Algeria - Economic development



Following independence, Algeria adopted an economic policy favoring a socialist organization of society. Under the Charter of Algiers, the basis of Algerian policy was that the workers themselves were responsible for management, while ownership of the property was maintained by the state. The first stage of development, covering 1967–69, set up a basis for expansion of industry, improvement of agriculture, and training of personnel.

The second four-year plan (1974–77) established a heavy industrial base for the economy and largely completed agricultural reforms. The period 1978–79 was used to consolidate economic gains. In 1979, the government decided to limit oil and gas exports and to decentralize industry away from Algiers in order to build up the country's less developed regions. The new five-year plan for 1980–84 switched the emphasis from heavy to light industry and to neglected social areas, especially housing. The second five-year plan (1985–89) emphasized agriculture and water supply in order to reduce the chronic food deficit, but industry (32%) and social infrastructure (27%) were allotted the largest shares of the proposed total investment. By 1999, the government defined broader national economic policy objectives for diversification and development.

In the early 1980s, Algeria said it would allocate 1% of its gross domestic product (GDP) to aid Third World countries, with about 80% going to other African countries, but Algeria has been chiefly a recipient of aid. Algeria's debt burden has increased steadily since the 1970s due to the world financial crisis and lower oil prices in the late 1990s.

In 1995, Algeria signed a three-year program for debt rescheduling with the International Monetary Fund (IMF), and rescheduled $13 billion of debt with the Paris Club. These programs resulted in an improved balance of trade, lowered government expenditures, and a government surplus. The government did not renew its programs with the IMF in 1998, saddling the economy with a total debt in 1998 that amounted to $31 million, and capital expenditures reaching almost 10% of the GDP.

Trade surpluses in the early 2000s led to improvements in Algeria's level of foreign debt. The stock of debt was reduced to $22.5 billion, or 43% of GDP, by the end of 2001. However, a reduction in oil revenues and increased domestic spending in 2001–02 led to a budget deficit in 2002. The government adopted a fiscal stimulus plan covering the period 2001–04. In 2002, Algeria entered into an Association Agreement with the European Union (EU). Continuing privatization and economic and trade liberalization have been key structural reforms. Terrorism has hindered foreign investment in recent years.

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