Does Algeria still have cash to buy social peace?

Does Algeria still have cash to buy social peace?

The Algerian military regime which has been ruling behind a thin civilian curtain has long used its gas and oil money to buy social peace and quell dissent. But, with the fall in oil prices and the depletion of state coffers, Algerian citizens felt the pain of a dwindling purchasing power which augurs ill for Algeria’s fragile social peace.

President Tebboune has promised generous cash handouts to the unemployed in a one-hour speech, in a cosmetic measure that will do little to absorb the growing popular anger against a military junta in disarray.

The move came as a surprise to analysts who have followed the free fall of the dinar which continues to devalue to worrying levels.

The country’s flawed monetary policies led to unprecedented levels of inflation hurting the purchasing power of citizens who now have to queue for basic services including flour, grains, milk, and cooking oil. Queues are now commonplace in Algeria which suffers from an acute liquidity crisis.

Tebboune and the military leaders behind him are disillusioned and disconnected from the reality that Algeria needs austerity and more reforms to diversify the economy instead of more subsidies in a cash-strapped economy.

Promising cash-handouts while the country is rationing grains and struggles with water-cuts across the country is like covering the sun with a finger. Some analysts say the promise to distribute more devalued dinars comes in a bid to quell an upcoming dissent.

Meanwhile, Algeria’s foreign exchange reserves are officially estimated at 38 billion dollars currently, down from 240 billion dollars in 2014. Algeria has banned imports of vital goods including some sorts of medicine leading to shortages in pharmacies in order to delay the collapse of its finances.

It shuns foreign debt citing state sovereignty. Tebboune himself said Algeria rejects foreign financing to be able to maintain its obsolete stance on the Sahara issue and Palestine. But he can’t hide the sun with a finger. Algeria is ranked as a high-risk country which means lending to Algeria will be highly expensive. Moreover, the IMF cannot lend to a country without asking for reforms to ensure they will reimburse debt.

Playing on the chord of false patriotism will not help Tebboune and his military masters deal with an impending economic and social crisis that was seen coming with the fall in oil prices.

 

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