Tunisia Bank Chief Says Unlikely to Hike Rates Again in 2019

TUNIS (Capital Markets in Africa) – Tunisia’s central bank is unlikely to raise interest rates again in the first half of the year, its governor said Wednesday, arguing that the latest increase was already paying off.

The regulator raised the benchmark rate by 100 basis points in February, the first increase since June, as annual inflation rose to 7.4 percent, near the 25-year high of 7.7 percent recorded in mid-2018.

“We hope we don’t have to do it again” in the last six months either, Marouane El Abassi said when asked about future rate increases on the sidelines of an IMF conference in Morocco. The gap between the real interest rate and the benchmark has moved from negative to positive territory in recent weeks, which “shows that our monetary policy is on the right track,” he said.

The North African nation that gave rise to the Arab Spring uprisings in 2011 has made marked gains in entrenching democracy. But economic revival has been hard to achieve amid political infighting, militant attacks on the tourism sector, a dearth of foreign investment and frequent strikes by unions.

Authorities have struggled to create jobs and cut spending, both of which are key goals under an International Monetary Fund-backed program.

The Washington-based lender had provided Tunisia with a $2.9 billion loan in 2016, but the latest installment and review was delayed amid a tug-of-war between the country’s largest union and the government over public sector wages.

El Abassi declined to comment on the IMF visit. In February, he said that foreign reserves had fallen to a level that made it difficult to defend the currency — upping the need for a cash infusion.

With the cost of financing currently high, authorities are working to offer investors preferential rates “so as not to damage investment and job creation,” he said without providing further details.

Source: Bloomberg Business News