Tunisia's dinar must weaken further (IMF) | Tunisia News Gazette

Tunisia’s dinar must weaken further (IMF)

Tunisia’s dinar must weaken further this year if the country is to boost exports and revive an economy battered by political upheaval since its 2011 uprising, BjAlrn Rother, the International Monetary Fund (IMF) Tunisia mission chief was quoted as saying by Bloomberg on Wednesday.

Rother, however, did not want to be a fearmonger, telling Bloomberg I don’t think that we need to see a big downward movement to equilibrium, I think we are not too far from it. He considered that the dinar was misaligned by 10 to 20 percent.

The author of the article argued that expectations that Tunisia is headed for a sharp currency depreciation have grown in recent months as foreign reserves have declined rapidly, reaching $4.6 billion on Monday, enough to cover just 78 days worth of imports

The IMF mission chief spoke in Bloomberg’s article about the drop in reserves, saying it is temporary caused partly by delays in the IMF loan and the sale of international bonds, adding that low reserves discourage investment but don’t signal an imminent currency crisis.

However, Central bank Governor Marouane El Abassi said last month a steep depreciation risks fueling inflation and public anger in a country that has had eight governments since sparking the 2011 Arab Spring revolts against authoritarian rule.

Rother also pointed out that Tunisia’s trade balance was beginning to improve, allowing it to move gradually on currency depreciation. The dinar declined 19 percent against the euro last year. The trade deficit shrank by nearly a quarter in January and February compared to the same period last year as exports grew 43 percent.

If you want to attract investment and if you want to develop your exports you need to be competitive in the world economy, said Rother. And the easiest way to achieve that is to rely on a competitive real exchange rate.

Source: TAP News Agency

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