The draft Finance Bill 2020 (PLF 2020), presented last Wednesday in the Government Council, proposes recourse to international financial development institutions to obtain a foreign financing for structural economic projects.
"The bill proposes the possibility of selectively using external financing from global development financial institutions to finance structural and profitable economic projects with amounts and timeframes related to the performance of theseprojects and their solvency," said the Prime Minister's Office.
Algeria's external debt does not currently exceed 1% of the Gross domestic product (GDP), while in 2018 the internal public debt amounted to more than 37% of GDP.
Among the international development financial institutions, the World Bank (WB), the Islamic Development Bank (isDB) and the European Investment Bank (EIB).
Bedoui gave instructions to develop the Finance Bill 2020 in light of the use of conventional financing, relying mainly on ordinary budget revenues.
Thus, the Government has preferred external financing to encourage vital economic projects rather than pursuing non-conventional financing, which could further increase the domestic public debt.
Due to a severe economic crisis, in 2017 Algeria amended the law on currency and credit to allow the Treasury to incur debt directly with the Bank of Algeria without capping this debt until 2022.
However, the Government had recently announced the freezing of on-conventional debt in the second half of the current year.
"Presentation of draft finance bill 2020: Maintain of State’s social policy
Minister of Finance Mohamed Loukal presented Wednesday in the meeting of the Government chaired by Prime Minister Noureddine Bedoui, the first draft of the finance bill 2020, marked by the progressive return of the budget curve following the logic of harshness, rationalization and stabilization of public finances, while setting objectives to return to the major economic equilibriums and to preserve the State’s social aid to vulnerable groups and the citizens’ purchasing power.
The bill aims to implement the major lines consisting in the rationalization of operating expenditures of services and public administrations, the rationalization of public expenditure and revenues from services and goods, the strengthening of the national economic attractiveness, the improvement of business climate, the diversification and extension of financing sources of the national economy as well as the improvement of the revenues from ordinary income of the State’s budget, according to a communiqué of the Prime Minister’s Office.
Based on “cautious prospects of oil tax revenues in the light of the situation marked by the instability of hydrocarbon markets,” finance bill 2020 provides, in addition to maintaining the State’s social policy, for a relative economic growth and a major rationalization of good and services imports with a controlled inflation rate,” added the source.
The public expenditure will drop by 9.2% because of fall of operating expenditures ( about 1.2%) and of capital expenditure (-20.1%) after “regulation and control operations of the State’s spending.”
Concerning the proposed legislative and fiscal provisions, they are part of the establishment of the fiscal system efficiency through the improvement of the tax recovery level and the increase in the State’s budget revenues, notably through ordinary taxation and the progressive extension of tax base.
They also aim at strengthening the national economic attractiveness with “the lifting of restrictions provided for under the 49/51% rule applied to foreign investments in Algeria and affecting non-strategic sectors.”
Finance bill 2020: Restrictions in 51/49% rule to be lifted
The finance bill 2020 presented, on Wednesday during a Council of Ministers meeting provides for the lifting of the restrictions part of the 51/49% rule applied to the foreign investments in Algeria for non-strategic sectors.
According to the communiqué of the Prime Minister’s office, this measure aims at "reinforcing the attractiveness of the national economy."
Created as part of the 2009 Finance bill, the 51/49% rule determines the foreign investor share in an Algerian company at 49%, against a rate of 51% of stakes to the Algerian investor.
In 2016, the rule has been withdrawn from the investment code, as part of the reform of the Investment Codes, to be framed since by the successive Finance Laws.
With the aim of attracting foreign capital for the benefit of the national economy, creating wealth and jobs and promoting economic activities in several sectors, which suffer from constraints and impediments, the Prime Minister has called for the establishment of all practical mechanisms to improve the business climate.
To encourage the local investment, Bedoui called for exempting the start-ups and young investors projects from taxes in order to facilitate their access to land bases.
Finance bill 2020 proposes wealth taxes
The draft finance bill 2020, examined Wednesday during a meeting of the Council of Ministers, proposes the strengthening of the taxes on taxes and properties.
This proposal aims at "ensuring a better distribution of tax burdens among citizens," said a statement from the Prime Minister's Office.
The imposition of a tax, ranging from 1% to 3.5%, on any asset worth more than 50 million dinars was introduced in the draft budget law (PLF) 2018 before its rejection by the National People Assembly (APN)’s Finance and Budget Committee.
The properties referred to in the PLF 2018 was essentially real estate, passenger cars with a cylinder capacity of more than 2,000 cc (gasoline) and 2,200 cc (diesel), yachts and pleasure boats, racehorses, aircrafts, works of art estimated at more than 500,000 DZD, jewelry and precious stones, gold and precious metals.