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Strikes Loom As Algeria Plans Tax Hikes To Offset Falling Oil Revenue

Algerian teachers and medical workers are threatening strikes against government plans to raise taxes and gasoline prices and freeze public sector salaries, in a bid to compensate for the crash in oil prices and lower gas revenues.

Algeria’s budget for next year – currently up for debate in parliament – envisages an increase in sales tax to 17 percent from 15 percent, along with higher gasoline prices and higher taxes on cigarettes—not to mention freezing public servants’ salaries.

Opposition MPs had warned that the budget proposals would lead to public unrest in the country.

The economy of OPEC member Algeria – the leading natural gas producer in Africa and one of the top three oil producers in Africa – has been suffering from the low oil prices in the past two years. Algeria’s oil and gas sales pay for 60 percent of its budget, and account for a massive 95 percent of the country’s export revenues.

As early as in September, a government official told Reuters that Algeria was preparing another 14-percent cut in spending next year, following a reduction of 9 percent this year, in order to compensate for lost revenues due to the oil price slump.

Although state-held oil company Sonatrach exported an all-time high volume of crude oil in October, volumes are unable to offset low prices. Algeria, like many other heavily-oil-and-gas-dependent economies, is trying to adjust to the new reality of lower-for-longer prices.

According to a World Bank economic brief from July, Algeria – which exports 540,000 bpd of its 1.1 million bpd total production – has seen its crude oil and natural gas output declining in the past few years due to delays in projects, problems in attracting partners for investment, infrastructure issues, and technical problems.

The oil price slump has led to Algeria’s fiscal deficit soaring to 15.7 percent of GDP this year from 1.4 percent of GDP back in 2013.

Algeria’s total reserves dropped to an estimated US$108 billion this year, down from US$194 billion in 2013, and are expected to plunge to US$60 billion in 2018.

By Tsvetana Paraskova for Oilprice.com

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