Algeria cuts spending as energy revenue forecast falls 50 percent

By amid Ould Ahmed in Algiers
Posted on Thursday, 23 July 2015 10:55

Oil and gas account for 95 percent of Algeria’s exports and energy revenues make up 60 percent of the budget.

The government expects economic growth outside oil and gas to reach 5.1 percent, unchanged from an initial forecast early this year, the cabinet said in a statement.

Inflation is expected to be 4 percent in 2015, up from the 3 percent initially expected, it said.

The budget is now based on an oil price of $60 a barrel, much lower than the $90 initially anticipated.

Oil and gas earnings are expected to drop to $34 billion from the $68 billion earned in 2014, the statement said.

Imports are projected at $57.3 billion for this year, exceeding by far exports for the first time.

The supplementary budget law sets spending at 7,692 billion dinars, down from 7,588 billion dinars ($112 billion) approved earlier this year.

Aiming to avert social unrest, the government has said the drop in energy revenues would affect social programmes.

The country, with a population of 40 million, spends heavily on subsidies, including cereals, milk, medicine, cooking gas, electricity and housing.

Algeria posted a trade deficit of $7.78 billion for the first half of 2015, compared with a $3.2 billion surplus a year earlier.

It imports most goods it needs, including food, medicine and manufacturing parts.

Its foreign exchange reserves, usually used to finance deficits, dropped by $19 billion to $159 billion in the first quarter of the year.

In a bid to “rationalize” expenditures, the government has been trying to restrict imports and offer incentives for domestic producers.

The supplementary budget law sets taxes on profits for import firms at 26 percent, higher than the 23 percent imposed on construction and tourism.

Taxes on profits for production companies has been reduced to 19 percent from 23 percent.

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