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Tunisia: CenBank Governor confirms signs for improvement of economy

Governor of the Central Bank of Tunisia (BCT) Mustapha Kamel Nabli said the signs for improvement of the national economy noted in January 2012 are “tangible” and result from objective data, particularly the rise in exports of manufacturing industries, imports of equipment goods and raw materials and semi-products as well as the growth of tourism earnings.

In response to criticisms and questions raised about the optimistic statement on the economic situation in the country released last February 15 by the BCT, the Governor said, in an interview with TAP, that this improvement was noted not only compared to January 2011 but also to January 2010.

Thus, exports of manufacturing industries posted a noticeable increase of 16% during the first 40 days of 2012 (From January 1 to February 10, 2012) compared to the same period of 2011 and were up 19.8% compared to that of 2010.

With regard to investment indicators, imports of equipment goods posted a growth of 19% compared to 2011 and 5.4% compared to 2010 while imports of raw materials and semi-products (indicators of production) grew by 15.3% (2011) and 13.8% (2010).

Tourism earnings also rose by 10.7% compared to January 2011, also said Mr. Nabli who considered all these indicators as a sign for economic revival.

However, he considered it “premature to determine a growth rate or indicate that the country has recovered a positive growth rate.”

The BCT Governor cautioned against the widening of the current deficit which rose to 634 million Tunisian dinars (MTD), i.e. 0.9% of the GDP, considering this rate significant.

This increase is the result of a significant rise in the cost of energy imports in view of their soaring prices on the global market (oil barrel at over 100 dollars).

He warned that the worsening of the deficit led to the fall in foreign currency assets that reached 10,200 MTD to February 21, 2012 (the equivalent of 108 days of import), calling for the need to mobilize foreign currency resources in donations or loans to address this situation.

He also spoke of the dangers of inflationary pressures on the country’ financial stability, indicating that these pressures continue, which requires vigilance and consolidating recovery.”

Moreover, prices increased by 0.7% in January 2012, resulting at 50% from the rise in prices of food products, particularly fresh products.

This increase resulted from specific reasons, including lack of control of distribution channels, poor economic control rather than from inflation, hence the need for a swift intervention to control it.

Expansionist monetary policy reached its objectives:

The governor said “the expansionist monetary policy,” adopted by the BCT in 2011, achieved its objectives.

In doing so, the country could be spared “an economic collapse,” and adopting an expansionist policy, consisting in cutting interest rates –twice– and the level of banks’ reserve requirements.

This policy left wide margins of maneuver, thanks to relatively high interest rates and a relatively limited inflation rate.

This policy helped, according to Mr. Nabli, boost the economic activity and increase access of businesses to necessary funding to overcome the hardships.

However, the inflation pressure has been one of the predictable results of this policy, which requires sustained monitoring, he said

In another connection, BCT chief pointed out that the expansionist budget policy adopted by the State in 2011 and which revolves around wage rises to increase demand and boost the economic growth, contributed to soaring prices.

“Margins are today limited, which requires from the BCT, one of the priorities of which is to preserve stability of prices, constant monitoring of the situation to take appropriate steps,” he further specified.

“BCT independence, guarantor of sound monetary policy”:

The Governor of BCT underlined that the independence of the institution “remains the only guarantor of the adoption of sound monetary policy, in conformity with the precise objectives of keeping inflation under control.”

“Any use of monetary policy for the achievement of the short-term objectives (electoral ambitions, mobilization of public opinion, etc.), lead to financial instability in the country”, he cautioned.

“In all democracies, the Central Bank remains accountable to the national community,” also said Mr. Nabli, concluding that “preservation of BCT’s independence is also crucial for the control of country’s banking institutions, given the guarantee of the banking sector’s stability, main source of funding the economy.”


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