In a statement to Tunisie Numérique on Thursday, economist Mourad Hattab remarked on the proposed law concerning changes to the Tunisian Central Bank’s system. El Hattab explained that it is not feasible to discuss a methodology that teaches “independence” or “non-independence,” as the global approach acknowledges that there is a monetary policy governed by rules and standards. The Central Bank’s mission is to preserve the value of the currency, target inflation, and manage a controllable key interest rate.
Hattab explained that the monetary approach, which has been in place since the 1970s, gives the Central Bank the ability to act independently in the financial market without the necessity to coordinate with frameworks set by any particular government, particularly regarding interest rates and domestic borrowing needs. This issue arose in Tunisia after 2016 and contributed to a rise in the key interest rate. Further, public debt became more expensive for the Tunisian state in terms of domestic borrowing, while manoeuvring room concerning the dinar’s exchange rate became limited.
He further explained that the current initiative, which permits the possibility of direct budget financing by the Central Bank, is not intended to turn the establishment into an “Ali Baba’s treasure chest.” Borrowing would be limited to 3% of the Gross Domestic Product (GDP). It is also natural to fix the key interest rate, as this rate influences financial and economic affairs and is not exclusively the domain of any one party, according to Hattab.
Moreover, the economist underscored that while there are global examples where the Central Bank leads monetary policy, these models have been demonstrated to be limited. Thus, one cannot apply North American or Southeast Asian models to Tunisia.
Hattab highlighted that the effects of eliminating the Central Bank’s independence will be positive and could benefit taxpayers, especially concerning domestic debt, since high interest rates will no longer be imposed. Besides, the dinar’s value could improve because the high-interest loans that previously drained public finances could now be obtained directly from the Central Bank.
According to Hattab, the results will soon be visible, and a reduction in the key interest rate by one percentage point may be registered as early as next month, with gradual reductions following. This trend aligns with the new approach the Tunisian government is adopting, seeking harmony between monetary and fiscal policy.
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