Tunisia Hikes Interest Rate to 7.25%

Tunisia Hikes Interest Rate to 7.25%
Central Bank of Tunisia

Tunisia Hikes Interest Rate to 7.25%


After 75 basis points adjustment in May, the central bank of Tunisia raised its benchmark interest rate by 25 bps to 7.25% during a meeting held on October 5th 2022, citing growing risks surrounding the future trend of inflation.

Tunisia’s inflation rate accelerated for the 12th month to 9.1% in September, the highest in over 3 decades, from 8.6% in August.

Meanwhile, policymakers noted that economic activity weakened in the second quarter of 2022, mainly due to the underperformance of non-manufacturing industries.

Tunisia, which is facing a worrying financial crisis and a lack of basic commodities, is seeking a new loan from the International Monetary Fund to prevent the collapse of public finances in exchange for unpopular reforms, including spending cuts, and cutting energy and food subsidies.

The IMF has been calling for further monetary tightening by Tunisia to tackle record levels of inflation. In May, Tunisia’s central bank hikes benchmark interest rate by 75 bps to 7% during its meeting, marking the first hike since 2019.

The Board said the decision aims to counter the inflationary pressures looming over the forecast horizon, and to avoid an acceleration of inflation and an accentuation of the external imbalance.

Policymakers noted the continued acceleration in headline inflation which reached 7.5% in April 2022, the highest since October of 2008, compared with 7.2% in March and 5% in April 2021. READ:Liquidity Shortage Keeps Inter-bank Rate at 15%

The diffusion of inflationary pressures from abroad to domestic prices, along with the repercussions of the adjustments expected in administered prices within the framework of the reform of the subsidy system, are expected to keep inflation at high levels in both 2022 and 2023.

The annual inflation rate in Tunisia quickened for the 12th straight month to 9.1% in September of 2022, the highest since August of 1987, from 8.6% in the prior month.

There was a generalized increase in prices, primarily food & non-alcoholic beverages, clothing & footwear; furnishings, education and miscellaneous goods & services. On a monthly basis, consumer prices were up by 1.1%, accelerating from a 0.4% rise in the previous month.

#Tunisia Hikes Interest Rate to 7.25%#