Fuel price to increase in Algeria as economy contracts

Algeria is increasing its fuel price. This OPEC member wants to reduce local consumption and imports as the economy battles from the effects lockdown on businesses.  

The decision comes as revenue from energy resources remains unstable leading to a review of Algeria’s 2020 budget. The new plan in the 2020 budget was recently drawn up by the parliament.

The government says its economy contracted by 2.6% this year from its previous growth of 0.8% in 2019. 

Under the new plan, the price of regular petrol, premium petrol and unleaded petrol will increase by 5.7% per litre, while the cost for diesel will rise by 15.5%.

Domestic fuel prices are very low by international standards as the government subsidises them. Overall subsidy spending, which also includes basic foodstuff, medicine and housing, among others, account for 8.4% of the gross domestic product.

The price rise is also aimed at countering smuggling to neighboring countries where fuel costs are much higher and easing financial pressure.

Under the new measures outlined by the cabinet, the budget will be based on an oil price of $30 a barrel, down from $50 in the previously approved plan. How practical this is, will depend on OPEC members’ compliance to output reduction and the agreement between Saudi Arabi and Russia.

Algeria is already trying to diversify its economy away from oil and gas and may exempt some businesses from taxes and customs duties to help boost its non-energy sectors and attracting foreign investors.

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