Abderrahmane Raouya, Minister of Finance: Interview

Interview: Abderrahmane Raouya

How will alternative financing be introduced to the economy, and what will the advantages be?

ABDERRAHMANE RAOUYA: It will be introduced with three main objectives: bolstering state liquid assets, settling internal public debts and financing the National Investment Fund. The use of alternative financing will be backed by important structural reforms and will also allow the reimbursement of debts held by the Public Treasury. As a result, public creditors will be able to recover their financial capacity and strengthen their investment plans, which will stimulate economic activity.

The banking sector will also benefit from more liquidity as it will boost its investment capacity. A follow-up mechanism is planned to supervise the programme and prevent the risk of inflation. Such a measure will generate significant growth and improve every citizen’s quality of life. It will also boost employment and allow public services, such as education and health, to function efficiently. Lastly, alternative financing prevents an increase of fiscal pressure and the use of foreign debt. In the long run, recurrent expenditure will be progressively covered by ordinary revenue in the country, and alternative financing will therefore be exclusively injected into public investment.

What new measures will be introduced through the promulgation of the 2018 Finance Law?

RAOUYA: The 2018 Finance Law will increase the capital investment budget by 76%, enabling the strengthening of basic infrastructure. The state also plans leverage focus on supporting economic activity through better interest rates and local project development in several sectors, such as housing, rail and road infrastructure, education, health and hydraulic projects. As for income, the base taxation rate will rise by 10%, a number that is dependent on the evolution of the economy and the efficiency of collection. The law will not affect the purchasing power of households or company activities. The only price adjustment will concern the tax on petrol, which will not have any impact on agriculture and fisheries thanks to dedicated support for these sectors.

The Finance Law also aims to stimulate the diversification of financial products to mobilise savings and sovereign bond issuances through Islamic financing. In that regard, efforts have been deployed to establish a legal framework for takaful (Islamic insurance) . This is being finalised to boost the Algerian insurance market, answering growing demand from insurers wishing to deploy takaful and set up support for banks that aim to develop alternative banking products following recent trends in the international insurance sector.

What are the potential benefits of formalising the economy further, and how can this be achieved?

RAOUYA: First of all, integrating the informal sector is a priority for the government as it will improve the business environment, establish social and economic equity and enlarge the tax base. Additional incentives have recently been established, such as the simplification of administrative procedures for investments and the reduction of tax pressure through reconversion programmes that have a two-year tax exoneration, as well as decreasing taxes for three years. Furthermore, there has been an overhaul of the flat rate tax and an increase in its application; land access facilitation through tax allowances and banking credit bonuses; and an extension of the voluntary fiscal programme until December 31, 2017.

There will be harsher fines for labour law infractions achieved via permanent legislative measures and operational actions in relation to tax, banking and commercial activities. Tax control programmes will be strengthened and a new information system will be implemented to increase tax efficiency and allow remote procedures. The banking system will be enhanced to boost scriptural transactions, diversify product ranges and modernise payment systems. Lastly, commercial practices and distribution network controls will also be strengthened.