Reshuffle frees Algiers to open talks with Islamists

THE departure on Monday of the hardline Redha Malek as Prime Minister of Algeria, and the eradication of the last vestiges of the old guard in the cabinet, allows President Lamine Zeroual a free hand to pursue his policy of dialogue with Islamist militants who are in confrontation with the state.

The timing of the change of government, however, was dictated by the economy. Over the weekend the government sent a letter of intent to the International Monetary Fund agreeing to swallow some of its standard medicine to arrest the decline in the country's economic health. It was normal that the man who ordered it to be administered should be replaced, so that the new government could dissociate itself from such unpopular policies as cost-of-living increases. The new Prime Minister, Mokdad Sifi, 54, has had a career as a civil servant, and since July 1992, as a minister.

The commitment to liberalise the economy will allow the granting of a dollars 1bn (pounds 670m) standby credit for balance-of-payments support. Algeria has a foreign debt of dollars 26bn.

Merely servicing this gobbles up all receipts from exports of oil and gas, virtually the country's only foreign-exchange earner. With oil prices at an historic low, Algeria's prospects for getting out of its economic rut are poor.

The outgoing Prime Minister, Redha Malek, in office less than seven months, was a strong supporter of radical steps to improve the economy. But some sectors of the ruling elite favoured less drastic measures. With the authorities in bloody confrontation with Islamist militants, which has cost 3,000 lives in the past two years, they felt the government could not afford to deliver a further blow to ordinary people with new austerity measures.

They argued that they would increase the disaffection of the urban population and thus fan the Islamist rebellion. Others, however, felt that with the domestic economy in such dire straits, and unemployment and inflation spiralling out of control, they had nothing to lose. These views prevailed.

The IMF has agreed to support Algeria so long as it introduces the usual package of structural reforms to the economy.

This means moving rapidly away from state control to assisting small business enterprises.

The former prime minister and his interior minister, also dismissed, were associated with hardline elements within the army who were opposed to any dialogue with the Islamists to find a political solution to the insurrection. They favoured a rigorous crackdown.

President Zeroual appears to have triumphed in getting his wish for conciliation with the Islamist rebels. The challenge now will be to find the right people to talk to.

The imprisoned leaders of the Islamic Salvation Front (FIS), which was poised to win the elections two years ago, are no longer the key men. The FIS has been superseded by two shadowy armed Islamist groups, neither of which seeks conciliation. The prospects for an end to the violence are dim.