Algeria Plans to Cut Food and Gas Subsidies to Curb Deficit
Algeria Plans to Cut Food and Gas Subsidies to Curb Deficit
Algeria plans to start reducing subsidies on food, fuel and electricity as the OPEC nation looks to cut billions of dollars in spending.
A draft of the 2022 budget shows the government plans to move to direct cash payments for the neediest segments of the population to avoid a public backlash as it curbs subsidies that cost an estimated $17 billion last year, according to Ennahar news website.
The cuts will target items including wheat flour, cooking oil, domestic gas and electricity, it said. Energy products account for a majority of Algeria’s subsidy spending.
The government also plans to introduce unemployment benefits for 19- to 60-year-olds and support for divorced women through a national social fund financed by taxes on tobacco and other items. To boost revenues, the gas-exporting nation plans to impose taxes on vacant homes and a stamp tax on some passports.
The steps comes after the International Monetary Fund warned earlier this month that Algeria needs to adopt a sweeping package of fiscal, monetary and exchange rate reforms to strengthen the economy.
“Persistently high fiscal deficits over the medium term would give rise to unprecedented financing needs, deplete FX reserves, and pose risks to inflation, financial stability and to the central bank’s balance sheet,” the IMF said in the report.
Algeria’s president had criticized the IMF’s recommendations and ruled out anew the possibility of the country turning to international markets for financing.
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