Reserves preservation has become increasingly important for the governor of the Central Bank of Tunisia, Marouane El Abassi, as the country grapples with hefty external deficits and a weakening currency.
“My first priority is to preserve reserves to cover the basic imports our economy needs,” El Abassi says in a recent in-depth interview with Central Banking.[1][2][3]
Despite the economic upheaval Tunisia experienced following the political transition unleashed by the Arab Spring in 2011 and the conflict in neighbouring Libya, reserves remained stable earlier this decade. They stood within the range $8 billion–6 billion from January 2011 through late 2015, according to the ratings agency Moody’s.
But in 2018, they have declined sharply to barely $4.2 billion in May and covered 70 days of imports in late August, down from 90 days in December 2017.
“I’m not focused on one number – 70 days, 90 days. What is important is to have the right policies and better fundamentals in the real economy,” says El Abassi.
The worsening trade balance and lower capital inflows derived from weaker external loans have contributed to the decrease, according to Moody’s. “Rising balance of payments pressure has also contributed to a weakening of the currency, which has depreciated by 6.3% and 7.6% against the euro and the US dollar, respectively, in the first seven months of the year,” Moody’s says in a report published on August 14.
However, stabilising the exchange rate does not feature among the central bank’s main goals due to the country’s weak external position.
“Stronger exports in the textile sector, growth in tourism and higher remittances – this is the way to stabilise the exchange rate and preserve
