June 15, 2017 / 7:07 AM / 2 years ago

Algeria's Bouteflika urges spending cuts, warns on foreign debt

ALGIERS (Reuters) - Algerian President Abdelaziz Bouteflika on Wednesday ordered his government to keep reducing imports and to rationalise spending to cope with a sharp fall in oil and gas earnings, but warned against turning to foreign debt.

Algeria's President Abdelaziz Bouteflika looks at journalists after casting his ballot during the parliamentary election in Algiers, Algeria, May 4, 2017. REUTERS/Zohra Bensemra

Bouteflika, who has rarely been seen in public since suffering a stroke in 2013, appeared on state television briefly presiding over a cabinet meeting with the new government put in place last month after legislative elections.

Energy earnings of North African OPEC member Algeria have collapsed with the sharp fall in global crude prices, and the country has started austerity reforms to offset falling revenues from energy sales, which account for 60 percent of its budget.

Analysts say that how to balance reforms and maintain the social peace is still a key debate for the leadership in Algeria, where past unrest and a 1990s war with armed Islamists left many people wary of instability.

In a statement from the presidency, Bouteflika urged the newly appointed government to enact budget cuts in a 2017 law but avoid foreign loans, suggesting instead “unconventional” internal funding.

He also called for reforms in the country’s banking system and improvement in the investment climate.

Bouteflika called for more renewable energy and “unconventional fossil hydrocarbons,” one of his first references to Algeria’s shale energy potential. The government in the past said it would not focus on those reserves after protests over environment concerns in the Sahara.

Algeria has struggled with a more than 50 percent fall in the revenue of its oil and gas exports, which account for 94 percent of total sales abroad and 60 percent of the state budget.

The decline has forced the government to cut spending for this year by 14 percent after a 9 percent reduction in 2016.

Authorities also increased prices of subsidised products including electricity, gasoline and diesel for the first time in years, while restricting imports, which will decline in 2017 by $15 billion from last year’s $46 billion, according to Prime Minister Abdelmadjid Tebboune.

Bouteflika said the government should be committed to Algeria’s social welfare policy, but called for rationalisation and better targeting of spending that subsidises everything from food to medicine, housing and education.

Tebboune, a former housing minister, took over as prime minister last month in a cabinet reshuffle that saw the appointment of new energy and finance ministers.

Bouteflika, now 80 and in power for nearly two decades, was seen in public for the first time in months when he voted in the May election from his wheelchair. His absences have left questions over his health and political jockeying before any potential transition before his term ends in 2019.

Editing by Patrick Markey and Leslie Adler

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