A Plummeting Oil Price has Ripple Effects in North Africa’s Revenues

Algeria needs the price of Brent crude, an international benchmark for oil, to rise to $157 dollars a barrel in order for its budget to add up. In May the Algerian government said it would slice spending in half, as oil prices fell due to people’s movements being restricted by the pandemic. Remittances from energy-rich states are a lifeline for the entire region. More than 2.5m Egyptians, equal to almost 3% of that country’s population, work in Arab countries that export a lot of oil. The money they send back makes up a sizeable chunk of the economies of their homelands. As oil revenue falls, so too will remittances. There will be fewer jobs for foreigners and smaller pay packets for those who do find work. Most visitors to Egypt are from Europe, but Gulf tourists stay longer and spend more money at restaurants, cafés and malls. These countries can look elsewhere for revenue, but it will be hard to replace the wealthy tourists in their backyards. Saudis spend the summer in Cairo or Beirut because those cities are close, culturally familiar and speak the same language.

SOURCE: THE ECONOMIST