Economy Insights – Update
On Saturday, Tunisian President Qais Said called for a review of the Central Bank Law, following a proposal last October by numerous Tunisian parliamentarians aimed at altering the central bank’s exclusive power in setting interest rates.
The proposed legislation would remove the Central Bank’s sole authority to modify interest rates and foreign exchange policy, stipulating instead that such decisions should be made in consultation with the government. However, the bank would retain the ability to fund the treasury directly.
Since 2016, the Central Bank has maintained complete control over monetary policy, reserves, and gold assets.
President Said emphasized the need for this review during a discussion with Central Bank Governor Zuhair Al-Nouri, asserting, “We want a Tunisian central bank, not one influenced by external pressures.”
Moreover, Said noted that numerous complaints regarding rising interest rates have been received. The central bank’s primary interest rate has remained stable at 8% since the beginning of 2023, amid warnings over potential inflationary pressures.
In a notable development last year, Said proposed that the bank should extend direct loans to the state treasury to mitigate the reliance on traditional bank loans. Subsequently, in December, Parliament approved legislation allowing the Central Bank to provide $2.2 billion for direct treasury funding to support the 2025 budget and address urgent debts. This represents the second instance within a year of the government turning to the bank for financial support.
This potential overhaul of the Central Bank Law occurs during a period of significant financial strain on public finances. The government is increasingly reliant on domestic financing due to challenges in securing external funds since Said centralized many powers in 2021, a move criticized by opposition factions as a coup.
For the 2025 budget, local borrowing is projected to increase to $7 billion, up from $3.5 billion in 2024, while external loans are expected to decrease to $1.98 billion from $5.32 billion.
