Tunisia Says Central Bank to Gradually Weaken Dinar, Lift Exports

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

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 minimize 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 Egypt floated its currency, the pound, last year, letting it plummet by 32.3 percent

The IMF agreed to release a delayed $320 million tranche of Tunisia's $2.8 billion 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 $1.15 billion in international loans after the IMF decision to pay out the second tranche - including $500 million from the World Bank, $500 million from the EU and $150 million from the African Development Bank - for the state budget. Zribi said Tunisia also received $1 billion in aid 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.

Tunisia has been held up as an example of a successful democratic transition since the overthrow of former President Zine El-Abidine Ben Ali in 2011, which ignited uprisings across the Arab world.

The North African country has enacted a new constitution, held free elections and adopted compromise-style politics to overcome tensions between secular and Islamist leaders.

But economic reforms have lagged and many Tunisians are concerned about the cost of living, unemployment and rural marginalisation, especially in southern and central regions that formed the heartland of the 2011 uprising.