The Covid-19 pandemic brought black gold prices down to historically low levels. A blow to the Algerian economy, which derives almost 95% of its export revenues and around three-quarters of its budgetary revenue from hydrocarbons. Consequence: the fall in foreign exchange reserves is accelerating, and the recession is deepening. The International Monetary Fund (IMF) expects gross domestic product to contract by 5.2% in 2020.

>> Read also: "Covid-19, petroleum, politics ... Algeria facing the nightmare of a multiple crisis"

For Alexandre Kateb, lecturer at Sciences Po, "the fall in oil prices came at the worst time for the Algerian economy" because the Covid-19 pandemic and its consequences add to political uncertainty, which had led, in 2019, "to a virtual blocking of business activity". According to him, "all this is added to obtain an explosive cocktail which will have very negative consequences in the months to come".

In this context, the Algerian government has decided to halve the state's operating budget. An objective that could prove difficult to set up, because "almost half of the budget is made up of salaries, and these salaries will not be affected", analyzes Alexandre Kateb, for whom the solution should come from a drop energy subsidies. 

In the short term, the country may also need to resort to external financing, especially if it wants to avoid running the printing press. But for now, Algeria rejects the hypothesis of a request for loans from the IMF.

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