President Chadli Bendjedid is predicting dire economic straits in apparently purposely exaggerated terms to shock Algerians into realizing that the days of easy petrodollars are over.
Diplomats and oil specialists are convinced that the 57-year-old president's estimates are overly pessimistic, perhaps exaggerated by as much as 50 percent to prepare Algerians for future austerity measures. The measures he has already taken, they say, are not enough to make good the shortfall the president is predicting.
The government will not say what major cuts it plans until the new budget is published in the spring. Until then, it is impossible to tell whether the president has been exaggerating or is trying to shock Algerians into accepting future cutbacks.
Bendjedid's bad news is roughly the same heard from all Third World oil-producing countries. In Algeria's case, 97 percent of its foreign exchange comes from crude oil exports, oil products and natural gas.
But the austerity message and his calls for self-reliance are undercutting the president's own liberalization policy. The policy is meant to provide Algerians with more consumer products following a generation of deprivation under his dour predecessor, the late Houari Boumedienne.
Faced with declining oil production, one of the world's highest birthrates and the necessity of importing 60 percent of its food, the leader of 21.5 million Algerians clearly felt he had little choice.
Since midwinter, the president and his ministers have repeatedly said that the country's exchange earnings will be down 80 percent this year, due to a 50 percent drop in oil prices and the decline of the dollar, the currency used to pay for the oil.
Already, the government has made decisions unpopular with many Algerians. Predicting oil price declines two years ago, the administration began trimming back on grandiose industrial projects and foreign loans.
Recently, the foreign exchange allowance for Algerians leaving the country as tourists was cut in half: from $200 a year to $200 every other year and only for adult travelers, regardless of the number of children they may be bringing along.
The government also ended a four-year-old postal package system under which Algerians could import foreign goods, principally spare parts for cars and other scarce manufactured goods.
The restrictions have gone the other way as well. Foreign visitors now are forced to pay for their lodging at the arbitrary official exchange rate, generally three times less than that offered by Algerians living in France and others seeking hard currency.
Also believed under study are restrictions on Moslem pilgrimages to Mecca and cutbacks on roads, hospitals and the projected Algiers subway.
However, multibillion-dollar subsidies remain on bread, sugar, cooking oil, rice and even coffee.
The government is moving cautiously, mindful of the food riots which two years ago shook neighboring Morocco and Tunisia when government supports on basic commodities were reduced.
There also has been no talk of ending Algeria's costly support for the Polisario guerrillas who, since 1976, have disputed Morocco's claim to the Western Sahara.
The rhetoric of an impending crisis has also allowed Bendjedid to bring home the need to increase exports such as wine, textiles and steel now that oil revenues and production are declining.
But those Algerians who last year hoped the president would further liberalize the economy were stymied by his austerity-minded advisers and now are thought unlikely to gain ground against conservatives.
Nor is Algeria willing to improve conditions for foreign investment and without it, say western diplomats, exploration of oil and gas reserves appears problematical. Industry specialists calculate that without new oil and gas discoveries, Algeria will just barely be able to satisfy the needs of its citizens, estimated to number 35 million by the end of the century.
Liberal economists and western diplomats doubt that Algeria can do much to rationalize the economy without a major devaluation of the dinar, unchanged since 1969.
To avoid the risky political course of devaluation, Algeria may instead seek as much as $2 billion in new foreign loans, according to diplomatic sources.