Tunisia central bank raises interest rates to reduce high inflation

The Central Bank of Tunisia raised its key interest rate to 5.75 percent from 5.0 percent on Monday to deal with  inflation that has hit the highest level since 1990.

The increase of the interest rate is the first under new central bank governor Marwan El Abbasi, who pledged last month after his appointment was approved by parliament to take “extraordinary measures” to end an economic crisis and bring down inflation.

Tunisia’s annual inflation rate rose to 7.1 percent in February from 6.9 percent in January, its highest reading for nearly 28 years, official data showed.

The central bank last raised its key interest rate from 4.75 percent to 5.00 percent last May, the second of two hikes that month as it tried to halt a slide in the dinar currency, which has hit historic lows against the euro and the dollar.

It is the first since 2005 that the bank has raised the key rate by 75 basis points.

The dinar has slumped as a worsening trade deficit has eroded Tunisia’s foreign currency reserves to cover only 80 days of imports for the first time in 16 years.

Tunisia’s trade deficit widened in December to $6.25 billion, a record level.

TunisianMonitorOnline (Source:BCT)

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