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The need for foreign resources to promote economic growth and development has long been debated by scholars and government officials, from both developed and developing countries. This has been stimulated by the successful experience of the Marshall Plan which contributed to the reconstruction of Western Europe after World War II and the views that development could be accelerated by an increase in the rate of investment through foreign capital, considering the lack of a strong domestic basis for capital accumulation in developing countries. It was argued that foreign capital could serve as an instrument to the relief of economic bottlenecks such as balance-of-payment deficits and financial shortages. It was claimed that foreign capital would make the requirements for coordinated changes in the economy less stringent and permits fuller use of domestic resources. Practically speaking, however, foreign capital in developing countries has proved, in many cases, to be less effective, if not ineffective, in relieving bottlenecks and inducing economic growth and development, something which goes against the claim that foreign capital is necessary to developing countries. This paper examines the major advantages and disadvantages of foreign capital. It begins with a brief study of views concerning foreign capital and its benign and malign role in the process of economic growth and development. It discusses Algeria's recourse to foreign capital to finance its public investment programmes with the purpose of development. It assesses the constraints of foreign borrowing and its repercussions on Algeria's development. This study highlights the various measures the Algerian government took to deal with the impacts of the foreign debt burden and finally concludes the prominent lessons to be learnt from the Algerian experience.

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