Why Algeria pulled the plug on its mega-port dream

Algeria’s economic strategy is straining under the weight of dual ambitions: maintaining costly social subsidies to suppress unrest, while pursuing grand infrastructure projects to assert regional power status. The recent cancellation of the $3 billion El Hamdania mega-port—once a flagship Belt and Road Initiative (BRI) venture with China—reveals how tightening budgets and domestic pressures are reshaping policy choices. Generous welfare policies are crowding out capital investment, sidelining long-term development projects for the politics of survival. The strain is evident in Algeria’s record $126 billion budget for 2025, which carries a deficit of about 22% of GDP, underscoring a fiscal path that is increasingly unsustainable.

A closer look

In March 2025, the Algerian government officially abandoned the El Hamdania deep-water port project near Cherchell. The $3+ billion plan, launched in 2015 as part of China’s BRI, aimed to transform Algeria into a transshipment hub linking Africa and Europe and to counter Morocco’s Tangier Med port, the busiest in North Africa.

It was backed by Chinese partners – financing was to come from China’s Eximbank and a Chinese operator (Shanghai Ports) was slated to run the port for 25 years. On paper, El Hamdania promised a world-class facility to handle up to 26 million tons of cargo annually and elevate Algeria’s geostrategic profile. Despite its ambition, the mega-port never gained momentum. The 2019 resignation of longtime President Abdelaziz Bouteflika ushered in years of bureaucratic upheaval, then COVID-19 piled on delays.

By 2024, spiraling costs and poor project management had stalled the project. Finally, in March 2025, the Public Works Ministry confirmed El Hamdania’s cancellation, with officials saying capital needed to be redirected toward more essential infrastructure and welfare delivery. Rather than pour billions into a new port, authorities are channeling funds into upgrading existing transport networks and basic infrastructure. For example, the government reviewed an expansion of the existing Djen Djen port in eastern Algeria (Jijel) to serve as a major trade gateway, and it has invested in trans-Saharan highway and railway links to improve trade connectivity inland.

For China, the collapse of El Hamdania is a rare BRI setback in the Maghreb. Beijing has remained diplomatically quiet on the matter, but the episode is prompting reassessments of large-scale infrastructure partnerships in politically fraught environments. Notably, Algeria has never been a top destination for Chinese capital under the BRI – roughly $9 billion in Chinese construction and investment has flowed to Algeria since 2013, a small fraction of China’s expenditure in Africa, in part because Algeria shuns foreign debt financing. The El Hamdania saga could reinforce Beijing’s caution, steering Chinese investment toward lower-profile ventures or more receptive neighboring countries. In short, Algeria’s port dreams being sunk sends a clear signal: grand projects can falter when domestic politics and finances won’t cooperate.

Subsidy saturation and the politics of buying time