Algerians woke up to renewed queues on cooking oil and bread in 2022, two commodities that joined a list of long essential goods whose prices spiked under the impact of high inflation and import cuts.
The queues indicate shortages coupled with a high inflation of basic products under the impact of a state policy to reduce its trade deficit through depriving its population while destroying their purchasing power via a policy to devaluate the local currency, the dinar.
The dinar has lost 6.2% of its value against the dollar and 10% against the euro from January to November last year compared with a year earlier.
The union of bakeries said they were selling bread at a loss and asked for the price of bread to be sold at 15 dinars, compared to 8 dinars previously, further indicating an erosion of the purchasing power of Algerians.
The price of pasta for example has more than doubled in a country where the state subsidies amount to $17 billion.
Hit by a deepening budget deficit which the government tries to mitigate through currency devaluation, Algeria braces for reducing subsidies, a move that may further undermine the purchasing power of Algerians.
The World Bank has warned in a December report of looming economic hardships for Algeria in the short term and cited a rise in poverty. The report triggered the wrath of a military regime in denial that has nothing more left to offer its citizen but brutal crackdown.
The erosion of the purchasing power of Algerians has serious implications for the country’s social peace amid omens of a return of mass protests.
The temporary improvement of oil and gas revenues will not help the country stop the tsunami of economic and social unrest due to the lack of genuine economic diversification efforts.
Hydrocarbons which make up 98% of Algeria’s exports is a capital heavy sector with a reduced impact on job creation as the non-oil sector remains in limbo.
According to the World Bank, the non-oil sector is still operating at 3% below pre-pandemic levels due to Algeria’s unfriendliness to business.