ALGIERS, Algeria — 

Currency traders in Algiers’ central square are carrying bundles of euros, pounds, and dollars, eager to trade with those concerned about the declining value of the Algerian dinar.

The existence of a black market for foreign currencies is one of the indications of the economic struggles facing Algeria. The government, hesitant to allow for a complete adjustment of the exchange rate, has shown an inability to control the high demand from the public due to their lack of trust in the dinar.

The increasing parallel currency exchange rate highlights the decline in purchasing power among ordinary Algerians, as the government has struggled to balance multiple priorities, including fighting inflation and sustaining state expenditures, subsidies, and price regulations that support the population.

According to rumors, business owners in the North African country, which is abundant in oil, are selling off their assets and acquiring euros through the black market to avoid being trapped with their wealth. Additionally, middle-class individuals also depend on euros and dollars to purchase scarce items such as medicine, car parts, and specific foods.

During the previous week, the official conversion rate permitted the sale of one euro for 145 Algerian dinars. However, on the same day, currency traders were selling one euro for approximately 241 dinars on the black market. This was a significant increase of 66% compared to the official exchange rate.

Rabah Belamane, a retired teacher from Algiers, who is 72 years old, stated to The Associated Press that the given rate is not accurate and his pension does not stretch as much as it used to in dinar or euro.

According to Belamane, the true worth of the dinar lies in the unofficial market rather than in the bank where an artificial rate is used to deceive the public.

For a significant amount of time, Algeria has had a reputation for having one of the most restricted economies in the region. It restricts the amount of foreign currency that its citizens can obtain, only allowing a small amount for tourism purposes. This amount is not enough to cover the expenses of important Islamic pilgrimages to Mecca or to visit relatives in Europe’s sizable Algerian community.

The estimated amount of foreign currency exchanged on the black market in the country is approximately $7 billion according to the government.

Experts caution that maintaining two exchange rates simultaneously, as seen in countries like Lebanon and Nigeria, can have negative effects on the economy. This can hinder investment and potentially lead to corrupt practices. Algeria has traditionally been hesitant to decrease the official value of its currency, fearing that this could result in inflation and provoke public backlash.

Traders are well-informed of the fluctuation in the gap between the official and black market exchange rates, which can vary on a daily basis. They anticipate it to increase as Ramadan approaches.

According to trader Nourdine Sadaoui, there has been a shortage of euros in the market, resulting in a significant increase in its value. He shared this while pausing from shouting “Change!” at passersby.

The scarcity could pose a challenge for Algerians when trying to buy certain products. However, there are government officials who view it as an indication of the effectiveness of import limitations and regulations restricting the amount of euros allowed into the nation.

Last week, Hicham Safar, who leads a finance committee in Algeria’s lower house of Parliament, stated that he was in favor of addressing these concerns. He pointed out that the widening gap between the official and black market exchange rates has resulted in a decrease in the amount of euros entering the country.

During an interview on Echourouk TV, he mentioned that customs officials are working towards stricter regulation of imports through the Bank of Algeria and reducing the reliance on foreign currency, resulting in an end to overcharging on imports.

For many years, consistent income from oil and gas enabled Algeria to purchase a wide range of items, from toothpicks to industrial equipment. This created a heavily import-dependent economy, giving a select group of businessmen significant control. These individuals were known to overcharge customers and hide their profits overseas, including in banks in Europe and the United Arab Emirates.

Since assuming office, President Abdelmajid Tebboune has focused on cracking down on the country’s wealthy elite, particularly those involved in import businesses. Under his leadership, the prices of essential goods in Algerian currency have fluctuated and restrictions on imports have been tightened.

Due to the increase in energy costs and Europe’s search for alternative oil and gas suppliers, Algeria unexpectedly gained advantages from the conflict in Ukraine. However, the nation has faced food shortages and growing frustration due to the rising prices of essential items such as chicken, cooking oil, and legumes.

According to economist Karim Allam, the euro’s strength has negatively affected Algeria by reducing the purchasing power of individuals earning dinars. He is doubtful that the government’s perceived shortage of foreign currencies is a sign of their success, and also questions the claim that business owners are leaving the country en masse or transferring funds overseas.

He stated that he doubts they will risk smuggling money out of the country, as it is considered a financial offense that carries a penalty of 20 years in jail.

The declining value of the dinar on the black market is a sign that Algerians are still facing a decrease in their buying power, despite attempts by the government to maintain economic stability and maintain high levels of government spending and subsidies.

Belamane, a retired teacher, stated that inflation has significantly reduced the purchasing ability of Algerians, causing many to experience poverty. He further explained that the Algerian dinar has lost its value.

Source: voanews.com