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More Belt-Tightening Ahead for Algeria

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The North Africa Journa: October 2, 2016: Algeria continues to seek cost containment measures, with growing expectation of fuel price increases in 2017 aimed at reducing the projected budget deficit of $2.6 billion.  There is also pressure on the government to freeze all expanses over the next three years. Although this may be difficult to fully achieve without  a major spike in social disruption, the ongoing debate of spending cuts shows how deep Algeria’s economic problems are. So much so that many local governments have been unable to pay their basic utility bills. This week for instance, state-owned power company Sonelgaz went as far as shutting down power supply to eight municipalities in Bouira because of unpaid bills.

Looking ahead,  although the 2017 financial law draft bill is still in the works, the prices of fuel are slated to increase as of 1 January 2017 by between 200 to as much as 900 Algerian dinars, equivalent to US$1.7 and $8 per hectoliter, depending on fuel types. The state calculates that it will earn US$410 million from the price hikes next year, which will help the government in dealing with a budget deficit that is expected to exceed $2.6 billion next year. The source suggests that the government is planning on freezing all expenses in 2018 and 2019.

This subject remains the main topic of conversation among Algerians. While this year’s hikes were tolerated, next year’s may not be, especially if the law also includes an increase in the prices of electricity and mobile phone plans.

Meanwhile, electricity provider Sonelgaz has cut off power to eight communal assemblies, namely Ain Turk, Sour el-Ghozlane, Chorfa, el-Adjiba, Aomar, Lakhdaria, Haizer and el-Hachimia, over unpaid debts amounting to $US1 million. All this comes against a backdrop of a regional economic crisis, which could affect citizens as the strict measures taken by Sonelgaz is likely to affect public lighting, schools and even water distribution systems.

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