2024-09-29 08:56:31
In a press release published on the 25th of this month, the BCT council presented a detailed inventory of the economic situation on the national and international levels, while emphasizing “the gradual deceleration of consumer prices which continued” as well as the fall in the inflation rate. The Central Bank has also decided to keep its key rate unchanged at 8%. A decision which was not unanimous within the economic sphere.
The recent decision of the Central Bank, consisting of keeping its key rate unchanged at 8%, is not unanimous among economists. Between those who expect it and those who find it an insufficient step to boost economic growth, the debate is polarizing.
According to the BCT, this decision is well-founded since “it is necessary to continue to support the deflationary process”, especially taking into consideration “the persistent risks surrounding the trajectory of inflation”.
Indeed, in a press release published on the 25th of this month, the BCT council presented a detailed inventory of the economic situation on the national and international levels while emphasizing “the gradual deceleration of prices at the consumption which continued” as well as the drop in the inflation rate which fell from 7% the previous month to 6.7% (year-on-year).
The trend is good
In addition, the BCT forecast “a continuation of the upward trend in economic growth in the third quarter of 2024, which will be supported by the recovery of external demand and the gradual strengthening of domestic demand”. The positive development of trade with the outside world (stabilization of the trade deficit and contraction of the current deficit falling to 2,130 million dinars against 3,105 million dinars at the end of August 2023) favored the consolidation of foreign exchange reserves, estimated at 116 days of importation on September 24, 2024. “For its part, the dinar exchange rate continued to demonstrate resilience against the main currencies, thus favoring the reduction of external pressures on price formation,” he said. – we said in the same press release.
If recent inflation forecasts count on a continuation of its gradual easing, the board of directors of the BCT estimated that the future trajectory of inflation remains surrounded by multiple upward risks in the short and medium term, relating to especially the rise in international prices of commodities and energy, water stress, the weakening of production capacities, and the still difficult situation of public finances.
To prevent an increase of inflation
The Council considered that despite the resilience demonstrated by the national economy in recent years, the implementation of reforms is more than essential to raise growth potential and restore overall balances in the medium and long term. Commenting on this decision, economist and financial analyst Moez Hadidane declared on private radio that the BCT believes that inflation and its reasons remain present. “The BCT considers that any reduction in the key rate could lead to an increase in inflation, and precisely, for it to achieve its objective of 7% inflation on average over the year, it must keep the current key rate “, he said.
However, other economists do not see this decision the same way. This is the case of Ridha Chkoundali who emphasized the negative economic repercussions of this monetary policy, which could result in a drop in growth and tax revenues and thus compromising the government’s economic strategy. According to him, this decision is unjustified and results from excessive caution, while experts expected a drop in the rate, which would have stimulated economic activity. The economist estimated that the Central Bank of Tunisia seems to be seeking to curb consumption by maintaining its key rate high.
Maintaining reserves in currencies
Same story, with Aram Belhadj who, in short, made it known, in a video shared on social networks, that this decision reflects the concerns of the BCT and its “conservative posture”. According to him, a reduction of 100 points in the key rate, to bring it down to 7%, would have brought a breath of fresh air to economic players. “A reduction in the key rate would have been relevant in a fragile economic context, marked by weak growth,” he said. He added that the positive evolution of international prices is currently benefiting Tunisia and should have a positive impact on inflation which is, according to him, imported inflation. He also explained that among the undeclared reasons which motivated the BCT to take this decision include, in particular, the institution’s concerns about maintaining foreign currency reserves at a time when Tunisia should honor its commitments. a value reaching 3,000 million dinars maturing in October. He considered that this decision benefits banks which fear a drop in their profits after the amendment of article 412 of the commercial code, which obliges the latter to devote 8% of their profits to SMEs.
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