(MENAFN- Gulf Times) Tunisia's central bank will reduce interventions so the value of the dinar gradually declines though it will prevent a dramatic slide in the currency, the finance minister said yesterday.
The strategy is part of Tunisia's talks on reforms with the International Monetary Fund.
The IMF is pushing Tunisia to overhaul its finances and reduce public spending, especially public-sector wages.
Tunisian public spending ranks among the highest in the world relative to gross domestic product.
One of the objectives of those negotiations has been finding ways to encourage exports and reduce the reliance on imports, a strategy which would benefit from a weaker dinar.
'The central bank is going to minimise its interventions to reduce the value of the dinar in a gradual slide of the dinar, Finance Minister Lamia Zribi told local Express FM Radio.But we will avoid a brutal devaluation like that in Egypt.
The dinar reached 2.5 dinars to the euro on Monday.
Egypt floated its currency, the pound, last year, letting it plummet by 32.3%.
The IMF agreed on Monday to release a delayed $320mn tranche of Tunisia's $2.8bn in loans. It had been held up by concerns over a lack of progress on economic reforms.
The deal to release the funds came after talks in Tunis that set reform priorities.
These included raising tax revenue, reducing the public wage bill through civil-service reforms and paring energy subsidies, according to an IMF statement.
The IMF also called for tighter monetary policy that would counteract inflationary pressures, and said 'greater exchange rate flexibility would help narrow the large trade deficit.
Zribi said public spending reforms might include raising the retirement age to ease the burden on the state pension system, as well as overhauling loss-making public companies.For our part we are willing to advance the reforms and avoid painful reforms, such as lifting subsidies completely.
She said Tunisia was now eligible for an additional $1.15bn in international loans after the IMF decision to pay out the second tranche — including $500mn from the World Bank, $500mn from the EU and $150mn from the African Development Bank — for the state budget.
Zribi said Tunisia also received $1bn in aid yesterday pledged by Qatar last November — half to pay off an existing credit and the rest to be deposited in the central bank and transferred to the state budget.
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