The economic impact of the Coronavirus pandemic, which has sent global demand for crude into tailspin, threatens to fling Algeria into a new crisis after a year of political upheaval and mass protests that forced a veteran president from power.
Even without the current global energy crisis, state-owned Sonatrach has struggled to maintain oil and gas export volumes, with rising domestic consumption of fuel and as European customers have turned to other gas suppliers for imports.
Algerians are watching the collapse of oil prices with alarm as the energy markets on which the North African nation relies for most of its export revenues have been plunged into turmoil by the Coronavirus crisis.
“We will soon start to feel a big crisis unless oil prices go back up,” said Halim Cherifi, a banker in Algiers.
Algeria’s Saharan Blend is now trading at less than $20 a barrel, while this year’s austerity budget was based on a price of $50 a barrel. Benchmark international crudes are trading at their lowest in about two decades.
The presidential spokesman said on television on Tuesday that the situation was under control because of “spending cuts and postponing some projects”.
But not everyone is convinced by such words of reassurance.
“The current oil market level is far below government forecasts,” said economics professor Abderrahmane Aya. “The situation may hit the value of the dinar currency and then the purchasing power of Algerians.”
Algeria has frozen much of its state housing construction, halted some energy projects and cancelled other development plans to reduce spending and bring deficits under control.
But the budget deficit has still been running at between 6% and 15% of economic output for the past five years, with generous subsidies on bread, electricity and other basic supplies weighing on state coffers.
