Algeria is reportedly seeking a $3 billion loan from the Islamic Development Bank (IsDB) to finance a major railway infrastructure project. The loan is still pending approval by the bank’s governing board,which includes key stakeholders such as Saudi Arabia and the United Arab Emirates,countries whose diplomatic ties with Algeria have been strained in recent years.
The move has raised eyebrows among observers,given President Abdelmadjid Tebboune’s repeated public opposition to foreign borrowing. He has often framed foreign debt as a threat to national sovereignty. In 2021,Tebboune stated that Algeria rejected external financing to preserve its anachronistic positions on Western Sahara and Palestine.
However,Algeria’s economic realities are becoming harder to ignore. The country is classified as high-risk by international lenders,making any potential borrowing costly.
Despite this,the government has long used “economic sovereignty” as a smokescreen to justify avoiding foreign debt. This has included unconventional measures such as direct central bank financing,import restrictions,monetary expansion,and incorporating the informal sector into GDP calculations to inflate economic performance.
Economists argue that foreign debt,when used to fund productive investments and structural reforms,can be a valuable tool for economic diversification,particularly for Algeria,whose economy remains heavily dependent on volatile oil and gas revenues. Yet,the government has shown little appetite for reform,preferring to maintain social stability through subsidies and public spending to the detriment of long-term financial stability.
With oil prices down more than 20% since the start of 2025,Algeria faces mounting fiscal pressure and a projected record budget deficit. The government’s resistance to reform and reliance on outdated economic levers may soon prove unsustainable.
United News - unews.co.za