Algeria: 50% reduction in the state operating budget

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In Algeria, the government has just decided to halve the state's operating budget by 2020. A decision announced on Sunday May 3 and dictated by the threat of an unprecedented financial crisis in the country.

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With an historic collapse in oil prices in recent days and the impact of the new coronavirus on all economic activity in the world, in particular trade, Algeria did not need more to explore ways of reduction government spending.

The measure to halve the operating budget planned for this year is not yet detailed, but the Algerian authorities consider it necessary to alleviate the serious financial crisis threatening the country.

The complementary finance bill which will be presented on Sunday May 10 provides for a drop in hydrocarbon revenues to 20 billion dollars, against 37 billion that were provided for in the initial finance law for this year.

The fall in oil prices will thus lead to that of foreign exchange reserves, for a country very dependent on oil rent. Its foreign exchange reserves have, for example, increased in recent years from 162.4 billion euros in 2014 to almost 57 billion euros at the end of 2019.

It is in this context of financial difficulties and against the background of the Covid-19 pandemic that the Algerian authorities must anticipate the risk of socio-economic crisis. The government has thus committed to increasing the minimum monthly income by more than 11% from June 1, 2020. It will drop from 18,000 to 20,000 dinars, or from 128 to 142 euros. In addition, for Algerians whose salary is less than 30,000 dinars (213 euros), income tax is abolished.

The country wants to count on its own resources to face the crisis. Last week (Friday May 1, two days before the decision to cut the state's operating budget by 50%), President Abdelmadjid Tebboune ruled out the idea of ​​going into debt with the IMF (International Monetary Fund) and other international donors.

► Read also: Economy: Algeria needs to exploit new natural resources

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