Jump to navigation

Tunisia

Saïed demands central bank loans to plug deficit

Risking hyper-inflation and a run on the dinar, the President is pushing for a bigger state overdraft

President Kaïs Saïed is piling on the pressure for Tunisia's central bank to become the latest African bank to provide billions of dollars in direct budget finance, a move which economists warn is likely to lead to inflation and a currency collapse.

Last month, the government approved a controversial bill allowing the central bank to finance the treasury, despite the objections of bank governor Marouane Abassi, who has warned that the measure, used in Ghana and Nigeria in recent years, could push inflation into triple digits.

Abassi, who is set to leave his post in March when his first six year term expires, has warned that 'a Venezuelan scenario will be repeated in Tunisia.'

Talks with the IMF on a proposed US$1.9 billion bail-out have made little progress and the government has been shut out of lending on the international markets. Saïed's returning €60 million ($64.5m) of a €785m 'cash for migrant control' deal with the European Union to Brussels has cast doubt over the remainder of the funding (Dispatches 17/10/23, Saïed chooses isolation after returning EU cash).

After keeping Tunisia's credit rating at CCC- in December, ratings agency Fitch warned that changing the law to allow the Central Bank to directly finance the government 'would endanger the credibility of the Central Bank and increase pressure on prices and the exchange rate'

The government wants the central bank to directly buy up to 7bn Tunisian dinars ($2.25 bn) of interest-free bonds to help close a budget deficit of 10bn dinars.



Related Articles

DISPATCHES

Saïed chooses isolation after returning EU cash

The President has turned down €60m of funding from Europe and is no closer to agreement on a $1.9bn IMF programme

It is increasingly hard to see where Tunisia will source financial support in the coming months after President Kaïs Saïed rejected funding from the European Union. Last ...

READ FOR FREE

Critical votes and toxic loans

Ahead of key national elections, concern is mounting about the legacy of bad loans from the time of President Ben Ali

Dealing with bad debts from the Zine el Abidine Ben Ali era which threaten the banking system has proved so problematic that the government has been contradicting itself. On the mo...


Enlightenment

Recent threats to Egyptian and Tunisian writers reflect a growing confrontation between Islamists and other Muslims. Egyptian philosopher Sa'id Mahmoud el Gomeni has said he'll giv...


Saïed's racial crackdown deepens economic woes

Tunisia's president is locking up political opponents and inciting racist violence, as the country's economy plunges into further chaos

President Kaïs Saïed is making good on his 28 December promise to crack down on what he calls 'the enemies of Tunisia'. In the past few weeks, he has imprisoned political...


Parliament in chaos over anti-Israel law

The President's inconsistency has dashed his hopes of bolstering his popularity by backing the Palestinian cause

Tunisians of all political stripes have united in their thousands in protest at Israel's retaliatory war against Hamas in Gaza. Demonstrations have continued over much of the last ...