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Algeria
Currency and Exchange Rates
The Central Bank set the daily price of the Algerian dinar, keyed
to a basket of currencies most widely used in payment for exports
but primarily linked to the United States dollar and the French
franc. The dinar has had a long history of being overvalued, resulting
in a runaway black market on which the dinar was traded at several
times the official rate for many years. In a serious attempt to
bring down black-market rates and thus achieve convertibility
for the dinar, the government decreed a major devaluation in mid-1990
and allowed the dinar to drop about 52 percent, from DA8.5=US$1
in July of that year to DA16.6=US$1 in March 1991. Although this
step helped the authorities meet IMF demands for reaching a new
standby agreement, they were concerned about the raised price
of imported consumer products and the potential social implications
for the poorer majority of the population. The considerable gap
between prices and economic costs for certain essential commodities,
such as energy products, prompted the government to institute
a policy of gradually reducing consumer subsidies while recognizing
the importance of price supports in protecting the most disadvantaged
people. Whereas the government tempered its policy of moving rapidly
to a system in which almost all prices were to be determined by
market forces, in 1991 it adjusted the prices of subsidized products,
electricity, natural gas, and petroleum products. These steps
resulted in reducing total 1991 subsidies by DA9.6 billion.
Data as of December 1993
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