Tunisian dinar holds steady amid crisis

Investment advisor Mohamed Sadok Jabnoun said that “the Tunisian Central Bank has managed to stabilise the exchange rate.
Wednesday 27/05/2020
Customers queue up to enter a bank branch in the centre of the Tunisian capital Tunis. (AFP)
Customers queue up to enter a bank branch in the centre of the Tunisian capital Tunis. (AFP)

TUNIS--The value of Tunisia’s currency remained steady during the coronavirus pandemic, despite a decline in export value and the interruption of the country’s crucial tourism industry.

The COVID-19 crisis is expected to cause a 46.4% drop in Tunisia’s GDP in the second quarter of 2020 (April to June). The losses are the result of a 6-week general lockdown imposed by authorities to contain the pandemic, according to a project paper released by the Tunisian Institute of Competitiveness and Quantitative Studies (ITCEQ).

Export and tourism revenue are some of the most important elements of the country’s  foreign exchange channels, which have been hit hard over the past two years by the declining value of the Tunisian dinar.

However, the dinar has enjoyed near stability over the past few months, due to an important balance of hard currency, mainly from the tourism sector, and the entry of some resources from loans and grants, according to Tunisian economist Mohsen Hassan.

Hassan said the currency’s “stability” could be explained by turmoil in the global exchange market, and the decline of foreign currencies, especially the US dollar.

However, he added that “after the crisis, there are concerns that the dinar exchange rate will decline, because the Tunisian economy’s crisis has become structural and is not only related to coronavirus, especially if the economic reforms are not accelerated.”

Hassan doesn’t expect the return of foreign direct investment in 2020.

Investment advisor Mohamed Sadok Jabnoun said that “the Tunisian Central Bank has managed to stabilise the exchange rate, and with the currency reserve there will be no significant decline in the level of the dinar’s value.”

He stressed that the situation will remain stable at these levels.

According to Central Bank figures, foreign currency reserves amounted to $21.7 billion dinars ($7.5 billion), equivalent to 134 days of imports, as of May 22.

However, Jabnoun said that the approximately 10% decline “remains relative and was not disastrous as expected.”

Tunisian exports fell in the first four months of this year by 20.6% compared to the same period last year. Imports also decreased by an unprecedented 46.8% last April, and by 21.5% in the first four months of 2020 year on year.

Jabnoun said that Tunisia’s tourism sector has been dramatically impacted by the global health crisis and will have to undergo changes before it kicks back into gear.

To ensure international standards are met, the state will need to provide some 2 billion dinars ($700 million) to restructure the sector and reduce hotel units while raising the level of services provided, Jabnoun said.

Hassan said it is unlikely international tourism beyond the Maghreb region will return to Tunisia before 2021.

Tunisian authorities expect the tourism sector to lose some 4 billion dinars ($1.4 billion dollars), and 400,000 jobs due to the coronavirus crisis.

The Tunisian economy contracted by 1.7% in the first quarter of 2020, according to a preliminary estimate released by the National Institute of Statistics (INS).