria, a member of OPEC, depends heavily on the petrol and oil industry, with crude oil making up 20% of its GDP and 85% of all exports. Ahead of Sunday’s announcement, Algerian crude oil was selling for $20 a barrel—$30 less than the government had predicted in the annual budget.
The North African country was already facing an economic decline before COVID-19 struck hard, with foreign exchange reserves sitting at a mere $62 billion, compared to $180 billion in 2014.
And, as Algeria sinks deeper into financial crisis, OPEC member states Russia and Saudi Arabia face off against the US over oil prices, meaning that the foundations of Algeria’s already shaky economy must remain braced for another potential hit.
Despite the massive budget cuts and no light at the end of the tunnel for oil prices, Algeria’s government announced an increase in the minimum wage from 18,000 dinars ($140) per month to 20,000 dinars ($155).
In a bid to cushion the economic shock for Algeria’s citizens, under total lockdown since early April, the government also plans to abolish income tax for workers earning a monthly wage of fewer than 30,000 dinars ($233).
Emergency finance bill on hold
The two contradictory announcements came with the postponement of a vote on an emergency finance law, aiming to rein in the economic havoc wrought by the COVID-19 crisis. The vote, initially set to take place on May 3, will now be held on May 10.
The draft bill takes into consideration Algeria’s oil receipts, which currently stand at $20.6 billion compared to a predicted $37.4 billion.
However, with oil prices at a historic low and the country’s foreign exchange reserves lurking in the danger zone and the national budget slashed in half, Tebboune will have his work cut out to meet the growing needs of the population and the oil-dependent national economy amid the pandemic.
The president clarified on May 1 that his government would not consider accepting loans or grants from international agencies or foreign-owned banks, despite the urgent nature of the COVID-19 crisis.
“I personally think that the absence of international debt is a strengthening mechanism amid the COVID-19 crisis,” he said in an interview at the presidential palace in Algiers.
Tebboune ruled out taking a loan from the International Monetary Fund (IMF), saying such a move would damage Algeria’s sovereignty.
Algeria is a “free country,” the president underlined. Debts to international actors compromise this freedom, he argued.
If Algeria were to accept a loan, the country would “no longer be able to defend causes, like the Palestinian cause and the Western Sahara conflict,” Tebboune emphasized.
The president said his country would prefer to take internal loans than to risk its autonomy through international debt.
The cuts to the national budget will directly affect the Western Sahara conflict, Sahrawi and former leading Polisario member Mustafa Salma said in a Facebook post following the announcement of the slashed budget.
The Algerian government uses national resources to cover the expenses of the breakaway group the Polisario Front and house its leaders in the Tindouf camps, where thousands of Sahrawis are currently trapped amid the novel coronavirus pandemic.
The Polisario member-turned-activist called on the governments of both Algeria and Morocco to focus their emergency response efforts on the humanitarian side of the COVID-19 pandemic and put the territorial conflict aside as the global crisis rages on.
It is, however, within the interests of the Algerian regime to keep the Western Sahara file open and active, Salma explained.
“Keeping the conflict as it is now is the best option for the Algerian regime, because it will give Algeria the time to fix internal problems and structure its economy to reach the level of its neighboring countries and their economies,” he wrote.
Salma believes the Algerian government has, for a long time, focused its resources on increasing oil revenue rather than developing a modern and competitive economy within the North African country.
A move away from transparency
Tebboune’s opinions on IMF loans come after he reportedly took back control of the Western Sahara file, held by the Algerian military since 1975, leading to speculation a change in the direction, or marketing, of the Algerian regime may be on the horizon.
Corruption and self-interest has, historically, been an inherent part of Algerian governance. The country’s population and economy are now living with the consequences, enhanced by the impacts of the global COVID-19 pandemic.
Salma’s call for change on Facebook reflected implicit doubt that Tebboune’s government represents the change the Algerian people hoped for.
The former Algerian prime minister became president in December 2019 after a series of start-and-stop elections, marred by protests.
The elections followed months of demonstrations against former President Abdelaziz Bouteflika. Protests against the regime began in February 2019 when the ousted president announced his intent to run for a fifth term of office. Demonstrators took to the streets, calling for a complete political overhaul.
Bouteflika stepped down and several public figures and politicians faced prosecution for corruption, but unrest continued to ripple across Algeria.
When Tebboune stepped into Bouteflika’s shoes, some Algerians were ready to settle down to stability with the new president, though many feared that the change was not enough and that more change was still needed. Online protests have continued into the lockdown.
While Tebboune’s promises of tax cuts and a higher minimum wage may bring hope to the troubled Algerian population, the president’s refusal to accept external loans, or external interest in the regime, and his decision to take foreign policy power from the military could herald a sinister turn away from transparency and a backward step in political reform