The government went public with warnings of continued economic hard times in 2018 because of the persistent low prices for oil and natural gas. Less publicized was the government inability to reform the economy quickly enough to reduce vulnerability to low oil prices. Foreign exchange reserves, essential to pay for imports, fell to $105 billion in mid-2017. Foreign currency reserves were $193 billion in mid- 2014. The government has cut its budget 14 percent in 2017 in order to get the budget deficit down to 8 percent (versus 15 percent in 2016). Even so after five more years of this the foreign currency reserves will be less of a cushion and more of a threat because of all the additional budget cuts.
The new prime minister proposed increasing efforts to attract foreign investment, something the government had avoided in the past because they knew that would not end well (the local corruption is epic and no secret). The solution appears to be allowing Sharia compliant (no interest) banking to attract wealthy Islamic conservatives (who are more comfortable with the corruption) and reforms to the stock market to make it more attractive to foreign investors. The government will also make another effort to go ahead with fracking projects. This means reviving 2015 plans to drill more than 200 natural gas wells in the south (over a thousand kilometers from the coast) and use fracking to extract 20 trillion cubic meters of gas a year. That would bring in over $60 billion a year in sales. There were protests against this program in the south because of the disruption the construction and operation of the wells would bring to the area. The locals also do not trust the government to handle the water problem (lots of water is used in fracking) in a responsible manner. Algeria has one of the largest deposits of frackable natural gas in the world. The need for more income may change minds in Algeria. The continued economic problems has changed attitudes in the areas where fracking would take place.
Algeria has had a serious budget problem ever since the price of oil fell sharply in 2013 and never recovered. While oil prices (and oil income) were up a bit in 2016 (to about $48 a barrel) they have to reach $90 a barrel before national finances return to normal and that will apparently never happen. In 2013, before the price of oil fell over 70 percent from record highs, oil and gas exports accounted for 30 percent of GDP, 95 percent of exports and provided enough income to cover 60 percent of the government budget. The unexpected drop in oil prices brought big changes to Algeria. The government has been largely successful in cutting the budget and finding additional sources of income to cope with this. But these solutions are only temporary because they depend on drawing from foreign exchange reserves each year.
The government cut their budget 17 percent in 2017 after a nine percent cut in 2016. The cuts are necessary to reduce the budget deficit (8 percent of GDP in 2017 versus 15 percent for 2016) and these cuts eliminate a lot of perks the government provided for Algerians over the years to keep the peace. There are limits on how long these deficits and budget cuts can be tolerated. The deficits are covered by drawing on cash reserves built up (to about $200 billion) before 2013. In 2015 these reserves fell 22 percent to $143 billion and in 2016 another 20 percent to $114 billion. In 2017 the goal was to keep the reserves loss to about ten percent (a decline to $102 billion). At mid-year that goal on track to being achieved. Current estimates are that the foreign exchange reserves can be drawn on for ten or more years (supplemented by some foreign loans). After that severe cuts will have to be made and there will be much unrest. To avoid that the government has actually addressed (or at least admitted to) problems like corruption and mismanagement that have long crippled the economy and created popular discontent. This led to the Islamic terrorist uprising of the 1990s that was defeated but not forgotten. The Islamic radicals still have supporters, especially among men under age 30 (about 30 percent of whom are unemployed). The government has tried, especially since 2010, to reduce the youth unemployment rate but so far has not had much success. But the government still has a chance because economic reforms have enabled Algeria to keep GDP growing despite the price of oil dropping fifty percent in the last three years and not showing any sign of increasing.
September 17, 2017: In Jijel Province (365 kilometers east of the capital) a veteran (since 2005) member of AQIM (Al Qaeda in the Islamic Maghreb) surrendered, bringing his AK-47 and useful information with him. Identified only as Abu Osama, he was taking advantages of an amnesty. Police described the man as very dangerous but worn down and discouraged after being sought for so many years.
September 13, 2017: A court found Islamic cleric Mohamed Fali guilty of “offending Islam” for being the leader of Algerian Ahmadi Moslems. He was released from jail and given a six month suspended sentence. Although the government plays down Islamic radicalism it does tolerate some forms of religious persecution. This is especially true of a minority Islamic sect; the Ahmadi (Ahmadiyya). This sect appeared in India during the 1880s and has been popular enough to get about one percent of all Moslems to join despite constant persecution in most Moslem nations. To most Islamic conservatives and radicals the Ahmadi are heretics and are often attacked and even killed because of their beliefs. The Ahmadi believe in centralized authority for Islam and a separation of church and state. They also have different views on the caliphate and the future of Islam.
Ahmadi first appeared in Algeria during 2007 but that soon got the attention of Moslem conservatives. Moslem sects must register with the government but the Ahmadi refused to do so because their leaders felt that would expose them to rejection by the government and more violence from Islamic conservatives. In Algeria nearly 300 local Ahmadi have been arrested since 2016 because a local Ahmadi group sought a (mandatory) government permit to build a new mosque. Many of those arrested have been prosecuted and fined or sentenced to prison. Because of all the persecution in Moslem nations the Ahmadi world headquarters is in Britain, where the Ahmadi are free to practice their belief that the West is in need of more religion and Ahmadi clerics seek new members from among Moslems and non-Moslems. The Ahmadi don’t believe in Islamic terrorism and that makes them tolerable in non-Moslem nations. But for nations like Algeria, to leave the Ahmadi alone is unpopular with a lot of Moslems who don’t want Islamic terrorism, or Moslems who are as nonconformist as the Ahmadi.
August 31, 2017: In the northwest (Tiaret Province) an ISIL suicide bomber killed two policemen. This is the second such incident this year. An ISIL attack in February was thwarted and the perpetrators soon found. This time two suspects were arrested on September 8th. Islamic terrorist violence this year is at a record low level.
August 22, 2017: Algeria confirmed it had received the first Russian Buk-M2E mobile SAM (surface to air missile) systems it had ordered and had used some of them in field exercises during July 2017. The Buk-M2E battery consists of a truck mounted command center, one or more surveillance radars (max range 160 kilometers) and four or more 6x6 wheeled vehicles carrying four 9М317 missiles. It is unclear home much Buk-M2E equipment Algeria has ordered or how much has been received but it was apparently at least one battery. Development of the Buk M, a radical redesign of the 1960s era SA-6, was completed in 1988, near the end of the Cold War and disintegration of the Soviet Union. This delayed its introduction on a wide scale. Russia was not able to start production until after 2002. When NATO discovered the Buk in the late 1970s they called it the SA-11.
August 15, 2017: The new prime minister was suddenly replaced (by a more reliable veteran politician) after only 80 days in office. Apparently his anti-corruption efforts were too effective and members of the ruling Bouteflika clan demanded action. What happened here did not get much, if any, notice in the local mass media. The basic problem is that Algeria is still a corrupt police state. There are constant reminders of that and since 2015 the government has been quick to punish any journalists who criticize Abdelaziz Bouteflika (the notoriously corrupt president of Algeria since 1999) or members of his family. This included comments posted online. In one notorious case such a critic who lives and posts on the Internet from London was arrested in mid-2016 when he came to Algeria to visit family.
The government has also punished senior officials (often retired) who have gone public with their support for reforms and action on the corruption in the government. In 2015 this led to the arrest of several senior military commanders who had gone public with their opposition to corruption. These military critics are national heroes because they were key leaders during the 1990s war with Islamic terrorists. The government did not having much success in depicting these men as ungrateful traitors. Most Algerians know what is going on here no matter how hard the government tries to spin it in another direction. Thus it came as no surprise in 2016 when a court (apparently following instructions from frightened politicians) ruled that Issad Rebrab could not buy a popular newspaper (with the largest circulation in the country) and its affiliated TV channel. Rebrab is a self-made billionaire who owns numerous enterprises in Algeria and France. Rebrab is one of the ten wealthiest businessman in Africa and long a critic of the corrupt Bouteflika clan.
The government has become more obvious and energetic in its efforts to shut down mass media (especially radio or TV stations) that spends too much time covering the various corrupt scams the wealthy and well-connected can still get away with. Officially the government is addressing the corruption problem but what is noticed most are efforts to suppress discussions of the corruption that still flourishes. The Bouteflika clan is not stupid and has been trying to improve the economy but that has proved difficult when so many members (and friends) of the Bouteflika clan have to be taken care of financially. Officially all the scams the Bouteflika clan have carried out are legal but even many judges and lawyers disagree although few will go public with this unless they flee the country. The last thing the Bouteflikas’ want is a self-made and popular businessman like Rebrab to gain control of the largest newspaper and TV channel in the country and start spreading the truth. Rebrab has the lawyers, cash and friends to block government efforts to silence him and this is a quiet revolution that appears to be just getting started.