Tunisia Raises Interest Rate as Inflation Accelerates
Tunisia Raises Interest Rate as Inflation Accelerates
(Bloomberg) -- Tunisia’s central bank raised its benchmark interest rate for the first time in almost a year as surging consumer prices and dwindling foreign reserves heap pressure on the North African nation’s struggling economy.
Policy makers raised the rate by 75 basis points to 5.75 percent. The increase was the first under Governor Marouane El Abassi, who was appointed last month amid protests over an economy that has failed to recover since the Arab Spring in 2011. His predecessor had resigned before a parliamentary vote to remove him from the post he had held for about six years.
The central bank said it raised borrowing costs “to face up to the real risks of ongoing inflation in 2018.” Consumer prices rose 7.1 percent from a year earlier as the currency weakens.
Other indicators, including the potential increase of international commodity prices raise the prospect of more “inflationary pressures over the coming period,” it said. The bank last raised interest rates in May 2017.
Tunisia was hailed as a model for the transition from dictatorship to democracy following the uprising that topped President Zine El Abidine Ben Ali. Political unrest, terrorist attacks and a dearth of foreign investment, however, have stymied successive governments already grappling with high unemployment and the fallout from austerity measures.
Foreign currency reserves have been steadily declining, and at 11.25 billion dinars ($4.67 billion), now provide only 78 days of import cover, according to data posted on the bank’s website on Tuesday.
To contact the reporters on this story: Jihen Laghmari in Tunis at jlaghmari@bloomberg.net, Tarek El-Tablawy in Cairo at teltablawy@bloomberg.net.
To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Amy Teibel, Kevin Costelloe
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