Algeria: Economist Proposes Removing a Zero From the Dinar to Reset the Financial System

An Algerian economist based in Washington, Mohamed Gahche, has proposed a radical monetary reform: removing one zero from the dinar to reset the system, fight the parallel market, and push financial integration.

In a column published on December 3 in Le Jeune Indépendant, Gahche outlines a structured plan aimed at creating a “new dinar” capable of addressing long-standing weaknesses in Algeria’s financial architecture. According to him, the current dinar’s progressive loss of value, the growth of the informal exchange market, and an exhausted tax system require a strong shock.

A New Dinar to Trigger a System Reset

His proposal is simple: redenominate the dinar by removing one zero. A 10,000-dinar note would become 100 dinars, without affecting citizens’ purchasing power. The reform would serve both symbolic and technical objectives, offering the state an opportunity to reset monetary mechanisms and rebuild confidence.

This is not his first call for such a reform—he floated the idea back in 2008. But this time, his proposal includes a broader and more detailed strategy.

Forcing Financial Integration Through Mandatory Banking

The reform’s core idea is to integrate informal liquidity into the formal system. All existing cash would have to be exchanged for the newly issued banknotes. To do that, people would need to open bank accounts.

Gahche suggests limiting cash withdrawals and requiring all transactions—transfers, cheques, bank cards—to be conducted through formal channels. This would force informal operators, currency traders, and money changers to declare previously invisible fortunes stored in cash.

Restructuring the Exchange Market

To support the reform, Gahche calls for restructuring the exchange market by authorizing licensed private exchange offices with a flexible tax regime. The closer they operate to the official rate, the lower the taxes. Large deviations from the official exchange rate, however, would be heavily taxed.

This approach aims to reduce the attractiveness of the parallel market while improving transparency and protecting currency flows.

A Reform That Requires a Strong Productive Base

Gahche warns that no monetary reform can succeed without a strong productive economy. A redenomination alone cannot restore the value of the dinar. For the project to succeed, Algeria must revive local production, reduce imports, support exporters, and diversify its foreign currency sources.

He mentions several avenues, including bilateral agreements with neighboring countries to enable trade in local currencies. For example, an Algeria–Tunisia agreement could allow both nations to settle imports directly in dinars. Tourism—still largely underdeveloped—could also become a major generator of foreign currency.

A Symbolic Gesture With Transformative Potential

Removing a zero from the dinar may seem merely symbolic. But within a coherent, ambitious, and well-coordinated strategy, it could become a genuine lever for economic transformation. What remains is the need for strong political will to launch such a bold reform.