By CentralBankNews.info
Tunisia’s central bank held its key interest rate steady at 4.0 percent and appealed for political stability and security along with measures to control the current account deficit, public finances and thus avoid “runaway inflation.”
Although Tunisia’s headline inflation rate was stable at 5.8 percent in October and September, the Central Bank of Tunisia said this should not obscure an acceleration of core inflation which rose to 6.9 percent in October from 6.8 percent the previous month.
Tunisia’s central bank last raised its rate by 25 basis points in March to control inflation.
The central bank also said in a statement following its board meeting on Nov. 27 that a revision of economic growth estimates for 2013 to 3.0 percent from 3.6 percent now “remains somewhat optimistic since its achievement requires no less than a 3.7 percent growth over the fourth quarter of this year.”
Tunisia’s Gross Domestic Product expanded by an annual 2.4 percent in the third quarter, down from 3.2 percent in the second quarter, due to a contraction in agriculture and the mining sector while manufacturing essentially stagnated.
The central bank expressed its concern over a further increase in the unemployment rate of graduates with higher eduction in the third quarter to 33.5 percent, or 248,000, despite a slight decline in the overall unemployment rate to 15.7 percent from 15.9 percent in the second quarter.
The central bank also noted the current account deficit of 6.5 percent of GDP in the first 10 months of the year compared with 6.9 percent a year earlier despite higher exports and lower imports. This means foreign currency reserves have to be tapped.
Tunisia’s foreign reserves rose to 11.673 billion dinars as of Nov. 25 – equivalent to 107 days of imports – compared with 9.486 billion on the same date in 2012.
Last week the Qatar National Bank, part-owned by the Gulf state’s sovereign wealth fund, gave Tunisia a $500 million deposit to support its foreign currency reserves.
www.CentralBankNews.info
By Tarek Amara
TUNIS Nov 23 (Reuters) – Qatar National Bank, part owned by the Gulf state’s sovereign wealth fund, has given
Tunisia a $500 million deposit to support its foreign currency reserves, a senior official in Tunisia’s central bank said on Saturday.
The deposit was made as Tunisia’s Islamist-led government faces pressure from lenders such as the World Bank and the International Monetary Fund to make reforms to trim its budget deficit and end a political crisis.
“Qatar National Bank gives a deposit of $500 to the central bank, which supports foreign currency reserves .. it is a shot of oxygen for the economy,” the official told Reuters, asking not to be identified because he was not authorised to speak to the media on the matter.
Qatar, which supports Islamist parties who rose after the Arab Spring revolts, gave similar deposits to Egypt during the rule of former Islamist President Mohamed Mursi before he was overthrown by the army in July.
Disagreements with the new government pushed Qatar to retreat from commitments to other deposits for Egypt.
Tunisia’s deposit will shore up the economy and also help shippers of essential goods such as grain to find foreign currency to pay for imports.
The official said that the deposit will be paid back over five years with an interest rate of between 2.5 and 3 percent.
After months of crisis, Tunisia’s Islamist-led government is in talks with secular opponents to hand over power to a caretaker administration that will govern until new elections are held early next year.
Nearly three years after its revolt ousted Zine al-Abidine Ben Ali, months of political deadlock have weakened the country’s economic outlook. The African Development Bank or AFDB cancelled a loan for 500 million dinars or around $300 million because of instability, the government said last month. The government forecast 3 percent growth this year and 3 pct in 2014.
The budget deficit will be 6.8 percent of GDP for 2013. Tunisia is struggling to revive its economy because of a lack of security and political instability in a country heavily reliant on foreign tourism and remittances from Tunisians living overseas. Fitch cut last month Tunisia’s sovereign rating two notches and warned it could cut further on political uncertainty and its potential damaging economic effects. (Reporting By Tarek Amara; Editing by Patrick Markey and Ralph Boulton)
lease of the BCT Executive Board meeting held 30 October 2013
The Board started its works by reviewing recent developments in the international economic situation and considered updated forecasts of the IMF’s world economic growth for 2013 and 2014. These were reviewed downwards to 2.9% and 3.6%, respectively, mainly in line with worsening risks linked to economic activity slowdown in several emerging countries in addition to the repercussions of public expenses reduction in the United States and ongoing recession in the Euro Zone, though at a slower pace than that of the previous year.
On the national level, the Board examined economic growth recent estimates for 2013 and 2014 which should post 3.6 % and 4% in constant prices, respectively, against IMF forecasts of 3% and 3.7% for the same two years.
While considering trends in the latest conjunctural indicators, the Board noted the stagnation in the industrial production index over July and the ongoing upward trend of tourism main indicators over September 2013 for the second month in a row after the decrease recorded over July.
Besides, The Board noted the ongoing downward trend in consumer price index for the third month in a row, with an inflation rate coming back to 5.8% in annual shift over September 2013 against 6% over the previous year. On the other hand, the current balance deficit stood at a high level over the first nine months of the current year (6.1% of GDP against 6.6% a year earlier).
In the same framework, the Central Bank could maintain net assets in foreign currency at a satisfying level: 11,371 MTD corresponding to 104 days of import on 29 October 2013 against 9,688 MTD and 93 days on the same date of 2012.
In the same context, the Board noticed a certain attenuation of the bank liquidity deficit over October 2013. This helped to reduce BCT interventions on the money market, coming to 4,392 MTD till 29 October against 4,715 MTD for September on the whole. Besides, the average interest rate on this market dropped over the same period: 4.66% vs. 4.72%. The outstanding balance of deposits held in the banking system and the overall volume of financing of the economy grew at a slower pace over the first nine months of the current year compared to the same period of the previous year.
In light of these trends, the Board focused on the need for a careful follow up of both economic indicators and domestic and external financial balances, while calling for the establishment of the required reforms that are capable of curbing the risks which threaten these balances and helping the resumption of confidence in the national economy outlook, and decided to keep unchanged the Central Bank key interest rate.
Tunisia c.bank chief says ready to intervene vs inflation
Sun Sep 29, 2013 12:34pm IST
(Reuters) – Tunisia’s monetary policy is still in a tightening mode and the central bank will intervene with various tools, including interest rates, if inflation starts climbing again, Tunisian central bank governor Chadli Ayari said on Sunday.
Speaking to reporters on the sidelines of a meeting of Arab central bankers in Abu Dhabi, he also said the country’s foreign exchange reserves had rebounded to about 103 days’ worth of imports, which was a “more or less safe” level.
Tunisia has been struggling with high inflation and pressure on its foreign reserves as it negotiates a political crisis. The Islamist-led government agreed on Saturday to resign after talks with secular foes to form a caretaker administration, which will prepare for elections in an effort to safeguard the transition to democracy.
Inflation fell for the second month running to reach 6.0 percent in August, compared to March’s 6.5 percent, which was the highest rate in at least five years. The central bank raised its key interest rate by 0.25 percentage point in March, its second rate hike in seven months, to fight inflation.
According to official data, foreign currency reserves on Sept. 25 totalled 11.291 billion dinars, the equivalent of 103 days of imports, after inflows of foreign aid and an overseas bond issue. In June, reserves had dropped to 94 days.
In a statement on Thursday, an International Monetary Fund mission to Tunisia said: “Fiscal and external imbalances are continuing to worsen, and the reforms (most of which are already in progress) are facing some constraints and are proceeding more slowly than anticipated.
“The short-term risks are on the downside, and vigorous measures – including in the implementation of reforms – are essential, notwithstanding the constraints associated with political developments.”
Ayari said on Sunday: “We will see if the increase of the rate of interest is justified or not. That depends on different factors including how inflation is behaving. So far we still have a rather high rate of inflation but it is starting to stabilise…and we expect it to decrease.”
He added, “If by any bad luck we see inflation restart going up, which is also possible, we will intervene with different means including higher interest rates.”
He predicted the inflation rate would be at 5.6-5.7 percent by the end of 2013, and around 4 percent by the end of 2014.
The government said this month that it expects the economy to grow 4.0 percent next year after an expected 3.6 percent expansion this year.
Ayari predicted on Sunday that gross domestic product would expand between 3.0 and 3.6 percent in 2013.