Algeria Receives Western Aid to Stabilize Economy

AS the religious month of Ramadan, the Muslim month of daylight fasting, gets under way this week, Algeria's beleaguered government can breathe a sigh of relief.

The military-backed leadership in Algiers has received clear signs recently that Western partners prefer assisting the regime in place, despite misgivings over the abrupt halt called to Algeria's democratization process in January, to seeing the strategic North African country of 25 million people slip deeper into chaos.

Last week a consortium of Western banks, under pressure from Western governments, approved a long-awaited credit of $1.45 billion that will allow Algeria to roll over especially high payments that were coming due on its staggering foreign debt.

The refinancing accord was accompanied by a French government decision to extend $550 million in credit to finance imports of crucial products such as machine parts for factories. It is also expected to open up access to other international loans.

As a result, Algeria should have an easier time keeping its promise to eradicate food shortages in the month of traditional after-sundown family feasts. With shortages during Ramadan having led to social tensions in the past, and with frustrations still running high following the country's recent political turmoil, the government was determined to make sure markets were well stocked in March.

Over the medium term, the infusion of foreign capital should allow Algeria to accelerate production in its industrial sector, which operates at just over one-third of capacity, in part because of unavailable machine parts.

Doubts about Western willingness to aid Algeria have lingered since the country's first multiparty national elections were canceled in January. The first round of voting in December had portended a huge victory for Islamic fundamentalists, prompting antifundamentalist military leaders to force the resignation of President Chadli Benjedid. A council of state was named to run the country and a two-year state of emergency imposed, after which free elections are promised.

Since shortly after the new leaders took power, emissaries have been sent to several Western and Arab capitals to secure political and financial support and to address concerns in Western capitals over the democratic process, and concerns in Gulf countries over Algeria's crackdown on fundamentalism.

The $1.45 billion credit, involving banks from European countries, the United States, and Japan, is particularly important because it allows Algeria to soften its debt repayment requirements over the next two years, the same two years the government has publicly stated it needs to get the economy back on its feet.

An ambitious plan for turning around Algeria's disastrous economy, announced by Prime Minister Sid Ahmed Ghozali last month, counts not only on the country's industrial machine, and billions of dollars in imports this year to get it running again, but also on the construction of 380,000 housing units over two years, to slash 25 percent unemployment.

The plan had virtually no chance of being implemented, however, without the refinancing accord which replaces short-term debt with longer-term loans.

Algeria already spends more than three-fourths of its annual income from oil and gas exports, which account for over 90 of export income, to pay back its $25 billion foreign debt. Yet particularly steep repayments were scheduled for the next two years, with more than $8 billion due in 1992 alone.

The accord among private banks, to be signed in Paris tomorrow, is also expected to pave the way for Algeria to receive more than $1 billion in loans from the European Community, the World Bank, and the International Monetary Fund.

French Finance Minister Pierre Bgovoy said Thursday that French and US officials had conferred on the Algerian loan question. EC countries also discussed how to respond to Algeria's situation.

Whether Algeria is successful in reversing its decade-long slide into turmoil and the accompanying rise of Islamic fundamentalism may hinge on how leaders manage the financial respite just accorded them. Massive imports of products to stave off consumer discontent will not be enough, some analysts warn.

"Traditionally Algeria hasn't used injections of fresh money for making crucial investments," says Abdelkader Djeghloul, an Algerian sociologist who has written extensively on his country. But if Algeria needs foreign money, "it is to invest in viable industrial enterprises."

That does not mean buying heavy industrial plants to operate independently, as a socialist Algerian state tried in the 1970s, Mr. Djeghloul adds, but development of foreign partnerships.

"Algeria has to put aside the source of its pride for the past 30 years, its jealous independence, and ask others to come help us," he says. "With that and only in this way is there a little hope."