Algeria to Reduce Imports As Oil Price Drop Bites

 

The North African state, which relies on oil and gas for 60 percent of its budget, has already cut public spending, reduced some energy subsidies and frozen infrastructure projects since its energy revenues fell by almost half last year.

 

But, reliant on its oil industry and with an under-developed non-energy sector, Algeria imports vast quantities of goods. Its import bill reached $51.5 billion last year, though that was down 12 percent from 2014, according to official figures.

 

"Our goal is to reduce the bill by 15 percent in 2016," Prime Minister Abdelmalek Sellal said in a letter sent to the central bank and state banks on Tuesday.

 

It was not clear how the government planned to reduce imports by that amount. Some restrictions are already in place on certain car, cement and construction steel imports.

 

But importers have been waiting for months for a complete government list of licenses on a range of goods that was meant to clarify restrictions. A commission of ministries and customs officials is working on those.

 

"They are slowly, steadily putting down obstacles on imports as a way to cut demand," said one importer.

 

The central bank has also recently slapped a further restriction on imports, requiring importers to make a "domiciliation" or pre-clearance of import operations in an online registration with state banks, APS state news agency reported.

 

Customs director Kaddour Bentahar told APS the measure would help reduce illicit cash transfers and false transactions that exaggerated the flow of foreign currency.

 

But some importers complained that decision will cause a backlog and delays rather than organized restrictions.

 

"My bank doesn't have its online system ready so how can I even register?" a book import trader said.

 

Since its 1962 independence from France, Algeria's economy has been largely a state-run, centralized system. Liberalisation and development of non-oil sectors have come slowly, and state bureaucracy remains a major concern for investors.

 

Oil revenues also pay for a vast system of social welfare and subsidies - from fuel, food and free housing to cheap credits - that have helped Algeria's government ease social tensions and protests in the past.

 

The International Monetary Fund, visiting this month, noted in a statement on Monday that "import restrictions, while perhaps providing a temporary relief, introduce distortions and cannot substitute for reforms aimed at boosting export."

 

With little foreign debt and still large reserves, Algeria's government says it has the tools to weather the fall in global crude prices. But just last year, reserves dropped $35 billion to $143 billion, the IMF said.

 

Energy earnings plunged 41 percent to $35.72 billion last year, and officials expect them to fall to $26.4 billion this year. The government forecasts foreign reserves will drop to $121 billion by the end of this year.