IS TUNISIA HEADING FOR THE OPTION OF FLOATING THE CURRENCY AS EGYPT DID?


23/04/2017




Adel Tayari - TDO –(TUNISIA) Many Media sources pointed out that the Tunisian government is considering the recommendations of the IMF mission to the government to float the dinar as the Egyptian authorities did to liberalize the Egyptian pound on the pretext that the decision would be in favor of attracting more investments, economic growth.

The public finances in Tunisia suffer from a lack of financial resources in light of the increasing demand for foreign currency to import goods against the decline of Tunisian exports. Several Tunisian economic experts have confirmed that the dinar will be subject to the floating system as confirmed by international reports and its purchasing power will collapse to at least 30% andexperts believe that the purchasing power of citizens will decline to about 40% because of high prices. The Tunisian dinar has witnessed a significant decline since the outbreak of the revolution at the end of 2010, where exchange rates for each one dollar stands at 2.26 Tunisian dinars and many observers link the decline in the dinar exchange rate political climate unstable in Tunisia for more than six years, which in one way or another reflected other conditions that led to the depletion of the central bank's treasury, most notably the rise in imports, the lack of exports and the depletion of foreign exchange reserves.Since the revolution, the Tunisian government has been burdened with many expenses to respond to social demands and wage increases . The government also faced a major problem: the decline of the most important sector in the Tunisian economy, namely the production and export of phosphate, which is the most important supplier of the treasury of foreign currency, where exports have declined significantly due to the interruption of production due to repeated strikes by workers. The Tunisian economy was also negatively affected by the decline in agricultural exports due to drought and the decline in tourism due to the terrorist operations in Bardo and Sousse in 2015. The Tunisian government faces a continuing deficit in the trade balance, which reached alarming numbers. All this has negatively impacted Tunisia's foreign reserves and forced the Tunisian government to borrow from international financial institutions.

Many experts believe that the Tunisian government's decision to float the dinar at the moment will put the Tunisian economy at a great shock has raised the fear of trade union organizations, whether for workers or businessmen where they considered that the decline in the value of the dinar will have very negative repercussions on investment and competitiveness of institutions and inflation and the deficit of the trade balance and  this will be reflected in the high indebtedness and debt service as well as the major financial balances of the country and the support fund, since most of the subsidized basic materials are imported from abroad, and they called on the government to explain the reasons for this situation and the plan that will be adopted to stop the bleeding of the national currency.

Many experts believe that the flotation of the dinar is the implementation of the reforms that the IMF is pushing the Tunisian government to follow while the government has alternatives to replace floating, which revolves around the confidence in the local economy in the eyes of foreign investors by preventing strikes and self-sufficiency in agriculture to reduce supply and raising exports of phosphate and locally manufactured materials, and then stopping the supply of luxuries and luxury objects and fighting corruption, theft and bribery and the tightening of sanctions on smugglers and currency traders and the activation of various reforms approved by the parliament, but their implementation was delayed.


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