Algeria’s dinar slides about 4.6% from its peak without an annual competitiveness gain

Algeria’s dinar has been losing ground against its trading partners’ currencies, raising pressure on import costs without delivering a matching annual improvement in price competitiveness. A cheaper currency can help businesses sell abroad, but that advantage shrinks when domestic prices rise faster than those of foreign competitors.

The nominal effective exchange rate, which tracks the dinar against a trading-partner basket, stood at 107 in September 2026, below its December 2024 peak. It was down 2.4% over the year. The path has been uneven, with a partial summer recovery, but the broader direction remains weaker.

The inflation-adjusted measure tells a different annual story. Algeria’s real effective exchange rate stood at 113 in the same month, up 1.3% from a year earlier. That represents real appreciation, not depreciation: Algerian prices became relatively higher after allowing for exchange-rate changes. There has nevertheless been some recent relief, with the measure falling 2.7% over the latest six months.

The annual divergence points to prices in Algeria rising faster than those of its trading partners by enough to outweigh nominal depreciation. The starting point also matters: the real exchange rate had already fallen substantially before the annual comparison began. Recent easing can therefore coexist with a higher year-on-year reading. A decline from the nominal peak and an annual real appreciation are not contradictory.

Domestic demand supported by public spending, supply bottlenecks and restrictions on access to imported goods could plausibly keep Algerian prices firmer than those abroad. Currency weakness can reinforce that pressure by raising the cost of imported food, machinery and production inputs. Subsidies and administered prices may cushion households initially, but would tend to shift part of the burden towards public finances or business margins rather than eliminate it.

Against the dollar, the rate reached 133 dinars in August 2026, a rise of 2.5% year on year. Because more dinars are needed to buy a dollar, unchanged dollar invoices become costlier in local currency. Algeria manages its exchange rate, so movements can reflect both policy choices and shifts among major international currencies; the dollar rate need not mirror the broader basket.

Hydrocarbon export receipts are central to Algeria’s foreign-currency supply, making energy-market conditions an important potential source of exchange-rate pressure. But a weaker basket rate need not signal a deliberate push to make exports cheaper: movements between the dollar and other trading-partner currencies can also contribute.

Food importers, equipment dealers and manufacturers using foreign components are exposed. They may pass costs to customers, accept narrower margins or delay investment. Households would feel the squeeze most directly through goods whose prices are less protected.

For non-hydrocarbon exporters, including fertiliser producers and food processors, nominal weakness can increase dinar receipts from foreign sales. Imported inputs and domestic cost increases can erode that benefit. Hydrocarbon earnings depend more heavily on global energy prices and export volumes than on changes in local price competitiveness.

The next test is whether inflation relative to trading partners eases enough for nominal weakness to become sustained real depreciation. Without that, Algeria risks more expensive imports without a broad-based export advantage.

Analysis by MENACodex. The reasons and effects discussed are our reading; every figure traces to official data.