Ahmed El Karam, one of the few wise men in the sector and former president of APTBEF spoke to Africanmanager about this new controversy over the financing of a very large part of the state budget by the BCT.
That controversy has not yet been discussed on TV, and yet directly affects the purchasing power of the citizen by the inflationary upsurge and the strong depreciation of the local currency.
What do you think of this nascent controversy over the financing of the state budgets for fiscal years 20 and 21 by the BCT, as the current government would like?
In reality, it is not the banks that will finance, but the BCT. The banks have two approaches to refinancing, i.e. the assimilated treasury bonds issued by the State Treasury.
The banks buy them, and refinance themselves according to the liquid assets they have at their disposal.
The other way is to resell these treasury bonds directly to the BCT to refinance themselves.
In both cases, it is the BCT that finances the Treasury by ensuring liquidity. The BCT can do so, depending on its strategy and objectives.
It must do so, because there is no choice, given the needs of the State budget and the difficulty it has in resorting to the international market, which is disrupted and at very high cost for a Tunisia whose ratings is not at its best.
Does the Tunisian financial market have the monetary space for the 14 billion TD requested by the State?
We do not. And that is why we will need the support of the BCT to which we immediately resell the treasury bonds.
This will implacably mean that inflation will rise to the top, and will become monetary inflation.
That is indeed the risk. This way certainly allows the state budget to be balanced, but it has an obvious inflationary risk. And this is the trade-off.
Are we in a situation where we should ensure liquidity for the market and for the economy, and privilege this over the BCT’s other objectives, which are to fight against price increases?
What solution then?
Logic dictates that, in parallel with the injection of this liquidity, other measures are necessary to accompany production, to remove all obstacles to investment, to restore confidence between the firm and the administration, so that the injected liquidity does not go, for example, to the parallel market, but lays the groundwork for economic recovery.
It will also be necessary to raise the problems of the equalization fund, which subsidizes expenses and not revenues, which subsidizes everyone and even non-Tunisians, that of public sector companies, and that we do not find ourselves next year with the same liquidity problems.
And who will do all this?
This entire support plan should be discussed between the BCT, the donors, the Ministry of Finance and the government in general.
Discuss to ensure that the liquidity goes into productive expenditures and that the same needs do not end up on the table of requests from the Ministry of Finance next year.
Making a wild money issue means ensuring double-digit inflation. How to do it then? A new salary increase will only make the situation worse. We must save the economy, it is a fundamental priority.
The BCT must not deflate. But a process of conditionality for reforms must also be set in motion.