Tunisia Holds Its Key Interest Rate With IMF Deal in Focus

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Tunisia's central bank held its key interest rate, voicing concern over a possible further uptick in inflation and urging authorities to reach a consensus on economic reforms that'll be crucial to securing IMF help.

The decision to keep the rate at 6.25%, where it's been for more than a year, comes as officials target reaching a pact with the International Monetary Fund in April. That deal would help restore confidence in an economy whose woes were amplified after President Kais Saied in July dismissed parliament in a move critics dubbed a coup.

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While Saied's power grab added to the political angst in the North African nation, global pressures have helped spur inflation, propelling it to its highest level in more than two years in December. The central bank said it expected inflationary pressures to continue “longer than expected,” and warned that Tunisia's path toward recovery from a record economic contraction of 8.8% in 2020 will be long.

Gross domestic product last year grew 2.9% and recovery prospects in 2022 are “timid,” it said.

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The regulator, which has been warning for months about the economic crisis, voiced “deep concern” about the delay in securing foreign financing needed for this year's budget.

The central bank also said:

Current-account deficit was 6.3% in 2021 versus 6.1% in 2020
Workers remittances “peaked” at 8.6 billion dinars ($2.98 billion) and mitigated the impact of a higher trade deficit
Foreign currency holdings showed “some resilience” and stood at 23.3 billion dinars by end-2021 or 133 days of import cover