Tunisia's central bank keeps key interest rate unchanged

BREAKING NEWSOctober 19, 2023 at 12:28 PM UTC

Tunisia's central bank has decided to maintain its key interest rate at 8%, as announced. The bank also provided a positive update on the country's economic indicators. The current account deficit has notably decreased to 3.461 billion dinars ($1.09 billion), equivalent to 2.2% of GDP, by the end of September 2023.

This marks a significant improvement compared to a year ago when the deficit was 10.387 billion dinars or 7.2% of GDP. The trade deficit has also shown improvement, reducing to 11.6 billion dinars by the end of September 2023, in contrast to 17 billion dinars in the same period the previous year.

Furthermore, an increase in tourism revenues and labor incomes has contributed to foreign exchange reserves, which reached 26.6 billion dinars, equivalent to 119 days of imports as of October 16.

Key Takeaways

Tunisia's annual inflation rate rose to 9.3% in August from 9.1% in July. While September data is yet to be released, the figure is expected to be 9.10 percent by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Tunisia's economy faced significant challenges due to various factors, including the Ukraine war, a COVID-induced economic slowdown, high debt levels, and financial deterioration. To address its financial crisis, Tunisia sought $4 billion in assistance from the International Monetary Fund (IMF). In October, the country reached a staff-level agreement with the IMF for a new 48-month Extended Fund Facility, which was set at approximately $1.9 billion. However, the IMF board did not approve this facility, initially scheduled for December 2022, due to unmet prior government actions. The fund specifically highlighted Tunisian President Kais Saied's opposition to an agreed-upon reform of fuel subsidies as a contributing factor to the facility's failure.

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