The Central Bank of Tunisia (BCT) has delayed the release of its annual report on banking activity but has made available its bi-monthly report on the economic situation.
This report highlights significant developments in Tunisia’s monetary landscape.
The average liquidity requirement of banks decreased by 702 million dinars (MD) in Q2 2024 compared to Q1 2024, settling at 14,523 MD.
Banks sell, BCT buys ….
The BCT explains this, in its own jargon, by saying that the reason was ‘the easing of the restrictive effect of autonomous factors on bank liquidity by 708 MD, against a slight increase of 6 MD in required reserves’.
According to the BCT’s explanations, this was “in fact due to two underlying factors. The first was the net sale of foreign currency against dinars by banks to the Central Bank, which provided the banking sector with liquidity of about 1,733 MD.
The volume of foreign currency-dinar transactions on the spot market surged to 12,201 MD in the first half of 2024, up from 6,860 MD during the same period last year.
The BCT played a key role in absorbing excess foreign currency liquidity, with transactions between banks and the BCT increasing sharply from 1,373 MD in June 2023 to 6,221 MD by June 2024.
During this period, the BCT intervened to absorb the excess foreign currency liquidity in the foreign exchange market. The interbank transactions increased by 9%, from 5,487 MD at the end of June 2023 to 5,980 MD at the end of June 2024,” reads the BCT’s business report for the first 6 months of 2024.
… and the customer puts money back into the system
A noteworthy development was the return of approximately 1,520 MD in cash (banknotes and coins) to bank counters during Q2 2024, 56% of which occurred in May alone. This marks a shift in behavior, with Tunisians moving away from high cash circulation and returning their money to the banking system.
In the first half of 2024, outstanding banknotes and coins in circulation rose sharply in January (+394 MD), March (+156 MD) and June (+732 MD) due to exceptional household spending during religious holidays and the summer season.
However, a return of cash to banks characterized the trend in banknotes and coins in circulation in May 2024 (-79 MD), although they remain on a high path,” confirm BCT analysts.
Treasury pumped 2,605 MD into banks’ coffers
The Treasury’s domestic dinar debt significantly impacted liquidity outflows, with banks subscribing to Treasury bills worth 2,721 MD and collecting the second tranche of the 2024 National Bond Loan for 1,450 MD.
The liquidity drained by the Treasury was partially offset by the repayment of domestic debt maturities, totaling 1,566 MD during the quarter.
BCT buys slightly fewer T-bills
The BCT’s average interventions in the money market decreased by 812 MD from Q1 to Q2 2024, with a decline across various instruments, including main refinancing operations, outright purchases of Treasury bills, and longer-term refinancing operations.
This trend was almost across the board and affected practically all the instruments available to the central bank, i.e. main refinancing operations (-523 MD), outright purchases of Treasury bills (T-bills -257) and longer-term refinancing operations with a maturity of one month (-32 MD). The average outstanding amounts of these instruments were 5,274 MD (PBO), 8,313 MD (FO) and 602 MD (one-month LTRO).
