Last week Algeria’s ruling party introduced a new finance bill with austerity measures sparking strong protests from opposition parties. This comes just before a crucial time for the ruling party, where support is essential as succession talks surround ageing President Bouteflika continue.
This year, Algeria has seen its economy crumble with rises in unemployment and poverty levels following the global slump in oil prices. Tellingly, foreign reserves have plunged from $194 billion to $159 billion in the past year.
The fall in energy dividends in Algeria’s the hydrocarbon dependent economy has tremendous effects: 60% of Algeria’s budget relies on energy revenues. In an attempt to cope with the decline in government revenues, the government recently passed a new finance bill that will raise taxes on electricity, gas, domestic gasoline, diesel, and 3G Internet. This has sparked strong protests from representatives of Algeria’s opposition parties. In a joint statement, opponents of the bill have claimed that it was drafted by legislators under pressure from corrupt businessmen.
Opposition party parliamentarians, including both Islamists and socialists, protested the law by holding up banners that read “no to austerity” and “social and democratic Algeria!” in the legislature. The reaction in parliament to this new bill could be a glimpse of what the future holds for Algerian society in general.
This state of affairs also comes at a crucial moment for a government that is opaquely organising the country’s political transition to the next generation.
2015: A year of protests
Algeria has seen several major protests in 2015, as the population becomes frustrated with the rise of poverty and unemployment, especially in the south. As an alternative to oil, Algeria started exploiting its shale gas reserves in the country’s south. Shale gas fracking, a water intensive process occurring in an already arid southern region, has spurred strong protests from the local population.
Water used for shale extraction is chemically treated, which damages the local environment and means that it cannot be used again. During the year, hundreds of demonstrators across the Algerian desert have been urging the authorities to stop the shale gas drilling operations.
Amar Saadani, Secretary General of the ruling party, notes the authorities concerns regarding the protests in the south: “we fear the possible advent of an Arab Spring from the south”.
Today’s introduction of austerity measures could trigger such a popular backlash.
These economic and social issues come at a crucial moment for Algeria. As Algeria’s economy is weakening, the government is in need of a strong support to make its political transition as smooth and peaceful as can be. Algeria’s political class is ageing and will need to transfer power to the next generation in the near future. This is a political imperative.
President Bouteflika has been at the head of the State since the Civil War in the 1990s. His succession could trigger instability, especially in the current economic and social context.
The opaque nature of the presidential succession process and question about who is really currently directing the country only amplify the population’s frustrations. President Bouteflika’s opponents such as Ali Benflis describe the situation as a “power vacuum”.
Algeria was able to avoid an Arab Spring revolution; buying societal peace via oil earnings and touting stability to the traumatized populace in the wake of Algeria’s civil war in the 1990s.
In 2011, when the Arab Spring began in Tunisia, in order to prevent the uprising spreading to Algeria, the government used its oil revenue to offer benefits and assistance to its citizens. Public sector employees received a salary increase and zero-interest loans were granted to thousands of unemployed people.
Today, the slump of oil prices highlights the weaknesses of this model. The combination of economy austerity, opacity in a corrupt political transition, and environmental issues in the south due to fracking could exacerbate the population’s frustrations and lead to a delayed Arab Spring in Algeria.
Given Algeria’s strategic location, its international partners such as the United States have a key interest in avoiding chaos in the country by promoting more transparency in politics and real reforms of economic diversification.