Algeria’s ‘system’ hangs tough

Said Bouteflika (C), the younger brother of Algerian President Abdelazziz Bouteflika
Said Bouteflika (2R), the younger brother of President Abdelaziz Bouteflika, is thought to be the key figure in Algeria’s political and economic power elite (source: dpa)
  • Algeria’s oligarchy made a short-term political decision to delay austerity and reform
  • Fiscal stimulus aims to quell unrest and secure President Bouteflika another term
  • Budget financing is provided by the central bank, but that operation has its own risks

Algeria appears headed down a road already taken by other resource-rich, authoritarian countries like Venezuela. As pointed out in two earlier reports for GIS, for years, Algerian governments have imposed a closed, crony oligarchy (called “the system” by Algerians) with very little economic freedom and opportunity for the average citizen. In exchange, they have offered subsidies and “social” spending paid for by vast revenue from hydrocarbons. This arrangement worked until oil prices began to tumble in 2014.

Since then, budget revenue and foreign reserves have shrunk, even after the slight rebound in oil prices since the summer of 2017. Some observers were hopeful: with Algeria’s fiscal breakeven oil price at about $120 in 2015, dealing with oil prices at about half that level would force Algeria to open its economy and end the country’s “resource curse.” Austerity policies alone would not suffice.

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