The average liquidity needs of banks continued to rise, at a brisk pace, reaching an average of 16.1 billion dinars in August 2018, compared to 15.1 billion dinars in July and 10.9 billion at the end of 2017, the Central Bank of Tunisia (BCT) said in its report on “Economic and Monetary Developments and Medium-Term Prospects, September 2018” released Friday.
This increase reflects the restrictive effects on bank liquidity stemming, on the one hand, from the banks’ significant recourse to the purchase of foreign currency from the Central Bank, allowing the various economic operators to honor their external commitments and on the other hand, the rise in withdrawals of bank notes to cope with the expenses of the summer season and Eid El-Idha.
Central Bank interventions stabilized around 11.5 billion dinars, and took the form, mainly, of main refinancing operations (7 billion dinars) also called tenders, foreign exchange swap operations for monetary policy purposes ($ 2.8 billion) and firm purchases of treasury bills ($ 1.2 billion).
Despite the intervention of the Central Bank, available liquidity was not sufficient to meet the needs of the banks.
This situation led to an increased use of the loan facility at 24 hours, bringing the volume of these facilities, on average, from 3,597 MD last July, to 4,594 MD in August 2018, against only 1,263 MD in August 2017.
The quantitative tightening operated by the Central Bank since July 2017 has caused the loan facilities to soar, despite their cost (currently 7.75%). The impact of the increased need for banks in liquidity, combined with the rise in the rate by 100 basis points, on June 13, 2018, weighed on the momentum of the interest rate on the money market.
The weighted average rate of the main refinancing operations and the MMR were 7.07% and 7.25%, respectively, in August 2018.
