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Falling Oil Prices A Concern For Algeria

Falling Oil Prices A Concern For Algeria

From ABC News

With oil prices at their lowest in five years and showing few signs of hitting bottom, Algeria is feeling the pinch.

Though its problems are dwarfed by the impact on Russia for example, Algeria may have to rein back many of the policies it has held dear over many years. Generous subsidies, for one, may have to be scaled back despite the potential risk of social unrest in the North African country.

Oil revenues make up 97 percent of the country’s hard currency earnings and 60 percent of the government’s budget. Like Russia, which has seen a full-scale run on its currency, there have been few efforts to diversify the economy away from oil and gas.

Central Bank governor Mohammed Laksaci has warned that the oil and gas dividend won’t last forever though nearly $200 billion of foreign reserves can help cushion the blow in the short-term.

“This capacity to resist such shocks will disappear quickly if the price of oil stays at a low level for a long time,” he told parliament recently, deploring the economy’s continued dependence on oil.

In many ways, the rule of Algerian President Abdelaziz Bouteflika has echoes with that of his counterpart in Russia, Vladimir Putin. Both have seen their long tenures buttressed by oil-driven economic growth.

 

Read more at ABC News