COVID-19: Algeria cuts budget, increases minimum wage

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.

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The government has decided to reduce the budget by “50 percent” for this year, President Abdelmadjid Tebboune’s office said in a statement.

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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.

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The government also postponed from Sunday until 10 May consideration of a finance law, which seeks to frame a response to the coronavirus pandemic.

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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.

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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.

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The draft law factors in a plunge in oil receipts this year to $20.6 billion, compared to the $37.4 billion previously anticipated.

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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.

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He said he preferred to rely instead on domestic borrowing.

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(AFP)

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