Cash-handouts will not help Algeria gain influence in region
As a state entertaining a rentier economy, Algeria has long sought to gain influence in Africa and the Arab region through cash handouts during the era of expensive oil. After years of diplomatic lethargy during the Bouteflika era, the recycled military regime tries the same recipe, yet money has run out.
Algeria first donated 100 million dollars to head of the Palestinian authority Mahmoud Abbas and later approved a loan of 300 million dollars to neighboring Tunisia triggering the wrath of Algerian economists who described the largess as Algeria punching above its economic weight.
The era of using cash-handouts to buy influence is over. Through such moves, the Algerian military regime expects to polish its image by showing support to Palestine or win support for the Polisario separatist by bringing Tunisia into Algiers orbit.
One would think Algeria is an advanced state to be in a position to give 400 million dollars in loans and donations and that its finances are in good shape.
Algeria’s GDP has dropped by more than 40% since 2014 to near 140 billion dollars last year and the country has eaten into its foreign exchange reserves which plummeted from 200 billion dollars to near 30 billion dollars currently.
The country, which depends on oil and gas for 98% of its exports, has seen its hydrocarbon sales plunge due to a steep rise in domestic consumption that makes any oil price hikes of little significance on the state budget.
At the very time Algeria gives its tax-payers’ money to Tunisia and Palestine, Algiers has imposed a drastic import restriction policy that affected foodstuff, medicine and even new cars.
The result can be seen in long queues of people waiting for a liter of milk or a kilo of potato while the price of used cars spiked due to lack of new ones.
Regional diplomacy is but a reflection of the domestic situation. Algeria cannot push for an aggressive diplomacy after years of absence while its own house is in disarray.
Algeria cannot simply aspire to mediate between Egypt and Ethiopia while it has created and fueled a crisis with its neighbor Morocco.
Algeria, which represents all that is wrong with the African economy, is in a very lamentable financial, economic, political and social condition and has to fix its problems first because the era of gaining influence through charity is over.