Today the Podcast Podcast Economy

The Algerian economy in the road: the challenge of the future government

Algerians should largely boycott the presidential election organized today under the leadership of the generals. The army continues to ignore the desire for political change expressed in the street, but can it long ignore the deterioration of the accounts of Algeria?

Like the hirak supporters, the numbers are stubborn and relentless. They tell us that from here, at best, three or four years, the fabulous Algerian exchange reserves accumulated thanks to oil and gas will be exhausted. The money raised when a barrel of oil flirted with the 100 dollars allowed Algeria to overcome without too much trouble the fall of the course of 2014. In particular by widening the public deficit to ensure the redistribution of income, expensive subsidies and inefficient in order to maintain social peace, to the detriment of investments that have fallen sharply to account for falling tax revenues.

But also by widening the trade deficit to import ever more goods that Algerians need but still do not produce at home. Given that the barrel is permanently installed in the zone of 60 dollars, Algeria will not reconstitute its "nuts", it can not continue to live beyond its means. The oil rent system is running out of steam and the next government is almost forced to reform.

Algeria, on the verge of economic disaster ?

There is urgency to quickly turn around a totally congested economy today. With the protest movement, several thousand companies have closed, for lack of contracts or because of outstanding payments amounting to billions of dollars. The once flamboyant companies owned by the ruffians of the regime, who are now behind bars, are still alive thanks to the directors appointed in September, but their development is totally at a standstill. To revive the machine, it takes trust, and therefore a way out of the political crisis.

But it will not be enough to change the software of the economy. For this, the structural reforms constantly postponed must finally be implemented to rectify the accounts and open the economy, provided that the army gives the go-ahead to a change that will completely question the privileges of the oligarchy and the waste associated with corruption. Finally, since the crates are empty, it will also be necessary to find fresh money to finance them.

Will Algeria have to ask for help from the IMF ?

It is a red cloth regularly agitated by the political class. Because Algeria was traumatized by the treatment inflicted by the Fund in the 1990s. Since then, the use of external debt has become taboo. Result, Algeria is today very little indebted abroad and is therefore far from being a country at bay on the same slope as Argentina, which can only turn to the IMF.

Nevertheless, taboos are falling. The 2020 finance law provides for a possible recourse to external debt to fill the deficits. Warning experts warn: borrowing instead of running the ticket to fill the gaps is an option, but it will not be enough. Moreover, then there are the " good " and the " bad " debts. The bad ones serve to plug the holes, the good ones can create growth, jobs, the future, that is what the Algerian youth demands today.

IN SHORT

The City on the war foot this morning because of the parliamentary elections . This will certainly be the longest day of the year for London traders . They are preparing for a sleepless night to react to the election results and any surprises that could frighten the markets and make the pound sterling waver.

Christine Lagarde, the new president of the European Central Bank holds its first monetary policy meeting . A new monetary stimulus program was launched by its predecessor Mario Draghi, it should not make a shattering announcement today but it will certainly be questioned about the slowdown in the euro area, the impact of negative rates on the sector banking. It's a bit like the baptism of fire for the former director of the IMF.

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