Algerian Economy PART2 and End

Galloping inflation, caused by higher cost of imported goods, following the devaluation of the Dinar, and by increased costs of production, exceeded 40% in 1994, and was around 30% in 1995, the highest since Algeria's independance. The situation is even more serious, when one realises that the Algerian consumer spends between 65% and 75% of his income on buying foodstuffs. The prices of foodstuffs have grown at an average annual rate of more than 90% ( 200% for coffee, 110% for milk, 93% for sugar, etc). The resulting fall in the purchasing power of money has led to a growth in poverty.

The present state of affairs bodes ill for the future. External debt is a millstone which will aggravate further the recession. The policy of debt rescheduling by the algerian regime in January 1994 and the implementation of IMF-imposed measures have had negative economic and social effects. The situation will get worse because rescheduling leads to only postponing the repayment of part of the debt. This means repaying, in 3 or 5 years, significantly greater sum of money than that due today.

It will also lead to a high level of inflation, greater loss of purchasing power, a growth in social needs and an increase in social problems, especially in matters of health, education, housing and transport. This will be caused by the reduction of public expenditure, in these spheres, as demanded by the IMF, although they are already under-funded.

External debt had already exceeded 29.4 billion USD in 1995. Total debt will most probably exceed 36 billion USD in 1998; 40 billion USD if military debt is included. Receipts from exports are not growing at the same rate. Exports of oil and gas represent 98% of all exports. The level of receipts from exports depends on fluctuations in the price of oil, which are completely outside Algeria's control.

According to Sonatrach, the provisional receipts from the export of oil and gas will grow from 8.6 billion USD in 1995 to 9.8 billion USD in 1996, and will stabilise at around 11 billion USD between 1998-2000.

Imports of goods and services alreaady exceeded 11.1 billion USD in 1995. Even if they remain the same in the year 2000- most unlikely, considering the natural growth in consumer demand- the gap will be difficult to cover because of increasing indebtedness and the mediocre performance by the economy. The productive sectors, such as industry, agriculture, housing and construction, are experiencing recession, and are incapable of generating adequate resources.

Neither the IMF programme of structural adjustment, nor the measures adopted by the present regime, which is directing the economy on a day-to-day basis, will be able to prevent the deterioration in the economic and social situation. And the gap between available currency resources and what is needed to finance the economy will be so great between 1998 and 2000 that Algeria will be unable to continue making repayments, and will find that the IMF is less cooperative than in 1994-95. ((BONJOUR L'ESCLAVAGE)) !!!

The level of debt will have risen steeply and the prospects of any growth in the receipts generated by exports are virtually nil, because of the state of stagnation in the international oil market. By the end of the century Algeria's ability to repay its debts will be reduced considerably. Unlike Morocco and Tunisia, Algeria does not even have the means-other than hydrocarbons-to promote agricultural and industrial exports.

Besides, the natural growth in population from 26 million in 1992 to 33 million in the year 2000, an increase of 7 million, will make it impossible to satisfy all the needs of the country in the coming four years-if the present circumstances continue. The financial, economic and social tensions will be such that they can only lead to a popular explosion. As the present situation is abnormal and unnatural, it cannot continue indefinitely.