The Central Bank of Tunisia revealed that the revised Finance Bill for the year 2020 recorded a deficit that far exceeds the repercussions of the health crisis of COVID-19, reaching an unprecedented level of 13.4% of GDP.
The Tunisian Central Bank warned that requests to purchase treasury bills to finance the budget deficit have a major impact on the economy, inflation and pressure on liquidity, calling for the need to control the impact of excessive recourse to internal financing on macroeconomic stability, and the direct and indirect effects on the level of inflation and the total volume of refinancing.
According to the Central Bank, the demand to purchase treasury bills increases the potential competition to finance the private sector, in addition to the possibility of external imbalance and the deterioration of the value of the dinar. Re-affirming its commitment to maintain price stability and contribute to achieving financial stability in accordance with the law relating to the regulation of the statute of the Central Bank of Tunisia.
It also revealed that bridging the deficit requires great efforts to mobilize the financial resources necessary to finance it in a very short period of time, and in a circumstance characterized by difficult access to the global financial market, especially with the deterioration of Tunisia's sovereign rating and the high cost of this market, as a results of liquidity scarcity due to the impact of the health crisis on the debt of countries and international investors’ reluctance to take risks in emerging market economies.
Source (Al-Araby Al-Jadeed Newspaper, Edited)
