Algeria bans imports of cell phones, furniture, food to curb trade deficit

Reuters , Tuesday 9 Jan 2018

Algeria has banned the import of 900 products including cell phones, household appliances and vegetables in a bid to cut spending following a drop in earnings from oil and gas, a trade ministry document showed on Tuesday.

The temporary ban, which took effect on Sunday, is the most drastic action undertaken yet by the North African OPEC oil producer to curb a ballooning deficit caused by the fall in crude oil prices since mid-2014.

Algeria relies on oil and gas for 60 percent of the state budget but earnings from the sector have halved since oil prices collapsed hitting the state-dominated economy hard.

The restrictions will also apply to furniture, most vegetables, some meats and fruits, cheeses, chocolates, pastries, pasta, juice, bottled waters and some building materials, according to the ministry document which was seen by Reuters and whose authenticity was confirmed by an official.

"The import suspension of those products is limited in time, and will be lifted gradually with or without maintaining or increasing taxes and other duties," the document said.

The import ban - following a 30 percent rise in taxes and customs duties already imposed on some of these products from January 1 - risked upsetting Algeria's younger generation, many of whom struggle to find jobs in an economy where unemployment stands at 12 percent.

The fall in crude oil prices has put huge strain on the economy and thrown down a big challenge to the leadership around veteran President Abdelaziz Bouteflika, 80, who has been in power for almost two decades. His poor health following a stroke in 2013 has prompted political manoeuvring behind the scenes.

"This kind of restrictions is bad for all consumers as it limit their choices. With the new policies, the black market will also expand, causing higher prices and hurting our purchasing power," said Ali Diji, a 30-old-year state bank employee.

With the new ban, the government hopes to bring down the import bill to $30 billion this year from a projected $45 billion for all of 2017 and $46.7 billion the previous year.

Analysts say the measure is just a temporary solution as Algeria needs to get serious about ending its dependency on oil and gas revenues, a plan for years in the works with few results to show.

"It is only with the diversification of the national economy and other reforms that the economic situation can improve," consultant and economist Brahim Guendouzi told El Watan newspaper.

Algeria has been trying to attract more investment but bureaucracy and lack of attractive laws has held back interest. Some elites in the North African country have resisted opening up the economy too much.

That situation has forced Algeria to rely heavily on imports to meet the needs of the nation's 40 million people, causing increasing spending on subsidies as authorities seek to preserve social stability.

The import ban replaces a license system, whereby importers had to apply for a licence to buy from overseas, which had shown its limitations, a senior official at the trade ministry said.

Entrepreneurs had dismissed the rules as too bureaucratic, leading to supply problems as well as higher prices for some products.

The value of Algeria's imports fell only 2.1 percent in the first 11 months of 2017 from a year earlier to $42.8 billion, according to official figures.

Oil and gas account for about 95 percent of Algeria's exports with the government having little success in boosting the non-energy sector. While the oil price has recently rebounded, it is still below $70 a barrel. Algerian officials have said it needs to be above $70 to help balance the budget.

To help cut the bill the government raised taxes and customs duties by 30 percent on some of those products from Jan.1 as part of measures aimed at securing new funding sources for the economy and reforming a subsidy system that covers almost everything.

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