November 21, 2017 / 4:04 PM / in 20 days

As energy revenue falls, Algeria struggles to cut import bill

* Restrictions doing little to reduce imports

* Algeria under financial pressure

By Hamid Ould Ahmed

ALGIERS, Nov 21 (Reuters) - Algeria is trying to cope with falling revenue from oil and gas by cutting imports, which deplete its shrinking supply of the hard currency needed to pay for products made abroad. It’s not having much luck.

The key to its effort is requiring licenses to import a wide range of products. But the system for granting licenses is tangled in red tape, and by curbing imports of raw materials, it’s hobbling local production, business people say.

“There are good signals from the government, but on the ground, there is no impact and things are not clear,” said Ali Hamani, the head of Algerian Association for Drinks Producers.

Oil and gas provide 60 percent of Algeria’s state budget. But their price starting falling in 2014, and now foreign reserves are expected to fall to $97 billion in 2017 from $193 billion three years ago. The rest of the Algerian economy can’t generate the foreign exchange needed to pay for imports.

Faced with that problem, Algeria focused not on bringing in more hard currency, but on cutting imports. It put restrictions on 30 classes, such as cars, some food products and raw materials. It targeted a reduction of $15 billion this year.

So far, the results have been disappointing. Imports reached $38.18 billion in the first 10 months, down just 1.8 percent from the same period in 2016. Food imports actually rose, by 4.5 percent to $7.12 billion.

“Supply problems are caused by slow administrative procedures,” said a member of the Algerian National Union of Pharmacists, asking not to be named. “Import licenses are not awarded in time, which paves the way for shortages to worsen gradually.”

The import licenses are issued by a committee drawn from several ministries, which experts say is slow in taking decisions. Worse, limiting imports makes it hard to increase domestic production, companies say, since raw materials fall under the new license system.

“The new import policy has failed because it is an ill-considered and improvised decision. It was taken without preparing alternatives,” said Larbi Gouini, business consultant and economics professor at Algiers university.

Drug imports, for example, fell 5.01 percent to $1.42 billion in the first nine months, and the restrictions have caused shortages, importers say.

“The problem is hitting basic products,” said schoolteacher Farid Maidi, standing outside an Algiers pharmacy where he failed to find drugs prescribed by his heart specialist. “It’s a disaster.” (Reporting by Hamid Ould Ahmed, editing by Larry King)

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