Algerian parliament endorses spending cuts, higher taxes for 2017

November 23, 2016 12:43 pm

Algerian parliament approved a budget for 2017 that endorses spending cuts and more taxes. (Image: Reuters)

Taxes meant to compensate for lower energy revenues

Spending to fall for a second straight year

Opposition lawmakers boycott budget vote

 

Algeria’s lower house of parliament on Tuesday endorsed a 2017 budget that includes new taxes on goods and fuel subsidy cuts as part of government efforts to offset a fall in energy revenues.

Spending cut

Next year’s budget provides for a 14 per cent cut in spending, following a nine per cent reduction in 2016, as the OPEC member remains cautious about any recovery in global oil prices.

Oil and gas account for 94 per cent of exports and 60 per cent of the state budget. Attempts to diversify the economy have largely failed.

The budget is widely expected to get final approval from the Algerian Senate.

Oil price woes

Lower oil prices have hit state finances hard. Authorities have used hydrocarbon revenues to subsidise almost everything from food to fuel and medicine to maintain social stability under President Abdelaziz Bouteflika, in power since 1999.

“There are certainly increases (in taxes)…but, on the other hand, there are a lot of provisions that are there to improve, boost and enhance economic growth,” Finance Minister Hadji Baba Ammi told parliament.

Under the new finance law, prices for unleaded gasoline, premium gasoline and regular gasoline will increase by 13.08 per cent, 12.94 per cent and 14.11 per cent per litre respectively and the diesel price by 7.85 per cent.

Earlier this year Algeria began to implement its first fuel price increases in more than a decade, though domestic prices for energy products remain very low by international standards. Diesel is currently 18.23 dinars a litre (16 US cents).

(Talks about the new budget began in September: Read here)

Tobacco tax

The new budget provides for a rise in value-added tax (VAT) of two per cent, while taxes on domestic property rentals will increase by between seven and ten per cent, and tobacco prices by between 60 and 100 per cent.

Prices for appliances such as air conditioners and washing machines will go up by between five and 60 per cent and the cost of advertising for foreign products by ten per cent.

Lawmakers also approved a new 10 per cent tax on alcoholic beverages. But they gave the green light for a 65 per cent reduction of electricity bills for residents and farmers in southern desert provinces.

 

(Algeria boosts oil output at two major fields, official says)

 

Boon or bane?

Opposition lawmakers, who represent a small minority in parliament, boycotted the budget vote. Some held up placards in parliament that read: “Starving the people” and “Undermining the social nature of the state”.

“The government is blaming citizens for its mistaken policies over the past two decades. It has punished citizens several times,” said Lakhdar Benkhellaf of the opposition Justice and Development party.

The government expects energy revenues to reach $35 billion in 2017, up from a projected $26.4 billion this year.

Last week it said it had raised $5 billion from a domestic debt issue, just days after the African Development Bank’s approval of a 900 million euro ($1 billion) loan for the North African country.

“The difficult economic situation requires the active contribution of all Algerians to overcome the crisis,” said Mohamed Djemai of the National Liberation Front, part of the ruling coalition.

 

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