This article was taken from Menas Associates’ Algeria Politics & Security publication

The central Banque d’Algérie has been quick to respond to the World Bank’s more pessimistic outlook for Algeria, which it published at the end of July and which contrasted with Prime Minister Abdelmalek Sellal’s assessment of the future fall in the country’s foreign exchange reserves.

As we reported last week (Algeria Politics & Security – 12.08.16), the World Bank predicts that the reserves will fall to US$60 billion by end 2018, while Sellal was adamant that they would not drop below US$100. Our own assessment is that, although possibly overly pessimistic, the former’s estimate is likely to be nearer the mark.

The Banque d’Algérie stated on 14 August that the World Bank’s report was ‘somewhat alarmist and not an evidence based hypothesis’. It went on to say that ‘the level of the reserves at the end of 2018 will be significantly higher than that announced by the World Bank, especially because of the effects of fiscal consolidation and its impact thereof on the external accounts and, correspondingly, the foreign exchange reserves’.

The central bank accused the World Bank of ‘giving no further details on the key assumptions underlying its economists’ forecasts.’ It accused it of ‘ignoring foreseeable developments of the various indicators determining the evolution of Algeria’s forex reserves of Algeria,’ and added that its only given was that the oil price would range between US$41 and US$60 a barrel between 2016 and 2018.

This is in line with the central bank’s own projection, which relied on the latest IMF forecasts which put the oil price for 2016 at US$36.6 a barrel in 2016, US$42.8 in 2017 and US$46 in 2018. The central bank also accuses the World Bank of assuming that the government will remain in a state of total inertia and unresponsiveness. It also claims that the latter’s projections are significantly lower than those of the IMF.

While the argument between the two continues to rage, most Algerians seem to be in agreement that they are heading into very tough times. They will begin to get a sense of this as soon as the government is back from holiday and the Loi de Finance or budget for 2017 comes under scrutiny in September.