New Government vs. Social and Budgetary Tensions

Reforms and Bill 2018

Creating three million jobs would require a growth rate between 2017 and 2020 of a minimum of 7 to 8%. The results of the bodies responsible for employment of the ANDI, the ANSEJ as much as of the NACC, are mixed despite their many allowed benefits. This is the New Government vs. social and budgetary tensions dilemma that the country’s newly appointed Prime Minister has to face up to within the remaining time of the president’s mandate.
However, the growth rate is relatively low in reference to public spending of 3% on average between 2000 and 2016.  According to the ONS, quoted by APS, in April 2017, the employed population was estimated at 10.769 million against 10.845 million people in September 2016, registering a negative balance of the 76,000 people where six unemployed on ten on average are long-term unemployed.

Utopias or real socio-economics of Algeria

The International Monetary Fund (IMF) report on the global economic outlook for Algeria shows that if in 2016, the growth of the real GDP was 4.2%, the situation could significantly deteriorate in 2017 and 2018. Indeed, the IMF expects growth of 1.4% of GDP in 2017 and 2018, the Algerian economy should know a stagnation, with a growth rate of its GDP of only 0.6%.

A direct result of this economic slowdown would be the unemployment rate that should substantially increase over the same period and is estimated at 13.2% in 2018 with an inflationary trend always according to the IMF that we are trying to compensate by creating jobs with very low added value. This is mainly due to the decline in spending in infrastructure, up to now key engine of growth and the business climate.

Similar countries with spending of a 1/3 of that of Algeria have more significant growth rates.

What will happen if the oil price stagnated at 50 – 55 Dollars a barrel or even less at between 40 – 45 dollars? Would the risk of social tensions in the case of dwindling financial resources, while posing no problems for three years be on the increase? But what are the $100 billion of foreign exchange reserves in July 2017, with an output of currency goods-services and capital transfers of $60 billion and inflows of foreign currency of only $29 billion or $32 – 35 billion dollars by end of 2017 if the price of a barrel is maintained between $50 – 55 despite all restrictions on import?

According to various statements of Mr. Ahmed OUYAHIA, prior to his appointment as Prime Minister saying : “If we don’t get over not standing on the economic plan, we risk ending up at the IMF” So what to do?

Contents of the Finance Act 2018?

  • Would we still hold on, in the Finance Act 2018 for budgetary calculation the $50 dollars a barrel like for 2017’s?
  • Would we above the regular 11% tax?
  • Can we have a VAT increase from 7% to 9% for the reduced rate, and 17% to 19% for the higher band even with the risk of inflation and unfair indirect taxes applied to all; direct tax being a sign of a greater citizenship?
  • Will we restrict all spending: where the capital budget that has been reduced to $22 billion by 2016 as a result of the latest budget cuts as much as the operating budget of about $41 billion that is incompressible unless of a deep public service redesign?
  • Will we establish a tax of wealth as based on accurate assessment of the distribution of income and the model of consumption by social strata and mastering of the importance of the informal sphere?
  • Will we to avoid external debt go towards a de-monopolisation program and further privatization with partial or total transfer of ownership of a number of public companies whose financial situation is deteriorating due to workload and management issues where Public Treasury has supported for more than $70 billion dollars in sanitation between 1974 and 2016 or with over 70% returned to the starting block?
  • Will we go for targeted subsidies where according to the Government about $18 billion was spent transfers in 2016, while revenues in foreign currency during the year fell by $37 billion,?

What will the socio-economic policy be?

  • Will it always use the Dinar (DZD) skidding to more than DZD127 a Euro as a means of adjustment of the deficit of the balance of payments?
  • Would the current industrial policy lead the country to debt therefore dependence and to correct it how would a dynamic industrial sector which represents less than 5% of the gross domestic product and 80 / 85% of raw materials of public and private sector coming from overseas and what would without proper analysis, the rush into car assembly plants with a low rate of integration bring?
  • Will we still keep to that out of date policy from the 1970 – 1980 years at the time of the fourth economic revolution looming between 2020 and 2030 as based on good governance, the economy of knowledge and environmental challenges?
  • What will a program that is dated, accurate and taking into account of the transformation of the new world of structural reforms to combat the prevailing central and local bureaucracy through to a real decentralization of the financial system onto a social and educational system as hub of the creation of value and the thorny problem of land?
  • Will we hang on to the same 2009 ownership share rule as applicable to all sectors instead being targeted and thus encouraging FDI in nonhydrocarbon sectors?
  • What will the proposed import licenses without any strategic vision nor taking into account that the Algerian economy is dominated by the service sector where small trade and services represent 83% of the economic area with dominance of the informal sphere?
  • How to apply one of the articles of the new Constitution and not differentiate the State sector from that of the private sector for all national and international creation of wealth enterprise by the lifting of all constraints of the business community?
  • And finally how do we go about organizing an economic and social dialogue so as to carry out reforms with economic and social credible intermediation?

Strategic vision within the new world

All political, social and economic actors are riveted to the presidential deadline of April 2019, but maintaining the status-quo until then could be suicidal. We must as of now envisage through the right strategic vision certain short-term economic policies and not appearances that might increase economic and social tensions and ultimately lead to a further deterioration in the purchasing power of the Algerians.

Any increase in the rate of inflation will involve primary banks interest rates rising, to avoid bankruptcy and discouraging investment. Without structural reforms related to good governance, there may not be genuine development in Algeria with the added risk of returning to the IMF in 2019 – 2020.

There are, for Algeria, opportunities to increase its growth rate because of its substantial potential that despite the crisis would assume a new strategic governance

The major challenge for Algeria would mean to implement operational instruments capable of identification, to anticipate changes in the behaviour of the economic, political and social actors at geostrategic level.

There is a dialectic link between development and security, and because without sustainable development there is necessarily increase of insecurity which has a growing cost. Strategic objective must reconcile modernity and authenticity, economic efficiency and a deep social justice if Algeria wants to avoid its marginalization from within the global societies. The passage of the status of ‘support against the rentier economy’ to that of the rule of law “based on work and intelligence” is a major political gamble since it simply involves a new social contract and a new political contract between the Nation and the State.

ademmebtoul@gmail.com

 

 

 

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