$70 billion to prevent protests in Algeria

The announcement of 2013’s inflation rates raised a controversy among specialists as some of them say they are less than reality.

According to the Statistics National Office, inflation rate went down to 3.3 percent last year from 8.9 percent in 2012.

Inflation rate remarkably increased between 2011 and 2012 and reached 8.9 percent due to pay raise in favor of employees in education, health, police, army, information and culture sectors. This comes as Algeria’s economic sector productivity did not increase at all and the national industry input in GDP fell to 4.2 percent in the end of 2012.

The number of workers in public service is estimated at 2 million while taxes do not cover 50 percent of governmental sector salaries.

Abderrahmane Mebtoul, an economist, believes that real inflation reached 10 percent last year. Algeria depends on goods and services field and its economy productivity is weak. A total of 70 percent of its food needs are imported. “That makes it vulnerable to external shocks and instable food prices in world market,” he says.

He also told Echorouk the State’s subsidy total cost reached 30 percent out of GDP in 2013. That means $70 billion. “The State can not bear this high cost any more if oil prices fall.”

Last year, Algeria’s exports reached $65.92 billion compared to $71.86 billion in 2012. Its imports went up to $54.85 billion last year from $50.37 billion in 2012.

Non-oil exports do not exceed $2.16 billion. This level does not cover the country’s needs in medicines.  The government refuses to give more details about accountancy and uses a general rate of annual inflation.

Mebtoul said the model followed by the Statistics Office in calculating general inflation rate in Algeria is not totally correct. It does not reflect the real situation of purchasing power of families of limited income who spend more than 80 percent of their income on food only.

“In this case, real inflation rate is estimated at about 20 percent and not 3.3 percent as the government says,” he added.