Tunis, Tunisia–Tunisia’s parliament passed an amendment on Tuesday allowing the central bank to finance the public budget with an interest-free loan that experts say will have negative consequences on currency value and inflation.
The Assembly of People’s Representatives approved by a large majority of 92 votes out of 133 an amendment to an article that prohibited the central bank from financing the public treasury.
The new measure allows the central bank to lend the state 7 billion Tunisian dinars ($2.2 billion) to be repaid without interest in 10 years after a three-year grace period.
The loan is intended to partially fill the budget deficit of 28.7 billion dinars planned for 2024, including 16 billion covered by external borrowing from which around 10 billion are still missing.
During the debate preceding the vote, Finance Minister Sihem Boughdiri Nemsia said the funds were “not intended to finance current expenses”.
She said three billion dinars will help repay old foreign debt by the end of February, but “a part will be used to finance public investments”.
Opposition representatives called it an “easy solution” and said it was unreliable, while others said it was much needed as Tunisia’s debt hovers around 80 percent of its GDP.
In October 2022, the IMF agreed in principle to a loan of around 2 billion dollars, but President Kais Saied rejected it later on the grounds that the reforms it required in return were not sustainable for Tunisians.
Central bank governor Marouane Abassi, whose mandate expires in mid-February, warned his institution’s loan would lead to “a decline in foreign currency reserves” with potentially negative effects on the Tunisian dinar.
Economist Ridha Chkoundali advised not to exceed 2.8 billion dinars of the loan to have “less severe repercussions in terms of the value of the dinar”.
Aram Belhadj, another economist, said he was worried that authorities “are asking for an exception of 7 billion but there is no guarantee that in 2025, there will not be another exception, then a third, a fourth and a fifth”.
It also brings about a major risk of high inflation, which is already running at around 8 percent, because “you will have a quantity of currency in circulation which has no counterpart in terms of goods and services”, he added.
“This will delay the necessary reforms,” said Belhadj, calling for reducing state spending, restructuring loss-making public companies and improving the business climate to revive an economy whose 2023 growth was estimated at a meagre 1.2 percent.