The Assembly of People’s Representatives (ARP) adopted last February 6 a law authorizing the direct financing of the budget by the Central Bank of Tunisia (BCT) for an amount of 7,000 million dinars (the equivalent of 2,000 million euros).
This decision comes against a backdrop of urgency, notably the repayment of a €850 million loan from the international financial market on 19 February 2024.
This measure has given rise to divergent opinions as to its impact on the Tunisian economy. The Arab Institute of Business Managers (IACE) has examined the potential repercussions of this decision, offering a factual and objective analysis.
In 2020, Tunisia had already called on direct financing from the BCT to deal with the consequences of the health crisis.
However, the current situation is different, highlighting the persistent economic challenges facing the country, including low economic growth and relatively high inflation.
The use of direct BCT financing in 2024 raises concerns about its implications for inflation and foreign exchange reserves.
The IACE stresses that there will be no direct impact on inflation if this financing is used exclusively to repay external borrowing.
Nevertheless, there could be a fall in foreign exchange reserves, leading to a depreciation of the dinar and a potential increase in inflation linked to imports.
Faced with these challenges, the IACE recommends prudent management of foreign exchange reserves, as well as extra-budgetary support measures to mitigate the adverse effects on social stability.
In conclusion, the excessive financing of the budget through recourse to short-term treasury bills is exerting inflationary pressures. This is why the IACE warns that inflation will pick up again in the second half of the year if preventive measures are not taken in time.
