The Board of Directors of the Central Bank of Tunisia, which met, March 30, approved at the beginning of its work the financial statements of the Central Bank closed in December 31, 2010 and audited by two auditors. It then reviewed developments in the economic and financial situation, particularly at the national level, noting signs of recovery of the economic activity but at a pace that remains below the desired level. This situation is reflected, particularly, through the increase in external trade, while industrial production dropped, mostly in manufacturing industries and tourism revenues in foreign currency and flows of foreign direct investment were also down.
Moreover, industrial investment intentions showed a net decline, especially in projects oriented to export, which shows the need to work to strengthen investor confidence. These developments, which resulted in a decrease in foreign currency assets (12,087 MTD or 136 days of imports to March 28, 2011 compared with 13,003 MTD and 147 days at the end of 2010), are likely to step up pressure on the pace of economic growth and financial balances.
In this context, the Board looked at the main challenges raised in the short-term and relating, inter alia, to risks of transmission of the negative effects and difficulties facing the global economic situation to the Tunisian economy, the rising external payments deficit, the loss of the momentum of economy induced by the non-resumption of sectors’ activity within an acceptable timeframe, increased unemployment and the decline in the rate of domestic demand.
There are also the risks of weakening of the financial sector’s capacity, due to the increase in unpaid loans granted to companies and individuals, the growing need for banks to establish provisions for them, and the economic and social pressures exerted on the State budget.
Such challenges require taking emergency practical measures to ensure economic recovery and boost employment, knowing that the situation at the national and regional levels does not allow easy policy space. On the monetary level, the Board noted the progress of the money supply M3 at a rate of 2.7% during the first two months of the current year, and further contraction of bank liquidity in March, which required the intervention of the Tunisian Central Bank to inject significant liquidity.
Thus, the average interest rate reached 4.59% against 4.65% in February, knowing that the recent reduction in the rate of mandatory reserve helped to provide additional liquidity to the banking system to about 360 MTD.
In light of these developments and given the decline in the rate of Inflation during the first two months of 3.2% against 4.9% during the same period of last year and provide favorable conditions for reviving production and investment and the resumption of the pace of economic activity, likely to allow boosting export and increasing job creation, the Board of Directors decided to reduce, again, the rate of mandatory reserve of banks by 5 percentage points and maintain unchanged the interest rate of BCT.
The Board also recommended to speed up the implementation by the banking system of measures it must put in place to support businesses while seeking to preserve the foundations of financial stability.
