The Central Bank of Tunisia (BCT) has decided to increase its key interest rate by 50 basis points to 4.75% and to raise the minimum rate of return on savings by 50 points to 4%.
According to a statement issued by the BCT on Wednesday, the decision aims to reduce the risk of inflationary pressures on the one hand and to encourage savings, which will help to strengthen liquidity.
The Central Bank said it was monitoring developments in the economic situation to take appropriate measures in time.
The BCT’s Executive Board, on Tuesday, said that monetary and foreign exchange policy is not aimed at devaluation or floating of the dinar, nor the exchange rate decline.
It rather seeks to make well-considered and co-ordinated interventions to cope with sudden changes in exchange rates, while at the same time ensuring the regulatory role of the exchange rate in controlling the slippage of the trade deficit and preserving a minimum threshold of foreign exchange reserves.
The Executive Board of the Central Bank of Tunisia has examined recent developments in the foreign exchange market which, over the last week, have seen a rise in pressures in response to increased demand for foreign currencies, resulting in a significant depreciation of the dinar against the dollar and the euro.
In analysing the above-mentioned developments, the Board asserted that the objective data and the available economic and financial indicators do not in any way justify the fluctuations in the foreign exchange market and the strong depreciation of the dinar against the main foreign currencies, especially since the recent discussions between the Tunisian authorities and the IMF mission in the context of the review of the Extended Fund Facility programme, were generally positive and encouraging.
With respect to price developments, the Board noted that inflationary pressures are on an upward trend as compared with the previous months, while the available leading indicators indicate the risks of continuing these pressures in the short term.
In examining the situation of bank liquidity, the Board noted that banks’ needs remained at high levels in view of the low level of national savings. It therefore discussed ways to strengthen savings in order to reduce the pressure on the liquidity of the economy.
In the light of the foregoing and taking into account the recent pressures on the foreign exchange market, following exaggerated speculative positions or unfounded fears, leading to a situation of liquidity shortage, the Board advises that the Central Bank continues to adopt the necessary flexibility in its conduct of monetary and foreign exchange policy in order to ensure market liquidity.
At the same time, it insists on the effectiveness of these policies in order to control the current account deficit, and calls for rationalising the use of foreign exchange resources and refraining from any unjustified practices prejudicial to the proper functioning of the exchange market and threatening its stability, which could affect macro-economic balances in a comprehensive manner.
The Board also wishes to reassure both operators and the public as to the continued functioning of the foreign exchange market and the continuous monitoring by the Central Bank to ensure the smooth running of transactions, while ensuring that foreign exchange reserves are maintained at a comfortable level.
TAP
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