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Tunisia’s gradual economic modernisation must continue



The ability of the southern Mediterranean countries to stave off the devastating effects of the financial crisis justified the limited deregulation of their financial markets. Tunisia is a case in point, and it must continue its steady economic reforms by resisting the temptation of potentially troublesome short-term capital.



Tourism in Tunisia benefited from the capital account liberalisation (photo BC)
Tourism in Tunisia benefited from the capital account liberalisation (photo BC)
TUNISIA. For several years, there have been two contrasting viewpoints on financial liberalisation.

Those who support a total liberalisation of the financial markets talk of capital being distributed more effectively across the world, with funds shifted from industrialised nations to help the growth of developing economies.

Other experts insist that unrestricted international capital flows do not guarantee growth; indeed, they may cause major crises if not accompanied by a raft of macroeconomic measures focused on modernising banking and financial systems. In other words, a more liberal market is not enough in itself. 



The debate would appear to have been resolved by the negligible impact of the 2008 financial crisis on the southern Mediterranean countries. By only very partially liberalising their financial markets – true market deregulation does not always go hand in hand with the free movement of capital and full convertibility of national currencies – they were fairly well shielded from the devastating effects of the crisis. This would support the notion that completely unrestricted capital flows do not always guarantee solidity.

Robust performance

Tunisia is a case in point. In a soon-to-be published study by FEMISE  (the Euro-Mediterranean network of economics institutes), researchers highlight the robust performance of a country that has implemented gradual macroeconomic reforms over the last 20 years. With a growth rate above the average seen in mediterranean countries (around 5% between 1995 and 2008) and an increase in foreign direct investment (FDI), Tunisia had a balance-of-payments surplus of TND 2.053bn (€1.08bn) in 2008 and a current account deficit of TND 2.109bn (€1.11bn), or 4.2% of GDP. “The Tunisian economy’s resilience to the recent crisis tends to justify the policy adopted up to now by its authorities,” claim the study’s authors. 

However, the researchers’ main objective was to measure the long-term consequences of more financial deregulation and to make some recommendations.

Keeping up with the reforms

In their view, the tariff elimination of recent years has greatly benefited manufacturing and services by encouraging investment, modernisation and competitiveness in these industries. Tunisia should therefore continue to simplify business administration, develop its infrastructure and increase the size of its markets through inter-regional agreements. 

From a financial perspective, the experts believe Tunisia should favour FDI over short-term capital movements in order to increase deregulation and financial flows without exposing its economy to uncontrollable risks. FDI is the only way to create more jobs, something which is not happening enough at the moment.



That is why the fine-tuning of monetary policy and the pursuit of financial sophistication should still be carried out gradually before implementing exchange-rate flexibility and totally free circulation of capital. Unlike the financial markets, macroeconomics is a long-term game.



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Brigitte Challiol


Monday, October 15th 2012



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