Tunisia will restrict the import of some goods to tackle its widening trade deficit and protect foreign reserves as the local dinar currency slides to historic lows against the euro and dollar, Prime Minister Youssef Chahed said.
Praised for its successful democratic transition after a 2011 uprising, Tunisia has struggled to progress with tough economic reforms to reduce public spending as demanded by the IMF and its international partners.
“The fall of the dinar reflects this enormous trade deficit but there is no need to panic. We will take some decisions.. We will limit some random imports. We have a lot of unnecessary imports,” he told reporters at an event in Sfax city.
The dinar traded at 2.64 against the euro and 2.46 against the dollar on Friday for the first time, traders told Reuters.
Chahed said a cabinet meeting next week would decide on the details of the restrictions.Tunisia‘s trade deficit expanded by 57 percent to reach $1.68 billion in the first quarter of this year because of a jump in imports.
“We will reduce imports of many luxury goods,” a government official told Reuters.
The local currency has continued its sharp decline since Finance Minister Lamia Zribi said last Tuesday the central bank would reduce interventions so that the value of the dinar gradually declines, though she said it would prevent a dramatic slide.
The IMF agreed this week to release a delayed $320 million tranche of Tunisia‘s $2.8 billion in loans. It called for tighter monetary policy that would counteract inflationary pressures, and said “greater exchange rate flexibility would help narrow the large trade deficit”.
The UTICA industry and business employers’ association, one of the country’s major economic lobbying groups, urged the government to tackle the dinar’s drop. It warned that the sharp decline of currency will increase economic pressures and hit companies that import raw materials from abroad.
