ALGIERS, Algeria (AP) — In a square near the center of Algiers, currency traders carry wads of euros, pounds and dollars, hoping to exchange them to those worried about the plummeting value of the Algerian dinar.
This black market for foreign currencies is among the signs of the economic woes plaguing Algeria. The state, reluctant to allow the exchange rate to adjust fully, has proven incapable of limiting demand among the population as confidence in the dinar remains low.
The widening parallel exchange rate underscores how everyday Algerians have lost buying power as the government has juggled competing priorities, trying to combat inflation and maintain state spending, subsidies and price controls that keep people afloat.
In the oil-rich North African nation, business owners are rumored to be dumping their assets and scrounging up euros on the black market so their wealth isn’t stuck. Middle-class people also rely on euros and dollars to buy things in short supply like medicine, vehicle parts or certain foods.
Last week, the official exchange rate allowed one euro to be sold for 145 Algerian dinar, while on the same day, currency traders were selling one euro for nearly 241 dinars on the black market — 66% higher than the official exchange rate.
Rabah Belamane, a 72-year-old retired teacher from Algiers, told The Associated Press that the official rate is a fiction and that his pension doesn’t go as far as it used to in either dinar or euro.
“The real value of the dinar is on the informal market, not in the bank, which uses an artificial rate to lie to the public,” Belamane said.
Algeria has long been known for having among the region’s most closed economies. It limits the amount of foreign currency its citizens can access to a modest tourism allowance that amounts to less than needed to carry out one of Islam’s pilgrimages to Mecca or visit family in Europe’s large Algerian diaspora.
The government estimates roughly $7 billion worth of foreign currency trades hands on the country’s black market.
From Lebanon to Nigeria, experts warn that having two parallel exchange rates can distort a country’s economy, discourage investment and encourage corruption. Algeria has historically been reluctant to lower the official value of the dinar, worried that devaluation will spike prices and anger the population.
Traders are intimately aware that the gap between the official and black market exchange rate can narrow or widen by the day. They expect it to swing up as Ramadan approaches.
“In recent days, the supply of euros has been lacking, which explains how it has shot up,” trader Nourdine Sadaoui told the AP as he took a pause from yelling “Change!” at people passing by.
That shortage may make purchasing certain goods difficult for Algerians. But some in government believe it reflects the success of import restrictions and laws limiting how many euros can be brought into the country.
Hicham Safar, the head of a finance committee in the lower house of Algeria’s Parliament, said last week that he “welcomed” such concerns. The growing chasm between the official and black market rates meant fewer euros are getting into the country, he said.
“There’s no more overcharging on imports,” he said on television station Echourouk, citing efforts by customs officials to better regulate imports through the Bank of Algeria and minimize the use of foreign currency.
For decades, steady revenue from oil and gas allowed Algeria to import everything from toothpicks to industrial machinery. The country’s large import market concentrated economic power in the hands of a small group of businessmen known to overbill clients and stash profits abroad, including in European and Emirati banks.
Since President Abdelmajid Tebboune took power, the country has targeted the so-called “oligarchs,” including businesses active in imports. Throughout his tenure, the costs of basic goods in Algerian dinars have swung and imports have been further limited.
Algeria emerged as an unexpected beneficiary of the war in Ukraine, as energy prices rose and Europe sought non-Russian suppliers of oil and gas. But the country has experienced food crises and rising anger as the prices of necessities like chicken, cooking oil and legumes have risen.
Economist Karim Allam said the strength of the euro had worked to Algeria’s detriment, cutting into the purchasing power of those who make money in dinars. He is skeptical of the idea that a shortage of foreign currencies reflects the government’s success, but also doubts that business people are fleeing the country in droves or sending money abroad.
“I don’t think they’ll take the risk of smuggling currency out of the country, which is considered an economic crime punishable by 20 years’ imprisonment,” he said.
Regardless, the falling value of the dinar on the black market is one indicator of how Algerians continue to lose purchasing power despite governmental efforts to stabilize the economy while keeping government spending and subsidies high.
“Inflation has destroyed the buying power of Algerians, who are falling into poverty. The dinar has become worthless,” said Belamane, the retired teacher.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
