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HomeFeatured NewsThe state and the banks: In the interest of all!

The state and the banks: In the interest of all!

Recently, local and foreign reports have been peppered with extremely alarmist analyses regarding the exposure of Tunisian banks to sovereign default, i.e. the inability of the Tunisian state to repay the loans that these Tunisian banks have granted it to finance its budget.

However, there is no mention in these reports of what would happen to these banks if they stood by and watched the Tunisian state collapse due to its inability to finance its budget and meet its obligations with its own resources.

Moreover, the Central Bank of Tunisia is said to have invoked the provisions of its new statute of 2016, which prohibits it from such operations, in order to excuse itself in 2023, leaving it entirely to the other banks to decide how to respond to the State’s requests.

Some of the reports mentioned contained very dangerous insinuations or even veiled incitements, such as the report published at the end of February 2023 by Standard and Poor’s Global Ratings, which essentially stated:  “In this context, banks’ exposure to the state remains significant at 12.9% of total assets–83% of total equity on Aug. 31, 2022 (including direct lending to the public administration)–up from 5.1% at year-end 2010. Although this is lower than that seen in some peer banking systems, it represents a major source of risk given the lack of visibility on how the country will finance its twin deficit.”

It added that: “our calculations show that a Tunisian sovereign default might cost the banking system $4.1 billion-$7.6 billion, or 8.0%-14.8% of forecast nominal GDP at year-end 2023.” This could be costly for savers and depositors. The losses will wipe out a large proportion of the deposits and savings held by the banking system.

Strange advice

If some analysts are to be believed, the recent collapse of the US bank Silicon Valley Bank may have been triggered by similar insinuations, which somehow led large depositors to withdraw their savings overnight.

The strangest thing about all these local and foreign reports on Tunisia is that they tend to push the Tunisian state to meet the IMF’s demands for the promised $1.9 billion loan from this international financial institution, presented as the only way for Tunisians to avoid collapse. This is a strange piece of advice that proposes to cure evil with evil, over-indebtedness with over-indebtedness.

According to all these reports, the lack of external financing is putting Tunisia in a situation of sovereign default.

The economist and former Tunisian banker Ezzeddine Saidane, commenting on the syndicated loan of 400 million dinars in foreign currency signed on May 16, 2023 between the state and 12 local banks, said “these are extreme solutions to deal with the serious crisis of public finances, while continuing to refuse to carry out the reforms that are both indispensable and inevitable” in order to see the IMF release the promised loan.

On the other hand, when the loan was signed, Finance Minister Sihem Nemsia welcomed the positive response of the participating banks and recalled the key role of the banking sector in supporting the state’s efforts to maintain financial balance and sustain economic activity.

The saviour state

It was also necessary to insist on the role of the State, or rather of the States, in rescuing banks and business enterprises in the event of crises and catastrophic situations, such as those that occurred throughout the world in 2008 during the international financial crisis provoked by the advocates of total deregulation (total abolition of the State and unconditional liberalization of financial, economic and commercial operations), who have since been declared persona non grata everywhere, or during the coronavirus pandemic in 2020/2021.

More sensible economists, including the economist and academic Abdelkader Boudrigua, considered the amount of the reported syndicated loan to be modest enough to be of great concern, although he feared that this approach would become a habit and a systematic policy.


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