Prime Minister of Algeria, Abdelmalek Sellal.

ALGIERS- In an attempt to save foreign currency reserves as the crash of oil prices has put the OPEC state under financial pressure, Algeria has decided to reduce its imports by 15 percent in 2016; according to a letter to banks from the prime minister.

The North African state, which relies on oil and gas for 60 percent of its budget, has already reduced some energy subsidies and cut public spending, also frozen infrastructure projects since its energy revenues fell by almost half last year. Nonetheless, dependent on its oil industry and with an under-developed non-energy sector, Algeria imports massive quantities of goods. Its import bill extended to reach $51.5 billion only last year, though that was down 12 percent from 2014, according to official figures.

Prime Minister Abdelmalek Sellal said in a letter sent to the central bank and state banks on Tuesday that their goal is to reduce the bill by 15 percent in 2016; however it was not clear how the government planned to reduce imports by that amount. From one side, certain restrictions are already in place on certain cement, car, and construction steel imports.

From another side, a commission of ministries and customs officials is working on what importers have been waiting for months for; which is a complete government list of licenses on a range of goods that was meant to clarify restrictions.

“They are slowly, steadily putting down obstacles on imports as a way to cut demand,” said one importer.
The central bank has also recently slapped a further restriction on imports, requiring importers to make a “domiciliation” or pre-clearance of import operations in an online registration with state banks, APS state news agency reported.

Although Customs director Kaddour Bentahar stated that the measure would help diminish illicit cash transfers and false transactions that exaggerated the flow of foreign currency, yet some importers complained that decision will cause a backlog and delays rather than organized restrictions.

“My bank doesn’t have its online system ready so how can I even register?” a book import trader said.
Since its 1962 independence from France, Algeria’s economy has been largely a state-run, centralized system. Liberalization and development of non-oil sectors have come slowly, and state bureaucracy remains a major concern for investors.

The International Monetary Fund, visiting this month, noted in a statement on Monday that “import restrictions, while perhaps providing a temporary relief, introduce distortions and cannot substitute for reforms aimed at boosting export.” Oil revenues also pay for a vast system of social welfare and subsidies – from fuel, food and free housing to cheap credits – that have helped Algeria’s government ease social tensions and protests in the past.

With little foreign debt and still large reserves, Algeria’s government says it has the tools to weather the fall in global crude prices. But just last year, reserves dropped $35 billion to $143 billion, the IMF said. Energy earnings plunged 41 percent to $35.72 billion last year, and officials expect them to fall to $26.4 billion this year. The government forecasts foreign reserves will drop to $121 billion by the end of this year.