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Monday, July 3, 2017
Algeria’s parliament approved government plans to repair the country’s long-standing subsidy policy, launch Islamic finance, and set new tax rates. The plans are part of wider reforms proposed by Prime Minister Abdelmadjid Tebboune.
Algeria has been struggling financially due to its reliance on oil and gas revenues to prop up the country’s budget. This reliance as made the country vulnerable to the downturn in oil prices over the past few years.
Tebboune revealed that the plans include setting up a framework for participatory funding, one of the tools of Islamic financing.
“Collecting money from the parallel market will help fill a gap for two or three years. The monetary mass in this market is huge,” Tebboune told parliament.
The government will also take steps to reform the outdated systems and bureaucracy of its banking system, which has deterred investment from local and foreign investors.
The new government will also launch consultations with parliament and social and economic partners over reforming Algeria’s subsidy policy. “We need a consensus because we are speaking about a policy that we have been implementing for more than four decades,” Tebboune said.
In developing countries subsidy reform is a touchy subject as their citizens rely on them for everything from basic foodstuffs to fuel to medicine. The Algerian government currently spends $30 billion per year on subsidies. The system helps the government appease the public, but given its current budget constraints, Algeria needs to justify the spending.
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