How did Algeria benefit from the Russian war on Ukraine?

Algeria -

At a time when the Algerian government expected a historical deficit in its budget for the current year, equivalent to 31 billion dollars, compared to a reference price for oil prices of 45 dollars according to the 2022 Finance Law, the global oil market jumped to its highest level since 2008 due to the repercussions of the Russian war on Ukraine This made Algeria among the main beneficiaries of the recovery in hydrocarbon prices, as it is the main source of public treasury income.

The Ministry of Energy hastened to announce production that it will reach one million and two thousand barrels per day during the month of next April, while the director of the National Oil Company (Sonatrach) Tawfiq Hakkar stated that the institution has “an untapped capacity on the Trans-Mediterranean gas pipeline, linking Algeria and Italy, which can be Exploiting it to increase the volume of supplies to the European market.

The annual average price of Saharan Algeria crude reached $70.89 per barrel in 2021, at a time when its oil and gas exports exceeded $34.5 billion, according to official figures.

Additional Income

By the end of 2022, it is very possible, according to the forecasts of energy economist Abdel Rahman Aaya, that Algeria’s income in hard currency from oil and gas sales will reach 42 billion dollars, a figure that has not been achieved since 2014.

The expert explained in a statement to Al Jazeera Net that the current indicators suggest the stability of the average price of a barrel at the limits of $100, given that the record levels of 130 and 140 dollars did not exceed a week, with the expectation that the price would drop to less than 70 dollars during the last third of 2022, and thus Algeria's export income would increase. Of oil and gas, between 8 and 10 billion dollars, in light of the possibility of Sonatrach raising its share of oil exports, as well as LNG, because the margin of movement of natural gas transported through pipelines up and down remains narrow by virtue of the contractual price, and it also represents two-thirds of Algeria’s gas sales.

Abdel Rahman Ayah expected that Algeria’s revenues from petroleum taxation would rise to 35 thousand billion dinars ($ 27 billion), after it was in the range of 25 thousand billion dinars (21 billion dollars) in 2021, which “reduces the state’s general budget deficit by 50%, and gives the government Significant additional resources to fund wage increases and staple food subsidies.

The government approves new increases in workers’ salaries and a grant for unemployed youth in Algeria (Al-Jazeera)

lessons learned

For his part, financial expert Breish Abdel Qader stressed that the emergency positive situation provides a margin of financial safety for the Algerian government in the face of the requirements of managing the economy and meeting the national needs of importing various raw materials and basic commodities.

On the other hand, he stressed on drawing lessons from this war and the geopolitical and geoeconomic transformations by strengthening Algeria's production and export capabilities of oil and gas, by increasing investments and concluding long-term gas contracts, and exploiting all the capabilities inherent in various traditional and non-conventional energy sources.

In a statement to Al Jazeera Net, he pointed to the obligation to exploit the current financial abundance to ensure internal energy security and the supply of Algeria's partners, with the need to launch projects for the energy, petrochemical and renewable energy manufacturing industries.

These data will prompt the government to review its economic plan, according to observers, by increasing public expenditures in the areas of processing and investment, and partial liberalization of foreign trade after preventing 2,900 products from being imported due to the erosion of foreign currency reserves.

Decision Pack

Meanwhile, the authorities announced the disbursement of the unemployment grant for the first time on March 28, estimated at 13,000 dinars (approximately $100), for the benefit of more than 300,000 young job seekers, and the list is open to benefit according to the specified conditions.

The Ministry of Finance also revealed a second wage increase before the end of next April.

President Abdelmadjid Tebboune recently ordered the freezing of all taxes and fees until further notice, especially those included in the 2022 Finance Law on some foodstuffs, with the abolition of all taxes and fees on e-commerce, individual mobile phones, and automated media supplies destined for individual use and emerging institutions.

At its last meeting, the Council of Ministers decided to lift administrative restrictions on 109 investment projects, allowing 491 new projects to come into service, according to a statement by the Presidency of the Republic.

For his part, the CEO of Sonatrach revealed that the investment plan for 2022 amounts to about $8 billion, directed to the exploration and development of oil fields to increase production.

Informed sources confirmed to Al Jazeera Net that it is very possible to issue a supplementary finance law to correct the observed imbalances when applying the 2022 law, in addition to adopting new programs and allocations to enhance infrastructure and public utilities in light of the improvement of public budget resources.

Expectations to reduce the general budget deficit of the government in Algeria by 50% due to the recovery of the oil market (Al-Jazeera)

Priorities and caveats

On the other hand, a member of the Parliament’s Finance Committee, Abdel Qader Buraish, suggested reconsidering the order of priorities on the government’s work plan by giving importance to vital areas closely related to national security, specifically related to achieving the requirements of economic, energy, food, water and cyber security.

He said that the government will take advantage of the increase in hydrocarbon revenues to achieve the economic recovery program and enhance the solidity of financial balances, especially reducing the budget deficit, while increasing the volume of public investments created for wealth and economic diversification.

The expert warned Berish against returning to "the policy of buying social peace, which has proven to be economically and socially futile, but the government should continue the program of structural reforms in the field of finance and banking and contain the parallel market."

He stressed the importance of completing the stalled projects, moving forward with the digitization of all sectors and improving the living framework and purchasing power of citizens by creating a stimulating environment for national and foreign investments, as he described it.