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Algerian deposit helps shore up Tunisia's currency reserves

A $100 million deposit from Algeria will boost Tunisian's foreign reserves

Reuters, Monday 5 May 2014

Tunisia's central bank said a deposit of $100 million by neighbouring Algeria would bring foreign reserves back to the level its board considers adequate to cover import requirements.

Tunisian state television reported on Sunday that Algeria's government had made a $100 million deposit to the bank's foreign reserves, and given a separate loan of $100 million and a donation of $50 million.

The country has won praise from regional and Western powers for its political transformation three years after an uprising overthrew then president Zine el-Abidine Ben Ali and inspired revolutions across the Arab world.

But its caretaker government still has to tackle economic instability and high public spending.

"This (Algerian) financing will bring the reserves back to levels equal to 100 days of imports," Tunisian Central Bank governor Chadli Ayari said in an interview with state television on Sunday.

Last week, official data showed a worsening trade deficit had further eroded Tunisia's foreign currency reserves, which had fallen to just 93 days of import cover.

Tunisia's central bank said on its website that foreign currency reserves stood at 10.39 billion Tunisian dinars ($6.50 billion) by April 25, equal to 93 days of import cover, compared with 102 days a year earlier.

Ayari told Reuters this month that the decline in reserves to "dangerous levels" was due to a worsening trade deficit and said the government was considering imposing restrictions on imports of luxury goods.

International creditors have demanded Tunisia cut its budget deficit.

The government's challenge is to cut high public spending and subsidies without fuelling the kind of discontent that toppled Ben Ali. His overthrow was caused partly by grievances over jobs, services and high prices.

Tunisia's budget deficit is set to grow to 8 percent of gross domestic product this year, mostly due to increased subsidies on fuel and basic goods and public service wage costs.

The government has secured offers of funding or loan guarantees from international lenders such as the International Monetary Fund, the African Development Bank and partners such as the European Union and Japan. 

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