Algeria is on the verge of losses due to the pandemic and low oil prices

Slimane stands in front of a bank in Algiers and takes out the gold necklace and ring from his wife’s jewelry bag, which he hopes to use as collateral for the loan.

During the pandemic, the 46-year-old businessman had to close his small company that designed and produced promotional materials and fired his four full-time employees.

“It’s very difficult. It feels like the sky is falling,” Slieman said, not wanting to disclose his full name. “The pandemic has forced companies to reduce business or shut down completely, especially in the tourism industry that I rely on for customers. My wife asked me to pawn her gold jewelry so we can open a grocery store near us.”

The coronavirus pandemic has dealt a heavy blow to Algerians and exacerbated the plight of the state-led economy, which has been scarred by years of falling oil prices and restrictions on local and foreign investment.

Even before the pandemic, less than a third of Algerian youth were unemployed, and many hoped to change after the massive protests that led to the overthrow of President Abdulaziz Bouteflika in 2019.

But analysts warned that Algeria may soon face economic disaster due to a single economy, completely dependent on oil and gas exports, and the depletion of foreign exchange reserves. Few people believe that politicians can bring about meaningful change, and the low turnout in last weekend’s election clearly demonstrates this fact. Analysts say that for a regime backed by the military, the first parliamentary poll since the protest has made it possible to predict a democratic revival, and any resulting independents and pro-regime coalition government are unlikely to change the status quo.

“Economic trends are extremely negative,” said Riccardo Fabiani, head of North Africa at the International Crisis Group, a conflict resolution organization. “There is a liquidity crisis in banks and local companies. The construction industry is the largest industry after oil, and the number of bankruptcies hit a record high. The country may be heading for an economic disaster, with a heavy social cost.”

According to data from the International Monetary Fund, the economy shrank by 6% last year. Due to rising oil prices, the organization expects the economy to grow by 2.9% in 2021. It predicts that the 2021 budget deficit will account for 18.4% of GDP. In order to balance the budget, the bank stated that Algeria needs an oil price of US$169.6 per barrel, more than double the current price of US$72. However, analysts said that it is not yet clear how the regime plans to prevent potential economic disasters.

Mabrouk Aib, a lecturer and public policy analyst at the University of Algeria, said: “Politicians say they want to open up the economy and diversify.” “They want a lot of things. This is what they claim, but in fact we don’t know if they are right. There is a clear strategy for how to implement this.”

Although the decline in oil prices in recent years has squeezed government finances and limited its ability to provide alms and create jobs for the predominantly young population, Algerian military policymakers, or Decision maker As we all know, they failed to achieve economic diversification. On the contrary, successive governments have been consuming foreign exchange reserves, which have fallen from US$200 billion in 2014 to US$47 billion in 2020.

The military traditionally controls key decisions Independence from France In 1962, he was reluctant to implement reforms to lift the shackles of the private sector, incentivize investment, and bring transparency to an economic system built on a network of vested interests and customerism driven by petrodollars. Under the leadership of Bouteflika, the crony capitalist private sector flourished, thanks to political sponsorship and government generosity. Many of these businessmen are now in jail on corruption charges, and some of their companies have been taken over by the state.

Fabiani pointed out that given the lack of foreign debt and rising oil prices, the Algerian regime can still buy for “one or two years.” It can resort to bilateral borrowing from China or the Gulf region. President Abdelmadjid Tebboune ruled out a loan to the International Monetary Fund last year, implying that this would limit the country’s ability to formulate an independent foreign policy. “The biggest question remains what the new government will do,” Fabiani said. “Will they come up with any new ideas?”

Rising prices have triggered repeated demands for salary increases and strikes from all walks of life, from teachers to doctors to postal workers. The firefighters in uniforms protested last month and were dispersed by the police using tear gas.

Out of vigilance against the protests, the authorities suppressed before the elections and prevented the demonstrations of the country’s democratic movement, which expelled Bouteflika in 2019 and flooded the city centre of Algiers with police cars. More than 200 people went to jail for protesting.

The authorities may suppress dissent, but they are well aware that under the combined effects of blockades, business closures and inflation, Algerians’ living conditions are getting worse and worse.

“I want to support a family of seven, but the construction company I worked for has closed down,” said 50-year-old unemployed Samir Yefsa. “The country is our only customer, but the government has no plans for construction right now. I don’t know what to do. I have a problem with my family. I can only borrow money from my family and friends who are retired and live on pensions because of other young people. Similar to mine.”

In a market in Naima Algiers, a primary school teacher complained about rising prices and declining purchasing power. “I swear to you, I haven’t bought fruit for my child for two months,” she said. “Now some things are too expensive for low- and middle-income earners.”