Tunisia is under attack. The economic consequences of this attack will be high, and will create huge social and political consequences.
Therefore, Tunisia need also an economic reaction.
As FED, Bank of England, Bank of Japan, Bank of Switzerland, and recently BCE, The Central Bank of Tunisia may implement a Quantitative Easing.
In this short note, we don't analyse the tecnicalities: there are many ways and several amounts in which doing the QE.
Here we are interested only to expose the idea and its benefits.
The tactical goal must be to devalue the Dinar on the foreign exchange market, at least 50%, to obtain the strategical goal: mantaining at least, if not improving, GNP and employment.
For this reason we suggest to adopt the Bank of Switzerland model of QE: creating Dinars to buy euro, dollars, sterlings, etc..The internal monetary circulation of Dinars, thus, will remain stable.
Pro:
- creating a very strong economic incentive for tourism and foreign residents to come in Tunisia; an incentive capable to offset the very strong disincentive caused by terrorism.
- substaining the export, and then employment and income generated from. Prices in Dinar remain the same, and therefore salaries, costs and profits.
- reducing the import, beginning to improve the external balance.
Against:
- there is only one big negative effect: the price of imported energy is likely becoming higher. But the indirect effects on the cost of living are manageable: e.g. Tunisia may reduce the taxes on the final price, and may finance this via QE.
Of course, there are always collateral effects, but often exist countermeasures.
The most important thing is giving to Tunisian people the correct message: help yourself, and God will help You!
