According to data provided by the Central Bank of Tunisia (BCT) on the monetary situation at the end of January 2021, the money supply saw an acceleration of its growth at the beginning of the year.
Indeed, the M4 aggregate grew in January by 12.4% (year-on-year) from 11.7% on average in 2020.
As for the M1 aggregate (banknotes and coins in Circulation + deposits), it exploded in January by 21.9% compared to 9.5% a year earlier.
Given the evolution of economic activity, it is clear that the use of cash in daily transactions has risen and that there is more and more money under the mattress.
The strong growth in the money supply is the result of the surge in bank credit granted mainly to the state.
Indeed, for the month of January alone, credit to the state increased by 3.5 billion dinars compared to December 2020 while bank credit granted to the economy, however, decreased by nearly 1.6 billion dinars.
Over the whole of 2020, credits to the state grew by 46.7% while credits granted to the economy increased by only 8.6%.
As a result, the share captured by the state in total bank lending reached a record high of over 20% in January 2021.
In contrast, the economy’s share of bank lending is declining to less than 80%.
As a result, the unbridled growth of the money supply in circulation is increasingly disconnected from wealth production.