Tunisia’s central bank says dinar hard to defend as reserves fall

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Tunisia’s central bank governor said on Monday the dinar currency could not be easily supported as international reserves go below three months of imports.

Tunisia’s economy has been in crisis since the toppling of autocrat Zine al-Abidine Ben Ali in 2011, with unemployment and inflation shooting up. It has struggled with tough economic reforms to reduce public spending.

Central bank chief Marouan Abassi said foreign currency reserves’ cover had fallen to 84 days of imports due to lower phosphate production and a large energy sector deficit.

The dinar hit a record low earlier this month against the euro as a worsening trade deficit and lower overseas remittances eroded reserves. It was at 3.53 against the euro and 3.11 against the dollar on Monday, according to traders.

The dinar fell about 13 percent versus the euro and 8.6 against the dollar in 2018. Tunisia’s trade deficit widened in December 2018 to a record 19 billion dinars.

“Today, we have a huge energy deficit of up to five billion dinars and production fall in vital sectors such as phosphates, in addition to a decline in tourism revenues by half compared to 2010, for example,” Abassi told parliament.

“What do we have to do? If we defend the dinar, the stock of the currency will fall further”, he added.

Production of phosphates, a major foreign revenue source, declined in 2018 to about 3 million tons compared to 8.2 million in 2010.

Though Tunisia has been praised as a rare success among nations where “Arab Spring” revolts took place in 2011, successive governments have failed to trim deficits and create growth.

Tunisia forecasts the budget deficit to fall to 3.9 percent of gross domestic product in 2019, from about 5 percent last year. It aims to raise GDP growth to about 3.1 percent this year from 2.5 percent last year.