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Tunisia Keeps Interest Rates Unchanged, Warns against Domestic Borrowing

The country must mobilize its financial resources to meet the current expenditure of the government.

The Central Bank of Tunisia (BCT) has decided to keep key interest rates unchanged at 8% with the aim of maintaining monetary tightening at current levels and stimulating the economy.

This is what emerges from a press release made public on Wednesday evening by the Tunisian Central Bank, following a meeting of its board of directors.

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Tunisia is experiencing an alarming increase in inflation rates, which reached 10.1%, on an annual basis, during the month of December, compared to 9.8% in November.

The country, however, needs an economic stimulus in order to find a way out of the complex crisis it faces, which has downgraded its ranking to abyssal levels.

The Central Bank said today that the recent decision by international rating agency Moody’s to downgrade the country’s sovereign rating from Caa1 to Caa2 and the negative future outlook is due to the lack of external financing.

Tunisia needs to mobilize its financial resources to enable it to meet the State’s current expenditure.

The board of directors discussed the possible repercussions of this downgrading of the sovereign rating on the financial and economic situation in general, and more specifically with regard to the potential negative impact on the normal course of foreign trade operations carried out by the banks. Tunisians.

The credit rating agency Moody’s, announced last Saturday that it had lowered the Tunisian government’s long-term ratings in foreign and local currencies from Caa2 to Caa1, and changed the outlook to negative.

According to the BCT, the Prudential Control Authority underlined, in its discussions two days ago, the risks linked to the intensification of the Treasury’s recourse to internal financing.

“In the absence of the capacity to mobilize external resources, the financing of the budget through the increased recourse to borrowing on the domestic market, during the first quarter of 2023, could lead to an exacerbation of the pressures on liquidity”, explained the BCT.

Tunisia is going through a serious economic crisis, which has been exacerbated by the repercussions of the coronavirus pandemic, and the rising costs of importing energy and basic materials, in the context of the Russian-Ukrainian conflict.

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