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Algeria
External Debt and Payments
Another area of financial concern related to Algeria's external
debt and debt-service payments. The country's substantial debt
dated back to the 1970s, when the government borrowed heavily
to finance development projects and meet rising consumer needs.
When the debt mounted to US$16.9 billion in 1980, Benjedid decided
to limit borrowing to DA50 million (for value of the dinar--see
Glossary) a year, which reduced the debt steadily until 1984.
Because payments came under pressure starting in 1985, however,
the debt-service ratio more than doubled between 1985 and 1988,
increasing from 35 percent to 80 percent. Amortization payments
increased by 38 percent until they reached US$6.2 billion in 1990.
In spite of falling oil production and prices, the government
managed to avoid debt rescheduling by cleverly obtaining soft
finance and trade credits.
By the end of 1990, the country's external debt slightly exceeded
US$26 billion, of which almost US$2 billion was in short-term
loans. To reduce the debt-servicing burden, the government subsequently
concentrated on obtaining medium- and long-term loans to repay
its financial obligations as soon as they became due. Also, to
augment its efforts to obtain more concessional financing, such
as bilateral lines of credit, the government has discouraged importers
from borrowing from suppliers; such loans are usually of short
duration and hence are more expensive than long-term lines of
credit. Countries that have bilateral credit lines with Algeria
include Belgium, France, Italy, Japan, and Spain.
Algeria viewed debt rescheduling as a politically unacceptable
step. The government was obliged, however, to make another politically
unpopular move in 1991, by reaching a standby agreement with the
International Monetary Fund (IMF--see
Glossary). The FLN had always opposed such a move as an encroachment
on sovereignty. The IMF standby agreement, however, had a positive
effect on creditors and potential donors, including the World
Bank, which decided to grant Algeria a US$300 million structural
adjustment loan. The European Community (EC--
see Glossary) also agreed in 1991 to provide a loan worth US$470
million. A year earlier, the Banque Nationale de Paris (BNP) had
provided a seven-year loan of 1 billion French francs to be used
in converting short-term borrowing into longer-term loans. Another
positive sign was Algeria's apparent determination not to miss
debt-service payments despite a debt service exceeding US$7 billion
in 1991.
Data as of December 1993
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