Algeria Table of Contents

Algeria has made considerable progress in its transition efforts toward a market economy. A money and credit law promulgated in 1990 granted the Central Bank the authority to formulate and implement monetary and foreign-exchange policies, removed controls on foreign investment in most sectors, allowed full foreign ownership of new investment projects, and encouraged unrestricted joint ventures between foreign companies and Algerian private concerns. In a bold move designed to promote trade liberalization, the Central Bank devalued the dinar almost 100 percent between November 1990 and the end of April 1991. On the latter date, the government introduced a major liberalization of external trade to augment the already far-reaching steps taken to liberalize domestic trade.

Algeria, not unlike several other countries in North Africa and the Middle East, has had to grapple with a heavy debt burden. The country's international creditworthiness has been subjected to closer than normal scrutiny on occasion, such as when its ratio of debt to export earnings moved from 130 percent in 1980 to 280 percent in 1989 and when the debt-service ratio shot up from 25 percent in 1981 to 95 percent in 1989. However, the combination of fiscal restraint on the government's part, adamant opposition to debt restructuring (mostly for reasons of political pride), and prudent use of budget surplus and intermittent higher revenues (from fluctuating oil prices) helped repay Ministry of Finance debts to the Central Bank and retire significant portions of foreign debt.

Over the long haul, however, how much progress Algeria makes toward establishing a truly open market economy will depend on the correlation between economic liberalization efforts and the dynamics of the domestic political situation, which was continuing to evolve in the early 1990s. If, for instance, the evolving political process encourages passage of new legislation similar to the June 1990 Law on Trade Union Activity providing for the creation of autonomous labor unions and collective bargaining, other key institutional changes could accelerate the pace of social progress and generate an environment conducive to political accountability and economic reform.

Richard B. Parker's North Africa: Regional Tensions and Strategic Concerns provides a lucid backdrop as to why and how Algeria's various economic reforms were conceived and introduced. It has the added virtue of placing Algeria in a regional North African context, comparing its situation with that of its neighbors to the east and west. North Africa: Contemporary Politics and Economic Development, edited by Richard Lawless and Allan Findlay, gives a solid analysis of the Algerian economy. David B. Ottaway and Marina Ottaway's Algeria: The Politics of a Socialist Revolution, although published in 1970, remains an informative source. For those interested in analyzing the fast-moving developments of the Algerian scene, the Economist and Middle East Economic Digest are essential.

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Source: U.S. Library of Congress