Algeria is taking bold steps to tackle its black market in foreign currency. A key measure is the recent increase in the annual tourist allowance, aimed at reducing dependence on informal currency exchanges.
The Problem with Dual Exchange Rates
Algeria’s dual exchange rate system has been criticized for its negative effects on the economy. While the euro trades at 141 dinars officially, it exceeds 257 dinars on the black market—an 80% gap.
This system drives inflation, discourages foreign investment, and slows economic growth. It also fosters corruption, with privileged groups accessing subsidized currency, and facilitates money laundering.
Algeria on the FATF Grey List
In 2024, Algeria was added to the FATF “grey list,” joining countries under scrutiny for money laundering risks. While not a punishment, this designation highlights the need to reform financial systems.
Remittance data underscores the scale of the black market. Algerian expatriates send home less than €2 billion annually, compared to €11 billion from Moroccans. Most Algerian remittances occur outside formal channels, costing the state valuable foreign currency.
Increasing the Tourist Allowance
To curb demand for black market currency, Algeria raised the annual tourist allowance to €750, up from just over €100. This aims to meet the needs of small-scale buyers like students and travelers, who contribute significantly to black market demand.
Capping Currency Exports
Another measure limits foreign currency exports to €7,500 per year, down from €7,500 per trip. This targets the “shopping bag trade” and money laundering networks that fuel the Informal “black” market.
Still Behind Neighbors
Despite these reforms, Algeria’s €750 tourist allowance remains far below neighboring countries, such as Tunisia (€1,800) and Egypt (€10,000). By keeping the allowance modest, Algeria hopes to avoid creating new problems, like currency hoarding.
Can These Reforms Work?
Algeria’s recent steps are promising, but implementation and enforcement will be key.
Key Points
• Algeria raised the tourist allowance and capped currency exports to weaken the black market.
• The dual exchange rate still hinders growth and encourages illicit activities.
• Success will depend on consistent enforcement and additional reforms.
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