(TAP) – The Executive Board of the Central Bank of Tunisia (BCT) decided, at its meeting Friday, to raise its key rate by 75 basis points to 8%.
The deposit and 24-hour lending facilities were brought up to 7% and 9% respectively, the BCT said in a statement, noting that this decision will come into effect from January 2, 2023.
It added that the board took this decision after examining recent economic and financial developments and the inflation outlook. The BCT seeks, accordingly, to contribute to curbing the upward trend in inflation, by bringing it down to sustainable levels in the medium term, in order to protect the purchasing power of citizens, preserve the stock of foreign exchange reserves and foster the conditions for a healthy and sustainable economic recovery. The BCT Board also decided to raise the minimum rate of return on savings to 7%.
It expressed, in this context, its deep concerns in relation to the risks surrounding the monetary and financial balances of Tunisia, while stressing the need to guarantee the external financing necessary for the balance of public finances and strengthen the policy mix.
In this regard, the board affirmed that the Central Bank will continue to closely monitor economic and monetary developments in order to prevent persistent inflation from taking hold.
//Economic growth rate could reach 2.2% in 2022//
The BCT noted that at the national level, after a slight contraction in the second quarter of 2022, a revival of activity was recorded in the third quarter. This recovery was driven by the good performance of the tourism, trade and export industries sectors. On the other hand, the underperformance of oil and phosphate mining activities continues to undermine economic growth despite an exceptionally favourable context marked by a strong rise in international prices of phosphate and its derivatives.
Over the whole year, economic growth rate could reach 2.2% in 2022.
In the external sector, the latest figures confirm the continued widening of the current account deficit, which stood at -7.8% of GDP at the end of November 2022, against -5.3% a year earlier, marking the worsening of the trade deficit expected to exceed a record high of 25 billion dinars for the entire current year, against 16.2 billion in 2021.
This situation has weighed heavily on the stock of foreign exchange reserves, which fell from 23.3 billion dinars or 133 days of imports at the end of 2021 to 22.8 billion or 101 days on 30 December 2022, said the BCT.
On the consumer price front, the board notes that inflation has remained on an upward trend, reaching a very high level of 9.8% year-on-year in November 2022, compared to 6.4% in November 2021.
This development, which is mainly due to the surge in international commodity and energy prices, the impact of water stress and the upward adjustment of some administered prices such as fuel, has been of widespread concern. In particular, the main measure of core inflation, “inflation excluding fresh food and administered prices”, continues to rise, reaching 9.1% in November 2022, up from 6% a year earlier, and is becoming increasingly persistent.
On the international level, the beginnings of a weakening of global economic activity have been felt in recent months in most of the advanced economies, notably as a result of the fallout from the Russian-Ukrainian conflict.
On another front, while uncertainty about future commodity and raw material prices remains high, inflation is easing relatively, although it remains at historically high levels. The risk of dealing with persistently high inflation rates in the future has prompted most central banks to continue the monetary tightening cycle by raising policy rates while indicating that further increases remain possible as long as inflation persists, the BCT said.
Source: TAP News Agency