The Algerian parliament has taken the unpopular decision of cutting gasoline and diesel subsidies for the third as part of the 2018 budget in an attempt to compensate for dwindling state revenues against the backdrop of staggering oil prices in international markets.
The budget was approved in the lower house and is expected to be passed in the Senate, where the government also has a majority of seats.
Since the end of the expensive oil era in June 2014, Algeria’s foreign exchange reserves are expected to hit a low level of $97 billion in 2017, down from $193 billion in 2014, official data shows.
To fend off an impending crisis that will see the state resort to foreign debt, Algeria has announced plans to reform its subsidy system, which covers almost everything from basic foodstuffs and drugs to energy.
The government has also taken measures to restrict imports of 30 goods, such as cars, some food products and raw materials. It targeted a reduction of $15 billion this year.
As a result of the recent cuts, imports reached $38.18 billion in the first 10 months of 2017, down just 1.8 percent from the same period in 2016. Food imports actually rose, by 4.5 percent to $7.12 billion.
However, analysts see the government’s import restriction policy as doomed to fail due to the lack of domestic production.
Importers are warning that limiting imports on such vital products such as medicine will result in serious shortages. Queues already started in front of some pharmacies where citizens line up to buy rare medicine.