Falling dollar could impact Algerian economy
2007-11-25
As import costs climb, Algerian business leaders say the increased value of the euro against the US dollar is likely to have repercussions for the national economy. According to the energy minister, however, record oil prices are balancing out the loss in purchasing power and sheltering the country from rate fluctuations.
By Lyes Aflou for Magharebia in Algiers – 25/11/07
 [Getty Images] Finance minister Chakib Khelil said OPEC will be examining the currency exchange issue in December. |
A new study suggests that the dollar's decline against the euro could have negative implications for the Algerian economy. Europe's single currency traded at a record 1.4752 dollars last week, the highest exchange since its introduction in 1999.
According to an analysis by Algeria's leading organisation of private employers, the Heads of Enterprise Forum (FCE), the dollar's 33% depreciation against the euro between 2002 and 2006 caused a 14.4% rise in the overall cost of Algerian imports. The FCE report found that 66% of Algeria’s imports, predominantly industrial capital goods and manufacturing materials, almost doubled over the past five years, to 21.5 billion dollars.
In this period of the rising euro, however, increased trade with China, India, Malaysia, South Korea and Japan have stayed profitable for Algeria as the dollar remains the exchange currency for these countries.
Algerian-Chinese trade for example, driven to new heights by President Bouteflika's visit in 2006, has exhibited a continued growth over recent years. China was responsible for 8.28% of trade in the first half of the year and, with $1.06 billion, is now in second place after France ($2.32 billion). Apart from purchases of capital goods and raw materials, the Chinese are also represented in various major projects in Algeria, including the impressive East-West highway.
Turkey and the Emirates have also increased their trade with Algeria by 20% per year. Due to the rise in the euro, Asian goods cost 30% less than those made in Europe.
The increased cost of a barrel of oil offsets the dollar's shortfall. Algeria is further insulated from the rise of the euro because its high-quality Sahara Blend oil sells at a high price, explained Minister for Energy and Mines and OPEC chairman Chakib Khelil.
"Even though 98% of Algerian exports are priced in dollars, the main trading currency for international oil transactions, and 60% of its imports come from the euro zone, the record prices being seen for a barrel of oil are balancing out the loss in purchasing power and are sheltering the country from the negative effects of exchange rate fluctuations," he said.
Despite its devaluation, the dollar "will for many years remain the only exchange currency" on the international oil market, Khelil added.
This, says Algerian economist El-Hachemi Siagh, is why the lasting solution for Algeria lies in "the diversification of its exports in such a way as to reduce its reliance on hydrocarbons."
According to Chakib Khelil, OPEC will examine the currency exchange rate issue at its next ministerial conference on December 5th in Abu Dhabi.
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abdellah Posted 2007-11-28
The price of heating oil here in Belgium never stops going up. In order for me to refill my tank, it costs me 2500 euros which makes 25 million in the home country, and as a result I am forced to cross off my vacation to Algeria. Is there anything Algeria can do to reduce the price of gas? Because we the citizens are suffering, even here in Europe.
يحي Posted 2008-01-23
I want a topic about the Algerian economy under economic globalisation.
Medour Mokrane Posted 2008-02-11
I have been looking for an answer to this question since the dollar started depreciating and finally I can read it here on this website. However, there are two other questions that keep coming to mind. First, what are the overall impacts of the fluctuating dollar on the Algerian economy, and, more particularly, on Algerian businesses? Second, what are the real causes of the rising oil prices beginning in 2002? Thank you in advance for your response.
lattari abdelmoumene Posted 2008-02-14
Please, I am looking for a response to the following question: what is the impact of the dollar’s fluctuation on the Algerian economy both in general and, more specifically, with regards to Algerian businesses? Thank you in advance
بغيجة سمير Posted 2008-02-15
Algeria should differentiate its exports firstly, then use the surplus of money earned from the rise in revenues and financial resources from the oil sales. Then it can encourage the private sector by facilitating access to loans for young people. We should remove bureaucratic hurdles in administration and achieve a varied basket of currencies including the Euro, Sterling pound and Japanese Yen to face the depreciation of the dollar.
بغيجة سمير Posted 2008-02-16
Algeria should vary the sources of its reserves of foreign currency to face any emergency related to the drop and depreciation of the dollar in international exchange markets.
BRAHIM Posted 2008-02-27
As a student of economics, I think that Algeria lives in the widest financial prosperity from independence. Therefore, we have to exploit this to the maximum and be tough because prosperity doesn’t last forever. That is why Algeria should increase financial investments and vary them, stay away from exporting in Euro, invest its money in different countries to avoid any depreciation of world currencies, try to increase exports other than hydrocarbons by boosting industry and agriculture by relying on local powers capable of going forward without burdening the state with expenses so that our economy won’t be a revenue economy under the mercy of the fluctuations of the oil market. Thank you for this forum.
بغيجة سمير Posted 2008-02-27
Algeria should invest the reserves of foreign exchange which is early 110 billion dollars in setting industrial projects and stop investing money as bonds in the American treasury at a low interest rate equal to 2%.
بغيجة سمير Posted 2008-03-04
Algeria has today about 110 billion dollars reserves of foreign exchange and an army ranked 17 on the world level, an oil reserve which will last for the coming 25 years, rare scientific powers which can be estimated at a million thinking mind, it has a wide area estimated at over 2 million square meters and a patient Islamic nation but in spite of all this Algeria hasn’t succeeded to make a strong takeoff and appear as a strong state, why? The answer is very simple, because Algerian officials don’t like the industry of triumphs and don’t like to appear powerfully in front of nations, their mentalities are obsolete, they don’t have the element of faithful work for the sake of God. They follow their wishes in managing the affairs of the nation, this management has no scientific feature.
belkheir Posted 2008-03-06
I want information about the standards for the weakness of the Algerian economy.
siham Posted 2008-03-27
I want information about the crisis of the Algerian economy.
meriem Posted 2008-04-09
I want information about the effects of the rising of euro in algerian economy
بلال Posted 2008-04-22
As a student of economics, I am very much interested in the state of the Algerian economy. Under the continuous depreciation of the dollar compared to the euro, what is the impact of this on the Algerian economy, especially foreign trade, as it is importing in euro and most of its exports are in the dollar?
فاطمة Posted 2008-05-06
The Algerian economy is experiencing today a wave of radical change. This is of course due to the high rise in the prices of oil which is around 120 dollars and with reserves exceeding 110 million dollars in American banks. So what is the new changes which happened to the Algerian people, all this has just made the food prices rise. A university student who didn’t take advantage from his scientific qualifications. Projects confined to drawers. Money transferred and stolen, the best example is Khalifa. Was he arrested, was he imprisoned? Algeria will not make any progress as long as there are corrupt officials.
sonia Posted 2008-06-12
I would like to know what the current impact of the fluctuation of the dollar and euro is on the Algerian economy, as well as the cause for the poor function of Algiers’ stock market.
macaroni-Bob Posted 2008-06-16
The strong euro is penalising the Algerian economy. Our foreign exchange reserves are losing their purchasing power. All the dollar has to do is sneeze and the Algerian economy will catch a cold. Observers of the national economic scene have a gloomy outlook on the depreciation of the dollar in comparison to the singular European currency and they are worried. The euro has climbed and is climbing yet still. The impact of this situation on the Algerian economy is as a double-edged sword; Algeria's exports are essentially hydrocarbons and, if you remember, they are priced in dollars. "Observers did note the rising price of a barrel of oil, but they have lost sight that the value of the dollar: 65 to 70 dollars is not what it was last year. It does not have the same purchasing power."
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