Algeria to cut spending and energy investment, delay projects

ALGIERS (Reuters) - Algerian President Abdelmadjid Tebboune on Sunday ordered the government to cut public spending by 30% and delay state projects to cope with financial pressures, the presidency said in a statement.

Tebboune also asked the state energy firm Sonatrach to reduce planned investment to $7 billion from $14 billion, the statement said, after a cabinet meeting to discuss state finances and the global oil market after a collapse in the price of oil.

Oil and gas revenue accounts for 60% of the state budget and 94% of total sales abroad.

Tebboune said Sunday’s measures were aimed at “saving foreign currency reserves”.

Declines in energy revenues have caused Algeria’s foreign reserves to fall to $62 billion now from $72.6 billion in April last year, $79.9 billion at the end of 2018 and $97.3 billion in December 2017, according to official data.

“We need to build a new economy that does not rely on oil,” the statement quoted Tebboune as saying during the meeting.

A large part of the energy earnings are being used to pay for imports of food and other goods, estimated at $45 billion annually, despite import restrictions.

The government has forecast $41 billion of spending on purchases from abroad in 2020 but Tebboune on Sunday instructed it to reduce the bill to $31 billion.

Elected in December, Tebboune has vowed to carry out political and economic reforms to meet demands from demonstrators who have been staging mass protests since early last year that led to the resignation of long-time president Abdelaziz Bouteflika.

The government has already approved a 9.2% spending cut for 2020 but kept sensitive subsidies on basic foodstuffs, fuel, housing and medicine unchanged to avoid social unrest.

Sectors such as education and health will not be affected by the new cuts in public spending, the statement said.

Reporting by Hamid Ould Ahmed; Editing by Kevin Liffey