Tunisia’s central bank raised its key interest rate by 75 basis points to 8 per cent from 7.25 per cent to combat high inflation, the bank said, marking the third hike this year.
Tunisia’s inflation rate jumped to a record 9.8 per cent in November from 9.2 per cent in October.
“Through this action, the Central Bank aims to help curb the upward trend in inflation,” the bank said in a statement.
The government expects inflation to average 10.5 per cent in 2023, up from the 8.3 per cent expected this year.
The last interest rate hike was in October when the central bank raised it by 25 basis points.
The bank also decided to raise the minimum interest rate on savings to 7.0 per cent.
The bank said it is deeply concerned by the risks surrounding Tunisia’s monetary and financial balances, and underlines the need to guarantee external financing.
The current deficit widened to -7.8 per cent of GDP at the end of November 2022, against -5.3 per cent in the same period last year.
The trade deficit is expected to be more than 25 billion dinars ($7.99 billion) for the whole of 2022, a record level that compares with 16.2 billion in 2021.
Tunisia, which is struggling to tackle its public finances, is seeking a loan from the International Monetary Fund in exchange for unpopular reforms including spending cuts, wage freezes and reductions in energy and food subsidies.
The IMF also called for further monetary tightening to tackle inflation.
Tunisia expects to reduce its fiscal deficit to 5.2 per cent next year from 7.7 per cent in 2022, driven by austerity measures, and has said it will reduce subsidy expenditure by 26.4 per cent to 8.8 billion dinars.
It is also seeking to raise tax revenue by 12.5 per cent to 40 billion dinars with the rate for somae jobs increasing to 19 per cent from 13 per cent.
The powerful UGTT union, with about 1 million members, has rejected the budget law, saying it would cause a social explosion.
Tunisia is also facing its worst political crisis since the 2011 revolution that brought democracy, after President Kais Saied seized power last year, dismissed parliament and started ruling by decree, in a move opponents called a coup.
Tunisia expects inflation to average 10.5 per cent in 2023, up from 8.3 per cent expected for 2022, as inflationary pressures continue to increase, economy minister Samir Saeed said on Monday.
The Tunisian government has no alternative to an agreement with the IMF, Saeed added, referring a $1.9 billion rescue package to help the country with its borrowing needs next year.
The North Africa country is seeing its worst financial crisis amid difficulties accessing foreign loans due to the delay in reaching a final agreement with the International Monetary Fund over a loan.
Inflation will continue to soar in Tunisia reaching 10.5 per cent in 2023 against 8.3 per cent expected in 2022 deepening further the economic and political crisis rocking this country.
The announcement of the inflation projection was made by Tunisian economy minister Samir Saeed at a press conference. “2023 will be a difficult year”, said the minister, noting that the Tunisian government has no alternative to an agreement with the International Monetary Fund, referring to a $1.9 billion rescue package to help the country with its borrowing needs next year.
Tunisia relies heavily on food and energy imports, and its economy has also been hit by unrest amid the worst political tensions in a decade.
Following the lowest ever electoral turnout (8.8 per cent) recorded in the Tunisian parliamentary elections held Dec.17, the opposition called on President Kais Saied to resign, saying he had lost his legitimacy as voters overwhelmingly boycotted the elections.
The country has plunged into political uncertainty after President Kais Saied suspended parliament and introduced a new constitution, reducing the prominence of political parties. These moves have been described as a coup against democracy, prompting regional and international concerns over the country’s stability.
Commenting the lower voter turnout, the US State Department said the fall in votes “reinforces the need to further expand political participation over the coming months”.
“We reiterate the importance of adopting inclusive and transparent reforms, including empowering an elected legislature, establishing the Constitutional Court, and protecting human rights and fundamental freedoms for all Tunisians”, stressed the US government.
“We will continue to support the Tunisian people’s aspirations for a democratic and accountable government that protects free expression and dissent and that supports civil society. We also urge the Tunisian government to take the necessary steps to address the current economic crisis and achieve long-term stability and prosperity for all Tunisians”, underlined the U.S State Department.