The Algerian government decided Sunday to reduce the state budget by half due to a financial crisis caused by the global collapse in oil prices and worldwide coronavirus lockdowns. The government has decided to reduce the budget by “50 percent” for this year, President Abdelmadjid Tebboune’s office said in a statement. Despite this huge reduction, the government also agreed at a cabinet meeting to increase the minimum wage from 18,000 dinars ($140) per month to 20,000 dinars, while income tax will be abolished for those earning 30,000 dinars or less, the statement said. The government also postponed from Sunday until 10 May consideration of a finance law, which seeks to frame a response to the coronavirus pandemic.
A collapse in hydrocarbon prices this year — caused by plunging demand due to societal lockdowns designed to combat the spread of the virus and exacerbated by a brief price war between key players Russia and Saudi Arabia — is putting ever greater pressure on Algeria’s external accounts. Even before this year’s crisis took hold, Algeria’s foreign exchange reserves had fallen to $62 billion at the end of 2019, from $180 billion in 2014. The draft law factors in a plunge in oil receipts this year to $20.6 billion, compared to the $37.4 billion previously anticipated. Tebboune on Friday ruled out approaching the IMF for a bailout, contending that “accumulating debt harms national sovereignty” when it is owed to foreign institutions. He said he preferred to rely instead on domestic borrowing.
AFP
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Algeria rules out IMF borrowing to ease financial woes
Algiers, May 2, 2020 (AFP) – Algerian President Abdelmadjid Tebboune has declared his country will not approach the IMF for loans, despite a financial crisis triggered by a collapse in global oil prices and coronavirus lockdowns. “Accumulating debt harms national sovereignty,” said Tebboune, in a meeting with Algerian media broadcast late Friday. The North African nation is heavily dependent on oil production, which generates over 90 percent of the country’s export receipts. A collapse in hydrocarbon prices this year — caused by plunging demand due to societal lockdowns designed to combat the spread of coronavirus, and exacerbated by a brief price war between key players Russia and Saudi Arabia — is putting ever greater pressure on Algeria’s external accounts.
Even before this year’s crisis took hold, Algeria’s foreign exchange reserves had fallen to $62 billion at the end of 2019, from $180 billion in 2014. But the president said Algeria would prefer “to borrow from its own citizens, rather than the International Monetary Fund or World Bank.” Algeria fell into heavy debt with the IMF during the 1990s, an episode Tebboune referenced in his address. He also expressed aversion to borrowing from foreign banks, saying that doing so prevented Algeria making its position clear on issues including the fate of the Palestinians and Western Sahara. Morocco has controlled most of the Western Sahara, a former Spanish colony, since the 1970s.
It fought a war with the Algeria-backed Polisario Front over the territory from 1975 to 1991, when a ceasefire deal was agreed. Tebboune also said that certain “friendly” nations had offered loans, which had been declined for the time being. He did not specify which countries had offered assistance. The president ruled out relying on extra printing of domestic currency by the central bank, noting that this could cause an inflationary spiral.
