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Algeria
TRENDS
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.
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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. (For further
information and complete citations, see
Bibliography.)
Data as of December 1993
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