Tunisia: the dinar continues its disturbing tumble

The Tunisian dinar's decline in the number of currencies versus foreign currencies, and especially the euro, continues in the aftermath of the difficult economic situation that the country has been experiencing since the 2010 revolution. Thus, between 16 December 2010, the day before the beginning of the revolution that Ben Ali brought, and on 25 August 2018 the Tunisian dinar depreciated by 67.07% against the euro, from 1.9115 dinar for one euro to 3.11935 dinar for the same euro. This depreciation has mainly accelerated since April 2017 and the falling dinar relative to foreign currency provide operators and Tunisians. And at this moment everyone expects to pass the bar of 3.20 dinars for one euro.

Several factors explain this situation, including the difficult economic situation, political instability, the broadening of the trade deficit, the decline of foreign assets under the effect of the current account deficit, the fall in investment, and so on. The IMF with its recommendations is no stranger to the depreciation of the Tunisian dinar. The institution has long argued that the dinar was overvalued.

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The recovery of certain strategic sectors of the Tunisian economy, such as tourism and the agro-food export sector, is not enough to stimulate the local currency.

This depreciation of the Tunisian currency makes some sectors of the Tunisian economy more competitive and the Tunisian destination more attractive for tourists and investors. However, the economic situation is still a drag on investors and tourist receipts, which are rising sharply in local currencies, remain negligible in foreign currencies.

Moreover, this fall of the dinar is mechanically translated by an increase in the debt ratio of the country, reported in local currency. It is currently around 70% of GDP.

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Moreover, the depreciation of the Tunisian dinar inevitably translates into an increase in the production costs of sectors that depend on imported raw materials and equipment. As such, it should be noted that about 70% of Tunisian imports consist of raw materials, including hydrocarbons and grains. A situation that leads to an increase in product prices and thus high inflation, which inevitably influences the purchasing power of the citizens.

Faced with this situation where the decay of the dinar is accompanied by a growing trade deficit, many experts think of the need to rationalize imports in order to preserve the current stock in currencies which each abandons. barely 70 days of importing goods. Meanwhile, the vicious circle of declining dinar and the growing trade deficit is seriously worrying and the authorities seem unable to curb this downward trend of the dinar.