Algeria Refuses to Borrow from IMF to Ease Financial Crisis

A vendor wearing a protective face mask serves customers inside his shop, ahead of the holy month of Ramadan, amid concerns over the coronavirus, in Algiers, Algeria. (Reuters)
A vendor wearing a protective face mask serves customers inside his shop, ahead of the holy month of Ramadan, amid concerns over the coronavirus, in Algiers, Algeria. (Reuters)
TT

Algeria Refuses to Borrow from IMF to Ease Financial Crisis

A vendor wearing a protective face mask serves customers inside his shop, ahead of the holy month of Ramadan, amid concerns over the coronavirus, in Algiers, Algeria. (Reuters)
A vendor wearing a protective face mask serves customers inside his shop, ahead of the holy month of Ramadan, amid concerns over the coronavirus, in Algiers, Algeria. (Reuters)

Algerian President Abdelmadjid Tebboune has declared his country will not approach the International Monetary Fund (IMF) for loans, despite a financial crisis triggered by a collapse in global oil prices and coronavirus lockdowns.

“Accumulating debt harms national sovereignty,” Tebboune told reporters in a meeting with Algerian media, broadcast late Friday.

Algeria fell into heavy debt with the IMF during the 1990s, an episode Tebboune referenced in his address.

Algeria is heavily dependent on oil production, which generates over 90 percent of its export receipts.

A collapse in hydrocarbon prices this year – caused by plunging demand due to societal lockdowns designed to combat the spread of coronavirus, and exacerbated by a brief price war between key players Russia and Saudi Arabia – is putting even greater pressure on Algeria's external accounts.

Even before this year’s crisis took hold, Algeria’s foreign exchange reserves had fallen to $62 billion at the end of 2019, from $180 billion in 2014.

But Tebboune stressed he prefers “to borrow from Algerian citizens, rather than the IMF or the World Bank.”

He also expressed reluctance to borrowing from foreign banks, saying that doing so prevented Algeria from making its position clear on issues including the fate of the Palestinian cause and Western Sahara.

Tebboune also said that several “friendly” nations had offered loans, which had been declined for the time being. he did not name these countries.

He ruled out relying on extra printing of the local currency by the central bank, noting that this could cause inflation.

Tebboune also revealed plans to develop new natural resources, including uranium, gold and phosphate, with the help of foreign investors, after the end of the health crisis caused by the novel coronavirus.

“The novel coronavirus has frozen several plans and projects. But they will be launched after the health crisis is overcome,” he said.

A sharp fall in oil and gas revenue in recent years has deepened the country’s financial problems, widening the budget and trade deficits.

Algeria still relies heavily on energy earnings despite previous announcements that it would carry out reforms and develop the non-hydrocarbon sector.

The coronavirus outbreak has worsened the economic situation with energy earnings dropping further, forcing the government to cut spending and planned investment for 2020.

“We are determined to develop our agriculture and reduce significantly the value of purchases from abroad,” Tebboune stressed.

Elected in December 2019 after mass protests demanding political and economic reforms and the removal of the ruling elite, Tebboune has vowed to open up the economy and amend the constitution to give a greater role to parliament.

“A political change will take place and strong institutions will be created,” Tebboune said, referring to demands by the protest movement known as Hirak.

The government has decided to postpone loan payments for state and private firms financially hit by the coronavirus, and Tebboune said more measures would be taken to benefit companies and the self-employed.

“Losses of firms are being assessed. We are ready to provide financial support. Even self-employed people such as taxi drivers and hairdressers will be helped,” he said.



Will Escalation Stop Israeli Gas Production?

File photo of the Israeli Leviathan field (Reuters)
File photo of the Israeli Leviathan field (Reuters)
TT

Will Escalation Stop Israeli Gas Production?

File photo of the Israeli Leviathan field (Reuters)
File photo of the Israeli Leviathan field (Reuters)

The American energy giant Chevron, which operates the Leviathan field off the Mediterranean coast of Israel, has decided to suspend work on laying an underwater pipeline, part of its third pipeline project, due to the escalating conflict and fears of potential missile strikes. This follows the earlier closure of the Tamar and Leviathan gas platforms as a “precautionary measure” during the Iranian attack on Israel on Oct. 1.

These developments came as the Israeli newspaper Yedioth Ahronoth reported that the Leviathan field, located 130 kilometers off the coast of Haifa, was the target of a missile barrage fired by Hezbollah on Wednesday morning at Mount Carmel and Haifa. Chevron subsequently activated “special procedures,” stating that it was dealing with an operational incident on the drilling platform.

During last week’s Iranian missile attack, Yedioth Ahronoth noted that NewMed Energy, a partner in the Leviathan and Tamar gas fields (the latter located about 19 kilometers off the Gaza Strip coast), informed the Tel Aviv Stock Exchange of Chevron’s decision to temporarily shut down the Leviathan field for several hours.

“In light of the latest security developments and based on the system’s operational considerations, the operator occasionally halts production from the Leviathan reservoir for certain periods,” NewMed Energy, which holds a 45.3% stake in Leviathan, stated to the stock exchange.

Chevron holds a 39.6% stake in Leviathan, while Ratio Energies owns 15% of the project. Chevron also has a 15% stake in Tamar.

Leviathan’s partners approved a $429 million investment on Aug. 1 to launch the preliminary engineering design phase to increase Leviathan’s gas export capacity from the Mediterranean Sea field to 21 billion cubic meters annually.

NewMed Energy stated that Chevron had informed the partners that plans for laying the underwater pipeline have been postponed until Apr. 2025—initially scheduled to begin in the second half of 2025—due to the deteriorating security situation. The delay is expected to be at least six months, affecting next year’s projected cash flow.

Currently, gas from the platform is transported to the shore and integrated into Israel’s national grid, where it is distributed to Israel, Egypt, and Jordan.

The Leviathan field was discovered in 2010 by NewMed Energy, Chevron (then known as Noble Energy), and Ratio. Natural gas production from Leviathan began on December 31, 2019, and since then, it has become a key source of gas for Israel, Egypt, and Jordan.

The third pipeline project was initiated by the Leviathan partners in July 2023, aimed at boosting Leviathan’s annual production capacity from 12 billion cubic meters to around 21 billion cubic meters. This increase is intended to meet growing local demand and export to neighboring countries and international markets, according to NewMed Energy.

Israel continues to export gas through pipelines from Leviathan and Tamar to Jordan and Egypt. Israeli exports to Egypt rose from 4.9 billion cubic meters in 2022 to 6.3 billion cubic meters in 2023, while sales to Jordan remained steady year-on-year at 2.7 billion cubic meters. In the second quarter of this year, Leviathan’s total gas production reached 2.8 billion cubic meters, with exports to Egypt rising by 12.5% to 1.8 billion cubic meters during the same period, while 0.6 billion cubic meters flowed to Jordan, according to Energy Intelligence.

Goldman Sachs estimates that the potential global market impact of disruptions at Leviathan and Tamar could reduce global liquefied natural gas (LNG) supply by nearly 9 billion cubic meters annually, or 1.7% of global LNG supplies, according to a report by Energy Intelligence.