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Towards full FX convertibility

Over the past decade and a half, Tunisia has won plaudits for its gradual macroeconomic reforms and stable monetary policy. The IMF recently noted that "Tunisia's economic performance has been one of the strongest in the region" over the past 10 years. It is one of only three African countries carrying an investment-grade rating " BBB with a stable outlook from all leading agencies.

According to the IMF: "Fiscal and monetary discipline has contributed to macroeconomic stability, in the context of a real effective exchange rate targeting framework with controls on capital flows." Rather than allow the market to determine the exchange rate, Tunisia's central bank aims to maintain a stable real rate against a basket of currencies weighted to take account of major trading partners and competitors.

The absence of a fully convertible dinar has become problematic for Tunisia, despite the benefits it has brought. Nick Eisinger, director of sovereigns at Fitch Ratings, says: "Capital account liberalization is necessary if Tunisia wants to be more integrated into the global financial system and open itself up to a larger base of foreign investors."

The IMF wants the authorities to relax capital controls to diversify external financing sources and maximize the benefits of foreign capital for investment and growth.