Currency Convertibility in the Middle East and North Africa

editors

Manuel Guitián

Saleh M. Nsouli

International Monetary Fund

Washington • 1996

Papers presented at a seminar

held in Marrakesh, Morocco,

December 16–18, 1993

© 1996 International Monetary Fund

Cover design by IMF Graphics Section

Cataloging-in-Publication Data

Currency convertibility in the Middle East and North Africa / editors Manuel Guitián, Saleh M. Nsouli. —Washington, D.C. : International Monetary Fund, 1996

• p. cm.

“Papers presented at a seminar held in Marrakesh, Morocco, December 16–18, 1993.”

ISBN 9781557755643

1. Currency convertibility—Middle East. 2. Currency convertibility—Africa, North 3. Foreign exchange—Middle East. 4. Foreign exchange—Africa, North. I. Guitián, Manuel. II. Nsouli, Saleh M. HG3968.2.C97 1996

Price: $19.50

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Contents

• Foreword

• Acknowledgment

• 1. Overview

  • Manuel Guitián and Saleh M. Nsouli

• 2. Opening Remarks

  • Omar Kabaj

  • Osama J. Faquih

• 3. Concepts and Degrees of Currency Convertibility

  • Manuel Guitián

• 4. Current Account Convertibility: Anachronism or Transition?

  • Saleh M. Nsouli

• 5. Experience with Exchange Controls in the Arab Countries

  • Mustapha Kara and Salam Hleihel

• 6. Currency Convertibility in Tunisia

  • Abdelmoumen Souayah

    • Appendix: The Move Toward Convertibility of the Tunisian Dinar for Current Operations Central Bank of Tunisia

• 7. The Exchange System in Morocco

  • Ali Amor

• 8. Experiences of Morocco, Tunisia, Jordan, and Egypt with Currency Convertibility

  • Arfan Al-Azmeh

• 9. The Issue of Capital Account Convertibility: A Gap Between Norms and Reality

  • Manuel Guitián

Foreword

Promoting currency covertibility, mainly as it relates to external current account transactions, has been at the heart of the International Monetary Fund’s mandate since its foundation. As financial markets have grown and become more globalized, the size and impact of capital movements have increased in importance. This was recognized in the 1995 communique of the Interim Committee of the IMF’s Board of Governors, which underscored the benefits of increased freedom of capital movements and emphasized the importance of firm economic policies to reduce the volatility of capital movements. The Committee encouraged the Fund to pay increased attention to issues relating to capital account transactions. Consequently, the Fund’s advice on convertibility has expanded in line with developments in world economic conditions.

The seminar on Currency Covertibility in the Middle East and North Africa that took place in Marrakesh at the end of 1993 coincided with the increased momentum toward establishing current account convertibility in the region. Most notably, Morocco and Tunisia, following the successful implementation of adjustment programs, had accepted the obligations relating to the provisions on current account convertibility under the Fund’s Articles of Agreement. Lebanon and Jordan followed suit. Many other countries in the region, which have different degrees of currency convertibility, are moving in the direction of accepting the obligations.

The seminar helped focus the attention of the many participants from the region on the benefits and conditions for adopting and sustaining convertibility. The papers published in this volume attest to the efforts that these countries are making and to the issues that they must confront in moving to full convertibility.

This volume will contribute to clarifying the issues and reforms involved as the Middle East and North African countries establish both current and capital account convertibility, thereby further integrating their economies into the globalized world economy.

Michel Camdessus

Managing Director

International Monetary Fund

Acknowledgment

The papers that are reproduced in this book were presented at the conference on Currency Convertibility in the Middle East and North Africa at the end of 1993. They covered a wide range of general theoretical issues and provided empirical information on the progress that the countries in the region were making in establishing the convertibility of their currencies. The seminar came at an appropriate time, shortly following Morocco’s and Tunisia’s introduction of convertibility for current account transactions and as other countries in the region were moving in that direction.

We would like to thank our colleagues in the Middle Eastern Department and the Monetary and Exchange Affairs Department of the International Monetary Fund (IMF) for their encouragement and support in the preparation of this book. Since the original papers were presented in different languages (English, Arabic, and French), we want to express our appreciation to our colleagues in the IMF’s Bureau of Language Services, who assisted in the translation into English of those papers that were originally in Arabic and French. We would also like to thank Janet Bungay of the African Department, who undertook extensive editing of the some of the translated papers. Ilse-Marie Fayad provided excellent research support, and Maureen Burke unstinting assistance in processing the various drafts of the manuscript. Particular thanks go to Juanita Roushdy of the External Relations Department for her thorough editing of the final draft manuscript and for coordinating the publication of the book.

We are also grateful to the authors, who reviewed the edited and, in some cases, the translated versions of their papers. The papers represent the personal views of the authors and reproduce the data and information provided by the authors at the time of the conference. The affiliations and position of the authors are those that were in effect when the conference took place.

We hope that these papers will provide useful insights to other countries inside and outside the region on the issues involved as they lay the foundation for establishing the convertibility of their currencies in an increasingly globalized world economy.

Manuel Guitián and Saleh M. Nsouli