The economic and financial situation between what was expected and what is now true
This is a
work published by Dr. Ahmed Benbitour 15 years ago. What was expected yesterday
is a reality today, and the diagnosis of defects and shortcomings in the
Algerian economy!
Exporter of
wealth and importer of poverty, such is the sad state of the Algerian economy,
as we will demonstrate by analyzing the Balance of Payments based on official
figures published by the competent authorities.
The
analysis of the state of the economy from the Balance of Payments is done at
four levels: the Trade Balance, the Services Balance, the Capital Balance and
the Change in Reserves.
1. In the Trade Balance, exports and imports of goods are recorded:
In 2005,
Algeria exported 46,380 million US $ including 45,590 million in hydrocarbons
(98.3%) and 790 million in other exports (1.7%). It imported for 19 570 Million
US $ releasing a Trade Balance surplus of 26 810 Million US $. In other words,
the exports carried out exceed the double of the imports. On first reading,
this could bring great satisfaction. But when we analyze the nature of exports
and imports we understand how Algeria exports wealth and imports poverty.
Hydrocarbons
being a non-renewable resource, it must be considered that each quantity of oil
and gas exported is, at the outset, an impoverishment of the Nation for the
benefit of the rest of the world (buyers abroad). The use that is made of
export revenues and petroleum taxation should subsequently be an investment in
the future and not a squandering of a non-renewable resource and therefore a
mortgage on future generations.
“Our duty
to oil is dictated to us by future generations. We must extract only what we
need to organize our development and leave all the rest of the oil in our
basement. It belongs to future generations. "
However, if
we consider the two years 2004-2005, Algeria was, a priori, impoverished by
78,600 million US $. It is the use that is made of these recipes that will
confirm or deny, a posteriori, this impoverishment.
Export
receipts were used, at the Trade Balance level, to finance US $ 19,570 million
in imports of goods consisting of food products, drugs, semi-finished products
and equipment.
Therefore,
Algeria exports a non-renewable resource used as a source of energy for buyers
(a wealth for them and an impoverishment for the country) and imports the labor
products of the exporter's workforce to the detriment of that of the importer.
In other words, we import the work of others at a time when there is
significant youth unemployment among us.
It should
be noted that our non-hydrocarbon exports barely cover 4% of our merchandise
imports. So if there is a large trade surplus, there is a serious trade deficit
which is the result of our labor force!
Hence the
relevance of the question: what was the oil money used for? We have just seen
what it is about the first level which is the Trade Balance. What about other
positions?
2. The Balance of Services records trade in non-factor services:
The balance
of trade surplus was used to finance the deficit in non-factor services for a
sum of US $ 2 160 million. This is an abnormal deficit for a country which has
the tourism potential of Algeria. In addition, we have become an importer of
housing by carrying out constructions by foreign companies here. We are the
only country on the southern shore of the Mediterranean which records a deficit
at this level.
The surplus
was also used to finance the deficit in factor services for US $ 4 920 million.
There too, this is an abnormal deficit for a country with a very large migrant
population and which has a level of foreign exchange reserves which exceeded,
at the end of 2005, more than three times the stock of debt. A new fact is the
importance of the profits returned by foreign companies operating in Algeria.
These profits reached US $ 4,740 million in 2005 and have increased almost five
times since 2001 (464.7%).
During
2005, Algeria recorded the inflow of US $ 1,020 million in foreign direct
investment and the outflow of US $ 4,740 million in repatriated profits from
foreign companies operating in this country. According to the estimates of a
competent International Financial Institution, these repatriated profits will
exceed 10,000 million US $ by 2007.
In other
words, the country will transfer outward in repatriated profits more than it
paid in debt services (interest and principal), at the most difficult times of
pre-rescheduling debt.
Are we
moving out of the problem of transfers on external debt to that of repatriated
profits? This is an issue that deserves full attention.
All the
more so, since in 2004, SONATRACH began to see its share in oil production fall
below that of its partners (48% for SONATR
ACH and 52%
for associates), with a downward trend among the national producer and a very
strong increase among associates.
3. The
surplus export earnings were also used to finance the deficit of the Balance of
Capital :
The surplus
export earnings were also used to finance the deficit of the Balance of Capital
for US $ 4,780 million, which is normal in a situation of net deleveraging.
However, it
must be borne in mind that the advance payment of the external debt can only
obey, in the current circumstances of Algeria, a very marginal cost / benefit
calculation. This is certainly not a strategy that is part of a policy of
seeking independence or reducing vulnerability. It is a lesser evil, nothing
more. Indeed, the advance payment concerns the debt and the interest due over
the period 2006-2011, date on which the date would be fully paid, according to
the initial planning of 1994. Therefore pay for a value of US $ 8 billion this
debt in 2006 or leaving it spread over the remaining five years cannot present
a major issue, because this sum represents less than 5% of the level of foreign
exchange reserves anticipated in 2011 or a variation in income over one year
corresponding to a price increase of 10 dollars. .
4. Use the proceeds to finance the increase in foreign exchange reserves :
The remainder of the proceeds was used to
finance the increase in foreign exchange reserves to US $ 16 310 million. This
sum went to swell already very important reserves, which by 2003 exceeded more
than two years of imports.
This
significant increase in foreign exchange reserves greatly exceeds the needs for
controlled management of external balances. Under such conditions, the Algerian
economy enriches the rest of the world by becoming poorer. In fact, the
Algerian economy supplies the rest of the world with non-renewable energy raw
materials and deposits with it a significant portion of export earnings in the
form of accumulation of unnecessary reserves for the country. Said, in more
direct language, the Algerian economy specializes in transforming a
non-renewable reserve into a volatile reserve!
In other
words, 46.6% of export earnings financed abnormal deficits and the needless
increase in reserves.
But in
addition to being a source of foreign exchange through export revenues,
hydrocarbons are also a source of budgetary revenue through oil taxation.
In 2005,
the budgetary receipts amounted to 3,081 billion DA including 2,352 billion DA
of oil taxation, that is to say 76.33%. This rate was 47% on average over the
period 1969-1978; In other words, the economy is sinking into dependence on
hydrocarbons!
An
important part of the receipts was directed towards the Regulatory Fund, that
is to say 1,368 billion DA or 44.4% of the total receipts or 58% of the
petroleum taxation. Insofar as the Regulatory Fund was set up to deal with the
repayment of the external debt, it is useful to note that of these 1,368
billion DA, only 115 billion DA (8.40%) were used for this purpose in 2005.
If we
consider the period 2001-2005, we find ourselves with the enormous figure of
2,591 billion DA (36 Billion US $) spent by this Fund, not entered in the
Budget, therefore, available to be used in a discretionary manner, i.e. that
is, outside parliamentary control.
In
addition, the Algerian economy recorded in 2005, a national savings rate of
51.7%. This is a very high number.
In fact,
this indicator has two readings that are difficult to reconcile.
As saving
is by definition a renunciation of consumption, such a high savings rate means
significant austerity imposed on the Nation. At a time when the
"introduced" display an outrageous conspicuous consumption rate, with
the risk of social explosion.
But a high
savings rate is at the same time an investment opportunity to fight
unemployment, eradicate poverty and secure a better future for future
generations.
In 2005,
the national savings rate was 51.7% and the investment rate, including changes
in inventories, was 30%. This 30% breaks down into 22% for the capital increase
and 8% for the increase in stocks. Put more simply, it was only a small portion
of the savings that went for investment, the rest was used for inventory
building and hoarding. 21.7% of the GDP was hoarded in 2005, more than a fifth
of the wealth generated in 2005 was used for nothing. They were neither
consumed nor invested. This represents 1,630 Milliar in DA (22 Billion US $).
And the situation has been going on for five years.
Note that
these are resource allocation figures. We do not work on corruption or prebend,
which is difficult to assess without careful investigation anyway.
Despite
significant resource endowments in quantity and quality, Algeria was, in 2003,
in the ranking of countries in relation to the Human Development Index in 108th
place behind Tunisia 92nd, Jordan 90th, the Jamahiriya Arab Libyan 58th and
Cuba 52nd.
In 2003, Algeria was ranked by Transparency
International in 88th place, in the ranking of countries in relation to their
anti-corruption programs, far behind Tunisia 39th place or Egypt and Morocco in
70th place.
For press
freedom, Algeria was ranked in 2005, according to Reporters Without Borders, in
129th place, behind Sub-Saharan African countries such as Mali (37th place) or
Niger (57th place)!
For the
degree of economic openness, Algeria occupies the 120th place, that is to say
in the rear pack. The same goes for the business climate.
Even in
Football, Algeria is in 2005, in 81st place in the ranking of the International
Federation of Football Association (FIFA) far behind Egypt (26th), Tunisia
(32nd), Morocco (35th).
In fact,
Algeria is in a situation of excessive economic and social vulnerability as
these figures prove. Likewise a political vulnerability marked by subversive
violence, lasting more than a decade, which has created a huge gap between the rulers
and the ruled.
A
generation of Algerians have been lost during this devastating time, expressing
their discontent with the riots and the destruction of symbols of the state.
Hence, the
urgency to go beyond the political and economic status quo in the face of the
social turmoil which is motivated by the obvious appearance of corruption,
incompetence; lack of accountability for transparency and integrity; as well as
inefficiency, waste and insensitivity to the demands of populations.
We must ban
the practice of making decisions without any coordination, causing damage
contrary to expectations.
We must be seriously concerned about the risk of seeing the creation of two antagonistic societies in Algeria: that of the nouveau riche through rent, financial ease, waste and corruption; and that of those left behind among regions and within regions.
In such a
case, the country would settle into a growing social protest, without the
latter being able to lead to a revolution and the changes that accompany it. It
would then be “the permanent misery trap”. Poverty calls for riots, which in
turn increase poverty due to the resulting political and economic instability.
At a time
when the country has very strong potential to emerge from it, it becomes
unacceptable, for those who have the capacity, to be silent on the possibility
of engaging Algeria on the path out of the crisis.
This is why
we are addressing all those who are keen to get their country out of the state
of crisis to tell them to carefully analyze this lucid and responsible
observation, which we present without any fear-mongering.
There are
times in the history of Nations when opportunities for change present
themselves as rendezvous with destiny:
to seize them is to open the way to progress
and prosperity; to miss them is to open the way to chaos.
Algeria is
currently living and for the next few years, a rendezvous with its destiny.
Financial
ease, the absence of organized political opposition, which in other
circumstances would hamper the executive in making economic choices, the
quality of potentials, technological progress in the world, the international
environment, offer a favorable ground , for the country's commitment to a New
Development Policy paving the way for strong and sustainable economic growth,
the successful integration of the Algerian economy into the world economy, the
enhancement and protection of heritage and especially peace in progress.
That we
miss this meeting, by doing nothing to change the economic policies and by
leaving the institutions as they are and it will be the inevitable fall into
"the trap of permanent misery", as is already the case. for a large
number of Third World countries.
Conclusion:
The current
economic policies seriously jeopardize the future of future generations, as the
economic and social realities which have just been presented prove.
Especially
since the officials concerned announce that "Algeria plans to produce 2
million barrels per day at by 2010 and plans to increase its exports of natural
gas and LNG to 85 billion m3 in 2015 ".
Especially
since the endowments of human, natural and cultural heritage are very
vulnerable and strongly threatened by the development of the country in terms
of demography, economic choices, land use planning, natural disasters and
weakness. management chronicle.
What
resources are we leaving for future generations?
By Dr Ahmed
BENBITOUR ( Economist and former prime minister)