The Central Bank of Tunisia (BCT) delegated the management of the exchange rate to executive authorities on the foreign exchange market, allowing (authorities) to play a key role, after the entry into force of the law on the independence of the issuing authority n° 35 of 2016, according to a report.
This report entitled “Monetary reforms of the International Monetary Fund (IMF), Depreciation as case study,” was published by the Tunisian Economic Observatory (OTE).
It showed that the adoption of the law on the independence of the BCT in April 2016 was included in the framework of negotiations with the IMF, which required that the Assembly of People’s Representatives vote on this law as a priority before signing any agreement or conducting any financial review.
Since 2016, the BCT has lost its role as protector of the national currency and guarantor of its stability. Its tasks have been limited to ensuring price stability, according to Article 7 of the Law on the Independence of the BCT.
According to the report, since 2012, the BCT has introduced several modifications to the exchange rate policy in response to requests from the IMF for access to its resources.
These changes have 4 axes: the first concerns the adoption by the BCT of a more flexible exchange rate policy in terms of calculating the reference exchange rate of the dinar, which led to fluctuations in the exchange rate, especially in the third quarter of 2012.
Since 2013 (the second change), monetary policy in Tunisia has followed a more flexible exchange rate policy through the institutionalisation of foreign exchange auctions on the foreign exchange market.
The third change (2014) concerns the modernisation of exchange rate policy instruments, and the fourth change (April 2016) concerns the adoption of the law on the independence of the BCT.
The depreciation of the dinar against the major currencies has led to an increase in outstanding debt, a rise in the prices of imported goods, a widening of the trade deficit and a sharp decline in net foreign currency assets.
From 2011 to 2022, the dinar lost 52% of its value against the US dollar. According to the IMF’s rhetoric, the main objective of this policy is to bring down the trade deficit by increasing exports and reducing imports. This, in turn, would help to protect foreign exchange reserves and reduce inflationary pressures.
Source: Agence Tunis Afrique Presse