Foreign Capital for Development: The Constraints of Foreign Borrowing with Particular Reference to Algeria’s Case

The paper examines the major advantages and disadvantages of foreign capital in the form of foreign "aid" and private loans. It discusses Algeria’s case as an oil producer and exporter which relied heavily on external resources to help finance its ambitious public investment programmes and achieve a self-sustained growth. The main concern is to examine the constraints of foreign borrowing and its repercussions on Algeria?s development. It assesses the various measures the Algerian government took to deal with the far-reaching effects of the oil crisis of 1986 and the foreign debt burden. It further highlights the major setbacks of Algeria’s development and asks why the growth of the country’s economy remained low and dependent on oil and gas revenues after more than half a century of development? It finally concludes the prominent lessons to be learnt from the Algerian development experience.