Reform of the Foreign Exchange Code and its Impact on FDI and SMEs in Tunisia: Promoting a More Open and Transparent Investment Environment

“In the long term, the reform of the exchange code could contribute to a structural change in the Tunisian economy. With greater freedom of movement of capital, Tunisia could become an attractive regional hub for investments, thus promoting economic development and job creation.” This is revealed by Mohamed Adem Mokrani, a business law attorney and economic consultant.

The reform of the exchange code in Tunisia, a highly anticipated project, is likely to have considerable and lasting effects on capital flows and foreign investments in the country. In the short term, the announcement of such a reform could immediately boost investor confidence, resulting in an increase in foreign investments.

In this context, Mohamed Adem Mokrani, a business law attorney and economic consultant, revealed that investors would be encouraged by the prospect of a more liberal and transparent regulatory environment, essential to reducing risks and improving return on investment. Simplifying rules related to foreign currency transactions would facilitate foreign direct investments, especially in key sectors such as real estate, tourism, energy, and technology.

Develop, Innovate, and Export More

In the long term, this reform could contribute to a structural change in the Tunisian economy. With greater freedom of movement of capital, Tunisia could become an attractive regional hub for investments, thus promoting economic development and job creation. Tunisian companies, including SMEs, would benefit from this influx of foreign capital, allowing them to grow, innovate, and export more. This dynamic would in turn encourage greater diversification of the Tunisian economy, reducing its dependence on certain traditional sectors and increasing its resilience to external economic shocks. Mokrani emphasized that the gradual liberalization of financial exchanges could also attract institutional investors, such as investment funds and sovereign wealth funds, seeking opportunities in emerging markets like Tunisia. This trend would be supported by increased stability and predictability of the Tunisian regulatory framework, key factors in long-term investment decisions. The adoption of modern financial technologies, such as crypto assets, also positions Tunisia as a forward-thinking market in the MENA region, attracting investors interested in digital and innovative economies. “However, it is important to note that these positive changes are not without risks. Exchange rate volatility and inflationary pressures could arise if the reforms are not properly managed and accompanied by adequate macroeconomic support measures. Therefore, Tunisia should adopt a balanced and progressive approach in implementing exchange code reforms, ensuring regular monitoring and control of capital movements to minimize financial risks. Thus, the reform of the exchange code promises substantial changes for the Tunisian economy, with a positive impact on capital flows and foreign investments. If well managed, this reform could be a major catalyst for economic growth and Tunisia’s international competitiveness,” the economic consultant stated.

SMEs and the Exchange Code

Mokrani explained that the proposed revision of the exchange code in Tunisia could have a significant impact on local businesses, especially small and medium-sized enterprises (SMEs). These changes are likely to alter how companies interact with the international market and manage their finances. “First, easing restrictions on foreign currency transactions would offer Tunisian SMEs new opportunities for import and export. Currently, many companies face difficulties when trying to conduct foreign currency transactions due to strict regulations and complex administrative procedures. Simplifying these processes would facilitate international trade, allowing SMEs to more easily access new markets and source essential goods and services. Additionally, the legalization and integration of crypto assets into the Tunisian financial system offer SMEs an alternative to traditional payment methods. This would be particularly beneficial for companies involved in digital commerce or those seeking more efficient and cost-effective ways to transfer funds,” he developed.

He also indicated that the possibility for companies to become authorized exchange operators could open new avenues for SMEs, allowing them to manage their currency needs more directly and potentially at a lower cost. This could also encourage entrepreneurship in the financial services sector.

“The reform of the exchange code would also enable SMEs to benefit from improved access to foreign financing. With less strict restrictions on foreign loans, SMEs could find it easier to access capital at more favorable rates, which is crucial for their growth and expansion. However, these opportunities come with challenges. For example, increased liberalization of currency exchanges could lead to greater exchange rate volatility, which could affect the costs of imports and exports for SMEs. Companies will therefore need to be better informed and perhaps seek advice on managing exchange rate risks. Even as legislation becomes more flexible, companies will need to remain vigilant in terms of regulatory compliance. Navigating in an evolving regulatory environment will require updating knowledge and skills, as well as adapting to new financial technologies. In summary, the reform of the exchange code could be a boon for Tunisian SMEs by offering them new growth and expansion opportunities. However, to fully benefit from this, these companies will need to adapt to the new market realities and develop new skills in financial management and regulatory compliance,” added Adam Mokrani.

Expectations of Foreign Investors

He revealed that the reform of the exchange code in Tunisia is raising significant expectations among foreign investors, largely due to current restrictions that hinder trade and international investments. These expectations can significantly influence their decision to invest in the country. “Foreign investors are primarily looking for regulations that promote a more free and transparent investment environment. With the reform of the exchange code, they hope for simplified procedures for capital transfers and better integration of modern financial instruments, including crypto assets. This modernization could facilitate direct investments in Tunisia, thereby reducing the costs and administrative delays often associated with international financial transactions,” the specialist assured.

According to his analysis, another key expectation is increased flexibility in repatriating investment profits. Currently, strict restrictions on capital movements can deter foreign investors who fear not being able to freely repatriate their profits or recover their initial capital. Liberalization in this area would therefore enhance Tunisia’s attractiveness as an investment destination. “Foreign investors are also concerned about the stability and predictability of the exchange rate regime. A reform that addresses these aspects could improve confidence in the Tunisian economy, thus reducing perceived risk and encouraging long-term investments. A stable and predictable exchange policy is essential for planning investments and managing associated risks, especially in sectors sensitive to exchange rate fluctuations such as import-export.”

He also pointed out that the digitalization of financial transactions with foreign entities and the integration of electronic payment platforms such as PayPal are highly anticipated elements. These tools facilitate international trade transactions and offer greater flexibility to companies operating in multiple countries.

Finally, Mokrani stated that “the reform is also seen as a means to strengthen Tunisia’s competitiveness on the international stage. By adopting a more modern regulatory framework in line with international standards, Tunisia can attract a wider range of foreign investments, including in high-value-added sectors such as technology and financial services. Foreign investors are attentive to how the Tunisian authorities will manage potential risks related to the reform of the exchange code, such as exchange rate volatility and inflationary pressures. Careful and strategic management of these risks will be crucial to maintaining investor confidence. Ultimately, if the reform of the exchange code is successfully implemented, meeting foreign investors’ expectations in terms of flexibility, transparency, and modernization, it could greatly influence their decision to invest in Tunisia, thus boosting the economy and strengthening the country’s status as an attractive investment destination.”