Al­ge­ria sees en­ergy earn­ings, re­serves drop­ping in 2016

Kuwait Times - - BUSINESS -

AL­GIERS: Al­ge­ria’s en­ergy earn­ings are forecast to fall to $26.4 bil­lion next year while for­eign ex­change re­serves will dip to $121 bil­lion af­ter low oil prices cut into the OPEC na­tion’s econ­omy, Fi­nance Min­is­ter Ab­der­rah­mane Benkhalfa said yes­ter­day.

The North African state, a ma­jor gas sup­plier to Europe, has al­ready said en­ergy earn­ings will fall by 50 per­cent this year to about $34 bil­lion. Oil and gas sales make up 95 per­cent of its ex­ports and ac­count for 60 per­cent of the coun­try’s bud­get. Al­ge­ria is con­sid­er­ing higher taxes, im­port du­ties and a hike in sub­si­dized diesel and elec­tric­ity prices to help cover its deficit af­ter the slump in crude oil prices eroded its rev­enues, ac­cord­ing to a draft of its 2016 bud­get.

“We have to be vig­i­lant in the man­age­ment of our money. We have to con­trol pub­lic spend­ing,” the min­is­ter told the par­lia­ment where the draft bud­get law was pre­sented. “We have to mo­bi­lize new re­sources. We have planned a rea­son­able in­crease in the prices of fuel and elec­tric­ity to cover pro­duc­tion costs,” he said. Do­mes­tic prices for en­ergy prod­ucts are very low by in­ter­na­tional stan­dards in Al­ge­ria, which an­a­lysts say is the main rea­son be­hind high consumption rates in the coun­try of 40 mil­lion peo­ple.

The world oil price slide is test­ing an eco­nomic sys­tem that re­lies on en­ergy rev­enues to pay for a vast range of so­cial sub­si­dies, from pub­lic hous­ing to cheap loans and sub­si­dized fuel, which helped Al­ge­ria avoid the kind of “Arab Spring” up­ris­ings that erupted in its North African neigh­bors. Benkhalfa said over­all spend­ing on sub­si­dies will rise 7.5 per­cent next year. That in­cludes mainly food, trans­port, hous­ing and pub­lic health cov­er­age. Al­ge­ria is also try­ing to draw more for­eign in­vest­ment to help in­crease oil and gas pro­duc­tion, which has re­mained largely stag­nant in the past three years. Al­ge­ria posted a trade deficit of $10.825 bil­lion in the first 10 months of 2015 against a $4.29 bil­lion sur­plus a year ear­lier, af­ter a 40.7 per­cent drop in en­ergy earn­ings, cus­toms data showed yes­ter­day. The fi­nance min­is­ter said for­eign ex­change re­serves will drop to $151 bil­lion by the end of this year be­fore reach­ing $121 bil­lion in De­cem­ber 2016. That rep­re­sents the equiv­a­lent of 23 months of im­ports, he said.

Re­serves were $159 bil­lion in June 2015, down from $193 bil­lion in the same month in 2014. The law is widely ex­pected to be ap­proved by the par­lia­ment, but some law­mak­ers have crit­i­cized the gov­ern­ment’s plans to in­crease the prices of some sub­si­dized fu­els.

“This is a dan­ger­ous law. The gov­ern­ment wants its cit­i­zens to pay for deficits from their own pock­ets,” said Lakhdar Benkhel­laf, a deputy for the op­po­si­tion Is­lamist party Jus­tice and De­vel­op­ment Front. “The price in­creases will push in­fla­tion up.” —Reuters

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