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Africa Economic Institute

Algeria Halts Projects Due To Crises

The government of Algeria decided to revise pending infrastructure development projects and   other economic development projects due to the weakening effects of the global financial crisis.

The government of Algeria decided to revise pending infrastructure development projects and   other economic development projects due to the weakening effects of the global financial crisis.

The Minister of small and medium institutions, Moustafa Ben Bada, in a conference to discuss future plans for small to medium institutions assistance programs, announced that Prime Minister Ahmad Awihiy had instructed all ministers to revise pending programs with possibility of delaying some.

The Minister reinstated that the government  will surely reduce the number of projects financed in the coming five years due to the negative implications of the financial crises.

Moreover, Ben Bada revealed that the main purpose behind the government’s action is the decrease in revenues resulting from plunging oil prices.      

This sudden decision by the government came after President Abd Al-Aziz Boutaflika issued instructions  in late December last year.  The President’s instructions dictated the tightening of public spending to decrease overall spending.

Furthermore, government officials declared in January that the Algerian economy will not enter into a recession because of the global economic climate, thus giving assurances to consumers and investors alike. This declaration is very contradictory with the latest governmental decision to postpone projects and to cut spending.

The Prime Minister, however, had declared earlier in September last year, the strength of the Algerian economy in surviving any crisis unharmed. The Minister’s statement came at a time when the prices of oil were sky rocketing. The government’s future plans were entirely dependent on revenues from oil, and little attention was given to the fact that prices could go down and indeed they did.

Algeria produces 2.173 million bbl/day of oil and exports 1.844 million bbl/day, while only importing 13,110 bbl/day.  Similarly, 85.7 billion cubic meters of natural gas are produced and 59.4 billion cubic meters are exported.  Algeria does not import natural gas.  Algeria’s main export partners include the  United States (29.4 percent), Italy (13.8 percent), Spain (9.6 percent), Canada (8.4 percent), France (7.4 percent) and the Netherlands (5 percent).  They receive the bulk of their imports from France at 18.7 percent.

Algeria’s real GDP has risen due to increases in both oil output and government spending.  However, the government’s efforts to diversify the economy, by attracting foreign and domestic investments outside of the energy sector, have had little success in lowering unemployment and improving the standard of living.

In order for the Algerian economy to recover it must diversify its major exports.  Development of the banking sector continues to progress slowly as it is hampered by government corruption and bureaucratic resistance.

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