The mechanism had been around for decades. In Algeria, Algerian deputies voted Wednesday, November 17 to abolish general subsidies on basic products such as oil, bread or milk. The government assures us that the system will be replaced by targeting the most needy. Above all, it responds to IMF injunctions.
“The government does not intend to renounce” the system of state aid. Algerian Prime Minister Aïmene Benabderrahmane had to respond to criticism from deputies on the end of generalized subsidies. Subsidies to basic products will still represent for 2022 a total of “17 billion dollars”, specified the head of government against “between 30 and 41 billion dollars” for the system of subsidies in force so far.
“A new philosophy”
This abolition voted in the framework of the 2022 finance law aims to adopt “a new philosophy aimed at targeting, directly by means of aid, families in need”, explained Aïmene Benabderrahmane, also Minister of Finance.
The terms of application of the law, in particular and the list of products concerned and the categories of households targeted, will be specified later by implementing decrees.
Critics of the main Islamist party
All parliamentarians voted for, with the exception of those of the main Islamist party, the Movement of the Society for Peace (MSP, 65 deputies out of 407). This proposal reflects “a major social transformation which weakens the purchasing power of Algerians in an unprecedented way without mechanisms to guarantee them access to monetary compensation”, denounced the MSP, in a press release.
IMF pressures
The State subsidizes many basic food products (semolina, oil, bread, milk, etc.) but also electricity, water, gas and gasoline. The Algerian social system also provides housing assistance and provides free education and health care.
Decrease in the level of foreign exchange reserves
In early October, the International Monetary Fund (IMF) called on Algeria to “recalibrate” its economic policy and carry out “structural reforms”.
Algeria’s budget is largely financed by receipts from hydrocarbon exports, which represent more than 90% of foreign exchange inflows, which strongly exposes the country to fluctuations in gas and oil prices. Foreign exchange reserves fell from $ 62.8 billion in 2019 to $ 48.2 billion at the end of 2020, according to the IMF.
