TUNIS: The Tunisian cabinet has approved a controversial bill allowing the central bank to finance the treasury, in a move aimed at financing the budget deficit but which reinforced fears over the bank’s independence, local media reported on Friday.
Earlier, the country’s President Kais Saied said the law should be reviewed to permit the central bank to finance the budget directly by buying state bonds, a step bank top official Marouan Abassi has warned against.
Experts believe the bill’s approval by the country’s cabinet enhances speculation the governor, who has headed the bank for 6 years, will leave the office next month at the end of his first term.
Critics said amending the 2016 law showed a likelihood of more state intervention in monetary policies, especially in light of the increasing fiscal deficit, scarcity of financial resources, and trouble in foreign borrowing.
Tunisia Approves Controversial Bill Allowing Central Bank to Finance Treasury
Abassi also warned in 2022 that government plans to ask the country’s central bank to buy treasury bonds have risks to the economy, including additional pressure on liquidity, inflation, and a drop in the value of local currency.
He added the move would uncontrollably rise inflation which could be in the triple digits, and “a Venezuelan situation will be repeated in Tunisia.” It is expected the bill will be passed by Parliament next weeks.
Tunisia’s need for external loans is set to increase in the 2024 budget to about $5 billion, including $3.2 billion which authorities did not say where it would be sourced.
