The Central Bank of Tunisia has taken emergency short-term measures in an attempt to prop up the ailing Dinar.
Currently, the Tunisian Dinar is trading at 2.19 against the dollar, down from 1.958 this time last year, putting additional strain on the country’s loan repayments and exporters.
Chedly Ayari, governor of the Bank of Tunisia’s presented the bank’s annual report for 2015 to President, Beji Caid Essebsi on Thursday, outlining some of the measures the bank was considering to shore up the falling currency.
Amongst a range of new austerity measures, the Central Bank has declined to inject any further cash into the economy and placed restrictions on the importing of foreign vehicles above a certain Horsepower.
In June, Minister of Youth and Sports Maher Ben Dhia declared a moratorium on the recruiting of foreign athletes and trainers, in a bid to safeguard the country’s foreign currency reserves for better use.
The Ministry of Local Affairs has also announced an increase in the price for various administrative services, such as birth or marriage acts, through The Official Gazette of the Republic of Tunisia of June 13.
Considering the underlying causes behind the Dinar’s fall in value, Chafik Ben Rouine, President of Observatoire Tunisien de l’Economie, told Tunisia Live that the reasons for the Dinarss drop in value were essentially twofold. The first related to the structure of the economy, and the second related to the loss of central control of the Dinar.
Commenting upon the first, Ben Rouine pointed to the negative balance in Tunisia’s trade that has developed over recent years and the second, to the relinquishing of central control of the Dinar by the Central Bank, a condition insisted upon by the International Monetary Fund, (IMF) as part of a wider loan agreement agreed to in 2013, but which only became effective this year. Moreover, Ben Rouine added, the IMF had specifically prohibited the Central Bank from intervening in foreign exchange markets in a bid to defend the country’s failing currency.
The outlook, according to Ben Rouine, was likely to remain bleak as long as the Dinar remained overvalued. “The IMF estimated in 2015 that the dinar was overvalued by 6 to 13 %. It’s very likely that the dinar will stabilize once its value falls to reflect that.”
Ben Rouine continued by saying that the decline in the dinar will increase the cost of repaying the country’s international debts, which are usually valued in either dollars or euros. The first installment of the 2013 IMF loan will fall in September.