Algeria suffers liquidity crisis as dinar collapses

Queues at Algerian post offices for employees waiting to receive their wages are growing as the country experiences a liquidity crisis combined with higher inflation that affects the purchasing power of citizens.

The cosmetic measures put in place by the government did not anticipate the cash flow crisis in the country where the banking system is one of the least developed on the African continent.

Liquidity has always been an issue in Algeria’s cash-dominated economy, but the drop in oil prices and the pandemic have caused an economic slowdown and impacted the flow of cash.

As the country grapples with high inflation, due in part to money printing in the past and the devaluation of the dinar, anger is mounting because people do not have access to their wages.

The sense of worry and panic further inflames pro-democracy protests that have recently gained momentum demanding a clean break with the ruling military elite.

Since the end of the era of expensive oil in 2014, the Algerian dinar has plunged and is now trading against 200 dinars for one euro on the black market.

From $ 200 billion in foreign exchange reserves a few years ago, Algeria now has less than $ 40 billion and is expected to exhaust it within two years and be forced to seek loans.

But with the lack of reforms and 95% oil and gas exports, Algeria will likely have access to expensive loans that will strain its budget.

The country avoided reforms aimed at diversifying its economy and maintained a policy of generous subsidies, essential to buy social peace.

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