ALGIERS, Oct 4 (Reuters) - Algeria’s government approved a 14-percent cut in its spending for 2017, after a 9-percent reduction in 2016, as part of measures to cope with the fall in oil prices, the presidency said after a cabinet meeting on Tuesday.
The government expects a budget deficit of 8 percent of gross domestic product, down from 15 percent this year, according to a statement issued after the meeting led by President Abdelaziz Bouteflika to discuss the draft budget.
The proposal is based on a price of $50 per barrel for crude oil on international markets. Oil and gas account for 95 percent of Algeria’s export revenue and 60 percent of the state budget.
The draft budget still needs approval from parliament, where Bouteflika’s backers have an overwhelming majority.
Algeria’s finances have been hit hard since oil prices started to fall in mid-2014, forcing the government to delay infrastructure projects. Attempts to diversify the economy away from oil and gas remain sluggish.
It also started raised subsidies on gasoline, diesel, gas and electricity prices for the first time in more than a decade, as part of changes to the vast social welfare system covering everything from housing to basic food goods.
The statement provided no details on other measures planned for 2017 to ease financial pressures on ordinary Algerians.
Officials have said the government is not planning increases for gasoline and diesel prices but will introduce new taxes including a 2-percent hike in value added tax (VAT).
The statement made no mention of a proposed move that sources have said the government is considering to allow foreign investors to buy controlling stakes in state banks.
Such a proposal would be a strategic shift in an economy that has been largely dominated by the state since the country’s independence from France in 1962. A law requires the state to retain 51 percent in partnerships with foreign firms. (Reporting by Hamid Ould Ahmed; Editing by Patrick Markey and Louise Ireland)