The most important of them is raising wages and purchasing power ... Does the Algerian government have financial resources to implement its plan?

Abdel-Hakim Hadaqa-Algeria

The first government of the Algerian President, Abdel Majid Taboun, preferred to preserve the social nature of public policy, as it was led by Abdelaziz Jarad, who presented a high-ceiling plan of action in the field of social and economic support.

The government decided to raise the guaranteed minimum national wage per month, which is currently estimated at 18,000 Algerian dinars ($ 120), with a review of the "base wage" (the basis for which retirement is calculated) for all employees and workers.

The government has adopted improving the purchasing power of citizens through a number of mechanisms, the most prominent of which is the dropping of the tax on professional activity (a tax on the revenues of industrialists' products), which leads to a slight reduction in the cost of products in the market, even though this tax was an essential resource for financing local groups (dust groups) ) With annual revenues of $ 3 billion.

It also abolished the tax on the gross income of those with wages less than 30,000 Algerian dinars ($ 150), in addition to pledges to launch public projects in the areas of housing, health, education, and others.

Despite criticism of the government's plan regarding the absence of the numbers, mechanisms and financial resources needed to implement the reforms, the plan won the approval of parliament at the end of the week.

Language of numbers
The Ministry of Finance data indicates that the deficit in financing state activities during the next three years is a candidate to reach 6656.5 billion dinars (the equivalent of 55 billion dollars), and it cannot be provided from the expected revenues of the petroleum tax and the regular tax.

As for the trade balance of Algeria, it recorded a deficit of $ 6.11 billion during the year 2019, according to the data of the General Directorate of Customs.

The government is resorting to bridging the fiscal deficit for the public budget since 2017 to internal borrowing, as the value of loans provided by the Bank of Algeria to the public treasury reached 6556 billion dinars ($ 50 billion) until the end of January 2019.

The deficit of the foreign trade balance is settled by relying on the "exchange reserve fund", but the latter is in great decline and currently contains less than 60 billion dollars.

According to followers, the reality makes the financing options limited to the government to fulfill its obligations, at a time when Minister Abdulaziz Jarad confirmed the ability of his team to mobilize the necessary resources, and did not exclude external borrowing from international development banks.

The weakest pay
As for the reality of the purchasing power of the Algerians in recent years, the leader of the "Union", Messaoud Boudeba, described it as witnessing a terrible deterioration that could set off the situation during the coming months, especially as the economic crisis looms on the horizon according to the assurances of experts, in light of the failure of public policies that Algeria has lived in. .

In his speech to Al-Jazeera Net, he explained that the high cost of living, high prices, inflation, and the low value of the dinar are matters that divided society into two categories. The first is classified in the circle of poverty by more than 80%, and the second possesses wealth and increases wealth, after the middle class has been eliminated.

Boudibah stressed the setting of a wage policy based on the reference to determining the minimum standard of living, including the minimum wage, and then building salaries that preserve the employee's dignity and establish societal stability.

And based on realistic studies that his union conducted years ago in order to determine the minimum standard of living according to the simplest criteria, he revealed that the lowest wage should not be less than 50 thousand Algerian dinars ($ 350) for a family of five and have their own house, noting that these indicators have risen More after 2014.

Mechanisms and indicators
On the other hand, Ahmed Sharifi, a member of Parliament’s Finance and Economy Committee, said that the government's action plan included tax exemptions to improve purchasing power, but without specifying sources of funding that would allow for these measures to be sponsored despite their legitimacy and their reflection on fragile segments.

He explained that the plan was directed at encouraging investment by eliminating fees for professional activity that contributes 25% of the municipalities budget, and reviewing the budget pattern dependent on the provision of resources, while neglecting the results and moving to the performance budget in order to rationalize public spending, combat fraud and tax evasion, and raise collection capabilities.

He added in a statement to Al-Jazeera Net that the scheme went towards the formal employment of pre-work contract holders and reduced the unemployment rate to 10%, but without specifying the mechanisms.

He pointed out that the current and expected indicators until 2022 are all declining, whether it comes to modest growth in the range of 2% or the continuation of the budget deficit and the trade balance and the erosion of the exchange reserves, with the deterioration of the value of the Algerian dinar.

Accordingly, these data - Sharifi said - make the government's plan difficult to achieve, unless accompanied by strict procedures to rationalize budget expenditures that require 70% contracts to govern.

Structural reforms
On the other hand, financial expert Abdelkader Berich sees realistic alternatives in initiating structural reforms aimed at affecting macroeconomic variables in order to improve performance and raise the rate of growth in the prospects of 2024 to 5%. This is done through activating the role of banks and the banking system, in a manner that allows financial inclusion (the introduction of money circulating in the informal market into the formal financial system), mobilization of savings by diversifying banking services, modernizing payment methods and engaging in electronic transactions, while expanding the network of banks nationally.

In his speech to Al-Jazeera Net, he stressed the development of the financial market and the resumption of the stock exchange to play its role in attracting capital and financing the national economy, while reforming monetary policy to target inflation and monitor the growth of the monetary block, in light of flexible management of the exchange rate and the elimination of the parallel exchange market.

He added that it is necessary to reform the tax system and modernize the tax administration in order to reach an effective, flexible and transparent system, which is characterized by a broad base and reduces the tax burden, to reduce evasion and tax fraud.

He also stressed the reform of the state's public budget system, and the management of internal debt by reducing the budget deficit and better budgetary governance, to link public spending in the medium term to goals and results, as well as covering the running expenses by regular tax resources.

In the fifth axis of reform, he emphasized the restructuring of the state's economic and commercial capital, linking it to efficiency and profitability, while identifying clear mechanisms for the governance of public economic institutions in accordance with international standards. He stressed that reforming the social protection system is imperative to reducing the deficit of pension funds.