Algeria desperate for deal at Opec meeting

ALGERIAN Energy Minister Noureddine Boutarfa’s shuttle diplomacy between Tehran, Moscow and Vienna before tomorrow’s Opec meeting underlines the nation’s desperation for a deal.

The oil-market rout has seen Algeria burn through cash set aside during the boom years to plug a widening budget deficit.

The country’s Revenue Regulation Fund, formerly one of Africa’s biggest state funds, is almost completely depleted after slumping 87 percent since 2013 to about $6.7 billion (R93.19bn), according to finance ministry figures.

With foreign exchange reserves eroding by more than a third over the same period to $121bn in September, the authorities started borrowing from overseas for the first time in about two decades.

This month, Algeria agreed a €900 million (R13.8bn) loan from the African Development Bank and signalled more could follow.

While the government has tried to curb imports and sell domestic bonds to boost liquidity, that won’t be enough to offset lower income from oil and gas, which comprise 95 percent of export receipts, according to Mohamed Said Beghoul, a former director of state-owned energy company Sonatrach.

“At current prices we won’t be able to survive two years,” said Beghoul, now an analyst in Algiers following 30 years in the oil industry. “There are some billions in foreign reserves but they risk to melt like snow in eight to 10 months if the price of the barrel stays as it is.”

Should that happen, the dinar would be devalued and the government would be forced to borrow more, according to Beghoul. Ultimately, the state would have to curb spending on housing, health care and basic foodstuffs, which helped suppress dissent in the years following the Arab Spring, he said.

The strain on state finances comes amid mounting concern over the health of ailing 79-year-old President Abdelaziz Bouteflika, a key ally of the West in the battle with Islamist militancy.

Should low oil prices persist, foreign reserves will be drained and the economy will deteriorate further, according to Ahmed Benbitour, an opposition leader and former prime minister. –