Rida Chakandali reveals consequences of direct borrowing from Central Bank [Video]

Speaking with Tunisie Numerique on Friday, December 6, 2024, economic expert Reda Al-Shakandali remarked on the government’s decision to borrow from the Central Bank for the second successive year. Chakandali stated that the first amount received by the government was 7 billion dinars, of which 3 billion dinars had been used, while there is no clear information concerning the remaining 4 billion dinars.

He explained that the issue does not lie in borrowing from the Central Bank, but in how direct borrowing is utilised. The state budget for 2025, which amounts to 78.2 billion dinars, will allocate 46% to wages and subsidies, nearly 36 billion dinars, which are consumption expenditures. A further 5.4% will be directed to development, and 31.6% will go to debt repayment, amounting to 24.7 billion dinars.

He noted that the amount allocated for debt repayment will be mainly directed either to salaries and subsidies (consumption expenditures), or to repay debts or finance development.

He pointed out that the first approach, which involves allocating this amount to consumption expenditures, will not enable the country to generate wealth, leading to economic inflation. If the Central Bank is permitted to finance state expenses, questions will arise about whether the financial institution will adopt a cautious monetary policy to limit consumption expenditures in order to reduce cash liquidity in the economy with a 0% interest rate, while increasing the interest rate on consumer loans for Tunisian families without providing them with the same measure.

Nevertheless, if the government decides to focus on debt repayment, it will decrease the foreign currency reserves in the Central Bank, which could result in a lack of liquidity to supply the market with essential goods, medicines, and especially raw and semi-finished materials needed by enterprises. This would cause an economic recession and a growth rate lower than the estimated 3%, which is considered a very high growth rate.

The economic expert predicted that failing to accomplish the 3% growth rate would lead to a decrease in tax revenues, which would threaten the self-reliance policy that the Tunisian state prioritizes.

He underscored that the only solution to achieve good economic results is to allocate the direct loan for development expenses, which totals 5.4 billion dinars, especially since the total amount of the direct loan is 7 billion dinars.