The Executive Board of the Central Bank of Tunisia (BCT) met on October 18, 2023 to review recent economic and financial developments, as well as the inflation outlook.
In the press release issued on Wednesday following this meeting, which took place after the participation of a large Tunisian delegation in the Marrakech meetings of the IMF and the World Bank, it is worth noting that the Board confined itself to saying that Marouane El Abassi, the Governor for Tunisia at the IMF and the World Bank,” held several meetings and interviews with senior officials of financial institutions and foreign investors”.
Deafening silence from the governor and the entire board of the BCT
An 18-word commentary that appeared to have been added in haste and which, in any case, contrasted with almost all previous announcements by the BCT Board that ended with a policy rate announcement.
Nothing was said about the content of these meetings, nor about El Abbassi’s interlocutors during these talks, which were referred to in vague terms, both for the donors and for the institutions, as if simply to avoid naming them and as if to say (follow their gaze!) that the IMF was finished.
All this at a time when Tunisia is preparing to receive the IMF under Article IV (in theory, who knows? Saïed could also say no). This mission has nothing to do with a loan, but is a kind of annual review that all IMF member countries, including Tunisia, are obliged to undergo. The last consultations under this article date back to December 8, 2020 and ended with a press release in January 2021.
But perhaps the BCT preferred to keep quiet on the subject after what happened to Samir Saïed, another governor for Tunisia at the WB and IMF, who was the only one to talk in detail about this mission to Marrakech. And we know what this statement to TAP cost the “last of the Mohicans”. Samir Saïed’s absence from the ceremony to hand over his former ministry to Sihem Nemsia is almost to be welcomed, as a last salute from a free and truly independent minister who is quietly bowing out.
No explanation for currency reserves
The rest of the statement issued at Wednesday’s meeting of the Executive Board of the Central Bank of Tunisia (BCT) was a parade of economic indicators that echoed the statements of the now super-Minister of Economy and Finance and Sihem Nemsia’s economic budget, describing an economy in forced recovery.
Everything seems to be going well, as the latest press release from a BCT that knows it will have to finance the budget directly, with the IMF loan no longer a source of financing for the 2024 budget, almost seemed to say.
With regard to the external sector, the Board noted “a significant reduction in the current account deficit, which stood at TND 3,461 million (or 2.2% of GDP) at the end of September 2023, compared with a deficit of TND 10,387 million (or 7.2% of GDP) a year earlier”.
According to the eminent economists on the BCT’s Executive Board, “this improvement reflects the continued narrowing of the trade deficit (FOB-FOB), which stood at 11.6 billion dinars at the end of September 2023, compared with 17 billion dinars at the end of September 2022. The current account also benefited from the good performance of tourism receipts and labor income. This dynamic has contributed to the consolidation of foreign exchange reserves, which stood at 26.6 billion dinars (or 119 days of imports) at October 16, 2023, compared with 22.9 billion at the end of 2022”.
However, the tourism sector is being burdened with new taxes that could affect its competitiveness under the new 2024 finance law introduced by a government that is firing on all cylinders to finance its budget. The BCT’s administrators are not very good at communicating anything other than laconic and administrative details. Nor did they feel the need to explain the fluctuating figures for foreign currency reserves, which rose from 107 days on September 5 to 120 days on October 7, then back to 119 days on the day of their press release (October 18), then to 117 days according to the figures published on the BCT’s website (October 18), while Tunisia received and then sent back €60 million.
All better with reserves
With regard to consumer prices, the BCT’s Executive Board added that inflation continued the downward trend that began in March, reaching 9% (year-on-year). In its view, this reflects the continued gradual easing of the rate of increase in underlying inflation excluding fresh food and products at administered prices (8.8% after 8.9% in August). The same BCT Board economists went on to say that “the central bank’s latest projections point to a further gradual deceleration in inflation in 2023 and beyond”. Clearly they had not yet read the draft Finance Bill for 2024, and their projections did not seem to take into account measures such as the carbon tax, which will have an impact on the cost of petrol and increase inflation, and transport, where costs to car owners will rise as a result of the Special Urban Transport Fund.
However, the results of this board meeting, as certified by the authors of the press release, contained a few reservations, with a “nevertheless” at the end of the paragraph, as if to qualify their blissful optimism. “Several inflationary risk factors remain active and could hinder the disinflation process. They could stem, in particular, from an excessive rise in international prices and from the intensification of hydraulic tensions,” the executive board members said.
In a final burst of real economicism, they went on to stress that “despite the resilience shown by the Tunisian economy in recent years, it is necessary to speed up the process of implementing reforms as the only way to resume healthy, sustainable and inclusive growth capable of preserving the overall balance of the economy”. And to achieve this, the Super-Minister of the Economy, Planning and Finance is here!
