Economic Challenges in Algeria: Currency Exchange Woes

Algeria’s economy is facing economic woes as the government struggles to combat inflation and maintain state spending, subsidies, and price controls.

Business owners are rumored to be dumping their assets and scrounging up euros on the black market to keep their wealth in check. Middle-class people also rely on euros and dollars to buy things in short supply like medicine, vehicle parts, or certain foods.

The official exchange rate allowed one euro to be sold for 145 Algerian dinar last week, while currency traders were selling one euro for nearly 241 dinars on the black market, 66% higher than the official exchange rate.

Algeria has one of the region’s most closed economies, limiting the amount of foreign currency its citizens can access to a modest tourism allowance. The government estimates roughly $7 billion worth of foreign currency trades hands on the country’s black market.

Experts warn that having two parallel exchange rates can distort a country’s economy, discourage investment, and encourage corruption. Algeria has historically been reluctant to lower the official value of the dinar, worried that devaluation will spike prices and anger the population.

Traders are aware that the gap between the official and black market exchange rate can narrow or widen by the day, and they expect it to swing up as Ramadan approaches.

The shortage of euros may make purchasing certain goods difficult for Algerians, but some in the government believe it reflects the success of import restrictions and laws limiting how many euros can be brought into the country.