Little by little, Algeria is being suffocated. In six years, people’s purchasing power has dropped by 25% and the tendency is accelerating. During the first quarter of 2020, even before the country was hit by the full brunt of the pandemic—the borders weren’t closed until 17 March—Algiers harbour, the country’s main port of entry, ground to a halt. Container imports, carrying a run-of-the-mill merchandise, from food to sporting goods, have decreased by 38%. And while grain, rebars and other building materials are more than holding their own, this can only partially conceal the disquieting collapse of domestic consumption.
On Aid El-Kebir, the religious holiday that marks the end of Ramadan, widely observed in Algeria, horse traders were hunting for customers in vain and nobody was buying the traditional mutton.
The market prices of seasonal fruits and vegetables are only barely profitable and often drop more than is customary. Inflation is no longer a source of worry, scarcely over 2.2% in July. Good news for housewives, accustomed to constant price rises, except that it is the lack of demand that is responsible for this new price restraint.
Paralysed by their fear of prison, public sector bankers have practically stopped lending since the beginning of the political crisis in February 2019. Arrears are piling up and the machinery is jammed.
A mysterious conspiracy
Day after day, endless queues have again become a commonplace sight on city streets but not in front of greengrocers or butcher shops. Civil servants and pensioners make up the bulk of the crowds that gather in front of the branch offices of Algérie Poste, waiting hours for a tiny share of the cash in their accounts. The authorities try to sound reassuring: “There are disruptions but no scarcity,” Finance Minister Aymen Benabderrahmane assured viewers of private channel Echourouk on 25 July. To justify spreading the payment of wages and pensions over the whole month, the Prime Minister tried to be more explicit: “There is no scarcity of liquid assets but a slow-down of the economy due to Covid-19.”1 The President unabashedly put an end to the debate on 12 August in another of his long speeches, laying the blame on a mysterious “conspiracy” and denouncing “an old man, born in 1911,” accused of siphoning off money from Algérie Poste.
The general director of the post office gave a more prosaic explanation: the Central Bank reduced its advance payments by 15% in June, at a time when withdrawals were going wild: 564 billion dinars (3.27 billion pounds, 4.35 billion dollars) in June, over 600 billion (3.47 billion pounds, 4.62 billion dollars) in July, which is to say in two months more than all the cash at the disposal of all Algerian Banks (approximately 900 billion dinars at the beginning of the year—5.2 billion pounds or 6.9 billion dollars). This unprecedented run on the banks is in fact a reflection of Algerians’ lack of confidence in their currency, in their leadership and in their future.
There are plenty of reasons for this. The public deficits are enormous. How can the People’s Democratic Republic of Algeria ever hope to repay the huge overdraft which for nearly ten years now has been flirting with 10% of the GNP, almost a world record? This year will be even worse. What with the cheapening of oil and gas and the fall in the volumes exported, plus the coronavirus pandemic which brought the country to a standstill, the debt is likely to approach or even exceed twice the amount of the previous decade, i.e., 20% of a GNP which itself is in decline and should fall by 3% according to the Algerian authorities and by over 5.2% according to the IMF’s World Economic Outlook for April 2020. To which must be added the losses incurred by government-owned corporations, over 1,100 billion dinars (6.38 billion pounds, 8.49 billion dollars) according to the Finance Minister, as well as the Treasury’s commitments abroad, arms purchases for example, or big construction projects like the Grand Mosque in Algiers.
A Central Bank without a Governor The official explanations are not very frank. This year’s oil revenues—24 billion dollars or 16 billion pounds, as against 86 billion dollars or 65 billion pounds in 1973—will be between 10 and 12 billion dollars (7.5-11.25 billion pounds) less than last year’s. This will mean a decrease of at least 1000 to 1500 billion dinars (5.8-8.72 billion pounds or 11.58-7.73 billion dollars) of the money stock, a decrease which is partially hidden by a relatively rapid depreciation of the dinar against the dollar and the euro in order to compensate the lack of dinars. This will increase to some extent the amount of money coming into the Treasury, the chief beneficiary of oil revenues, which are paid in dollars, but it will not benefit Algerians, who export almost nothing.
The economic problem is by no means new, but during the eight months that the new government has been in power, nothing has been done to tackle it. No serious steps have been taken to reduce public spending, or to increase the direct taxation of the unwaged. The Bank of Algeria, which has not had a governor since last Spring, is conspicuously on hold and does not fulfil its role as a central bank. Despite its officially autonomous status, it takes its orders from the executive and finances the Treasury beyond all reason. Lately, it decided to lend 1900 billion dinars (13.9 billion dollars or 10.45 billion pounds) in banking credits to companies on their last legs. And since the public banks have no resources of their own, once again it will be the State that will be put to contribution by printing more money.
No effort has been made to crack down on the black market in foreign currency, and importers—all specialists in over-invoicing, in a country where everything has to be imported—keep on getting rich by pocketing the difference of 40 to 50% between the official rate and the parallel rate.
On the other hand, students, sick people in search of foreign care, and tourists have no access to the foreign currency held by the Bank of Algeria, unlike their Tunisian or Moroccan neighbours, despite the fact that those countries are poorer.
At the origin of this immobility, this absence of any project of sovereign adjustment, conceived and carried out in Algiers, there is a lack of political courage. Like his predecessor Abdelaziz Bouteflicka, President Abdelmajid Tebboune does not want to reduce expenditures because he knows that this would be to attack his most dangerous enemies: the country’s vested interests. Because he will not or cannot face up to them successfully, he circumvents the obstacle—a daunting one to be sure. Cutting back the subsidies (20% of all operating expenditures) would be to run the risk of a social upheaval, as in 2011 at the time of the Arab Spring. The unavoidable reduction of military credits, which put as much stress on the budget as social expenses if not more, would be even more perilous for the regime, and for many higher-ups, deeply compromised by corruption, having given up years ago the militant austerity of their youth.
Abandon the country to the IMF?
Everything seems to indicate that the establishment is tacitly resigned to letting the IMF do the dirty work when the foreign currency reserves (probably less than 40 billion dollars or 30 billion pounds by the end of 2020) are exhausted. After all, the Fund’s previous intervention, in 1994, brought them unprecedented wealth at the cost of a general impoverishment of the rest of the population.
The same immobility prevails on the political front. There is still no sign of the new constitution meant to be made public on 8 March. In theory, elections are to be held on November first—a symbolic date2—and the electoral preparations will precede the publication of the contents of the new Constitution. But this will certainly not bring many changes regarding civil liberties or the access to positions of power. Is this what the country expected? Not if we listen to the voices of Hirak, that mass movement in which the two main forces to be heard—until it was suspended last March on account of the Covid-19 pandemic—were the Kabyles and the Islamists—two groups that want to take part in the affairs of State but are prevented from doing so by “redlines” that in reality have ceased to exist long ago.
The army: that great unknown
President Tebboune has carefully avoided tackling the real problems. He is running the country exactly as before, showing a little more respect for institutional rituals than his predecessor, appointing fifteen senators to the Council of the Nation which public opinion wants to see abolished, presiding over the monthly cabinet meetings, confused and generally long-winded, leaving a fraudulently elected parliamentary majority to get on with its little schemes.
And the government continues playing cat and mouse with its youngest and most radical opponents. They go in and out of gaol according to mysterious bargaining between the security forces, the Ministry of Justice and the Presidency, without it being possible to know who is doing what or the motivations of the various parties: to induce fear, to make political hay out of the release of prisoners or just to perpetuate business as usual?
The army remains the unknown factor in this political manoeuvring. What is going on in there? Seventeen generals are in gaol or have taken refuge abroad, accused of corruption or treason; the general staff and the intelligence services have been purged, the gendarmerie has had three chiefs in less than two years, the commanding staffs of the infantry and the air force have both been changed since January 2020. The purge has affected all the generals appointed since 2018 by former military strong man, General Ahmed Gaid Salah, who died suddenly on 23 December 2019. Has his little known successor, Lieutenant General Saïd Chanegriha, been promoting his personal favourites, as has so often been the case since independence? Has the President taken over the army or has the chief of staff strengthened his hand? The people of Algeria have no inkling and are worried about what comes next…
1Speech to the National Conference on the Socio-Economic Recovery Plan, 19 August.
2EDITOR’S NOTE. 1 November 1954 is the date of the first appeal addressed by the FLN to the Algerian people, in connection with the “Red All Saints’ Day” action day which marks the beginning of Algeria’s war of independence.