A change of minister does not always mean a change in the results of a department’s work. This is also true for trade and all its indicators, including inflation, which remains the most important measure of social impact. Kalthoum Ben Rjeb replaced Fadhila Rebhi at the Ministry of Trade on January 12, 2023. Inflation was 10.2% at the time. Since then, she seems to have done no better than her predecessor, Fadhila Rabhi. It seems that everything that comes out of the finance ministry (Ben Rjeb and Rebhi) is not good.
Ministerial changes will not reduce inflation
According to the BCT’s latest press release following its Executive Board meeting on March 22, inflation continued to rise at a steady pace, reaching 10.4% in February 2023, compared to 10.2% in the previous month and 7% in the same month last year. According to the BCT, this is “essentially due to the increase in the price of fresh food”.
Although still subject to considerable uncertainty, the inflation outlook suggests some easing from the second half of 2023, but would remain at historically high levels.
The Council is closely monitoring core inflation (inflation excluding fresh food and controlled prices), which is showing signs of rigidity. Indeed, it stood at 9.6% in February 2023, compared with 9.5% in the previous month and 6.3% a year earlier.
Specialist websites define core inflation as “inflation that would occur in the absence of exogenous disturbances unrelated to the business cycle”. It is a seasonally adjusted index that reflects the underlying development of production costs and the confrontation between supply and demand.
In other words, core inflation serves to track the core inflationary trend of the economy, excluding cyclical disturbances.
And it seems, if we understand the BCT statement correctly, that the evolution of core inflation is a harbinger that inflation will continue to trend upwards. This is to be expected, given that the Tunisian economy does not control any of the levers of price reduction, such as the cost of energy, transport and other production inputs, even at local level.
And we believe that the executive and the BCT are well aware of this, and that they can either accuse everyone of conspiracy and speculation and change ministers, as is the case with the Head of State, or use the financial instrument of the base rate against inflation, as the BCT may once again intend to do.
BCT Executive Board avoids the IMF case
Otherwise, the BCT’s Executive Board was keen to point out that, even if it foresees, without substantiating it, “economic growth for the whole of 2022 slightly higher than the initial forecasts (…), the prospects for economic activity in 2023 remain dependent on the situation of public finances, the acceleration of inflation and the persistence of water stress, among other factors”.
Contrary to all local and international analyses, this analysis of the Tunisian economy’s prospects remains cautious, as if the members of the BCT’s Executive Board wanted to avoid confrontation with the presidential analyses of Kais Saied, who says that Tunisia has the means, as if to tell the IMF to go look elsewhere if there is a sovereign Tunisia.
And so, the BCT’s Executive Board merely stressed, with all the diplomacy required, “the need to raise the external financing required to guarantee the balance of public finances, strengthen the policy mix and implement structural reforms aimed at controlling the twin deficits and revitalizing economic activity”. At no point did the BCT, the main negotiator for the USD 1.9 billion, mention the word IMF in its statement, as if it thought Tunisia could do without it!
Visibility for operators: Charity begins with the BCT
Otherwise, the BCT Board believes it has identified “a significant reduction in the current deficit, which was recorded in the first two months of 2023 at -0.4% of GDP, compared with -1% in the same period of the previous year, supported by the reduction in the trade deficit, the improvement in tourism receipts and the consolidation of workers’ remittances.” And the BCT even speaks of “a performance (that) would have been much better had it not been for the widening of the energy balance (1,693 MTD for the first two months of 2023 against 779 MTD a year earlier).”
The experts of the BCT’s Executive Board confirm the fall in foreign exchange reserves to 95 days of imports and say nothing about what could happen to these reserves and their prospects in the coming months, in a country that imports to consume as well as to produce.
The same Board that “urges all stakeholders to send strong positive signals to restore confidence and give more visibility to economic operators” forgets that charity begins at home!