The forex traders in Port-Saïd Square are only the visible part of a network whose level of sophistication is such that it is truly illusory to think that the police could overcome this market.

The dinar yesterday established a new floor on the informal currency market at 215 DA for one euro, while its parity against the dollar remains stable around 174 DA for 1 dollar.

Yesterday, shortly after 10 a.m., in Port-Saïd Square, reputed to be the parallel exchange hub in Algiers, a curious atmosphere reigns which contrasts with several months of tension, where exchange transactions were reduced to a minimum, given the closure land and air borders for the purpose of combating the spread of the Covid-19 pandemic.

Port-Saïd Square seems to be gradually regaining its usual crowds and hubbub. Except that the currency traders, formerly placed all along the rue Abane-Ramdane, under the arcades connecting the Courthouse to the garden of the National Theater, bundles of banknotes in hand are now invisible, certainly to protect themselves.

“The demand for currencies is recovering with the hope that the airlines will regain some air in the coming weeks. This explains, in part, the flow of foreign currency seekers in recent days”, explains a forex trader, installed at the entrance of a building, staring suspiciously at passers-by. Messaoud is a Square regular.

Like “a piece of furniture” which has not moved, even when the foreign exchange activity was almost at a standstill for the past nine months. The parallel market has frozen since March, “while most transactions were done by telephone, involving traders based in France and those established in Algeria”.

“That is to say that dinars are lent in Algeria against euros cashed in France thanks to networks linking forex traders from the two countries”, explains Messaoud, underlining the virtual disappearance of the supply of foreign currencies, except made up of the contribution of pensions, while demand continued to be fueled by savers.

Ahmed, who runs a shop under the arcades of the Square but who has bleached under the harness in the currency trade, tells us that forex traders are now developing concepts of “sheltering”, isolating themselves in the inside buildings and cafeterias or even on social networks “to better protect themselves”. Some have even adopted “home service” approaches rather than spending the day scanning pedestrians and motorists for potential buyers.

Sophistication

The dinar resumed its decline against the euro. “Yes, it is a fact. This was predictable, because life has to go back to normal,” our interlocutor told us. Against the euro and, to a lesser degree, against the dollar, the national currency is now close to its pre-Covid-19 lows. Ambient optimism on the resumption of flights and the expected opening of borders contributed to the rebound in the value of the main currencies on the informal market. But not only.

The fall in the value of the dinar on the official market set the tone. "Moments of crisis are often conducive to doubt and this spectacular fall of the dinar on the official exchange market has resuscitated the reluctance of Algerians as to the capacity of the dinar to rebound in the current context of crisis", explains Ahmed, specifying that the periods crisis favor the phenomenon of hoarding in foreign currencies.

"Those who thought that the health crisis got the better of the informal currency market are seriously mistaken because the holders of large capital in dinars continued to discreetly frequent the informal foreign exchange market by taking advantage of the drop in prices to hoard in foreign currency", testifies Ahmed. He maintains that the Square currency traders are only the visible part of a network whose level of sophistication is such that it is truly illusory to think that the public force could come to the end of this market.

Twenty meters further on, at the entrance to a cafeteria, Hichem, in his forties, is sipping tea, waiting for a potential buyer to appear. He assures us that he will be able to make sums in foreign currency available to applicants throughout France in return for dinars collected in Algeria. He does not know that we were there for a report.

“I can give you some foreign currency, enough to be able to travel to Lyon and, once you arrive, collect the rest in France, which will allow you to avoid the recurring interrogations of customs officers and police officers at airports”, assures he said casually and sure of himself. “Here, it's concrete!”, he continues as if to convince us, assuring his momentum that “discounts are possible if the amounts are significant”.

The devaluation effect

Informal market traders expect the dinar to fall further as many countries ease lockdowns and move towards mass vaccination. They also evoke the psychological effect exerted by the devaluation of the dinar on the official market; the value of the euro being fixed at 164 DA, while that of the dollar is at 134 DA.

Like what, the mistrust that settles in relation to the dinar makes the bed of another scourge, that of hoarding. The euro and the greenback have thus become a safe haven. This distrust only reinforces the parallel market which now seems to escape all control, given the levels of sophistication it has reached, but also the amounts it handles annually without any countermeasure being prescribed.

In its latest analysis of the evolution of the economic situation in Algeria, the International Monetary Fund (IMF) had sounded the alarm about a parallel currency market which “seems to be gaining in scope and sophistication”. “The existence of the parallel market complicates macroeconomic management, because it fuels inflationary expectations, distorts price formation and weakens the transmission channels of monetary policy,” noted the IMF.

He suggested that “gradually adjusting the official exchange rate, raising indicative ceilings on the amounts of foreign currency that travelers can carry, and easing restrictions on imports could reduce the size of the parallel market, but would not be enough. to eliminate it”.

The unification of the two markets will only be possible by gradually liberalizing capital transactions, a measure that can only be considered once macroeconomic conditions have become more favorable, say experts from the Bretton Woods institution.

Beyond these recommendations, which have remained empty words, just like the speeches of the fight against the informal circuits of the economy, the informal currency market seems to be regaining its moments of euphoria, while the country's economy and its currency capsized, for lack of a clear course and good governance.