ASSESSMENTS

Algeria Goes It Alone

Oct 19, 2017 | 21:33 GMT

Algeria's prime minister has announced a five-year plan to solve his country's economic woes.

Algeria's prime minister has announced a five-year plan to solve his country's economic woes. The plan calls for Algeria to borrow from itself to pay its bills and close its ballooning budget deficit.

(Getty Images)

Highlights

  • Algeria's new strategy to finance itself without courting external investment will be a risky endeavor.
  • The country's government will prioritize pushing through necessary economic reforms without disturbing the business networks among the Algerian elite.
  • Despite the government's aversion to courting external financing, Algeria will keep slowly opening up its oil and gas sector to more foreign investors out of necessity.

Algeria's economy is teetering on its precarious foundations. The government knows it needs to enact reforms to prevent economic collapse, but its approach is to rely on what it knows best: isolation. After energy prices tumbled in 2014, Algeria -- which depends heavily on hydrocarbons, even compared with other energy exporters in the region -- opted to burn through its saving rather than borrow money abroad. But that measure is proving unsustainable. Recent estimates revealed that Algeria's cash reserves could dip below $100 billion in the next couple of months, prompting the government to try a different strategy. In September, Algerian Prime Minister Ahmed Ouyahia announced a five-year plan to reduce his country's ballooning budget deficit by borrowing directly from the central bank. The plan aims to solve Algeria's economic woes while still avoiding international debt markets, and includes proposals for structural reform to accompany five years of financing, drawn...

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