Tunisia’s central bank raised its key interest rate to 7.75 % from 6.75 % to combat high inflation, the bank said, the third such hike in the past 12 months.
Tunisia’s central bank last raised the interest rate, by 100 basis points to 6.75 percent, in May.
“The continuation of inflationary pressures represents a risk to the economy… requiring appropriate measures to reduce its negative effects… the bank decided to raise by 100 points the basic interest rate”, the central bank said in a statement.
Tunisia central bank chief said on Wednesday he expected inflation to fall to 6.8 or 6.9 percent in 2019 from 7.5 percent in 2018, following the bank’s decision to raise the benchmark interest rate.
“After our decision to raise the interest rate we expect the annual inflation to fall to less than 7 percent, precisely to 6.8 or 6.9 percent,” the governor of the bank, Marouane Abbassi, told reporters.
Tunisia’s annual inflation rate in January stood at 7.1 percent after 7.5 percent in December. It had reached 7.8 percent last June, the highest since 1990.
The dinar has slumped as a worsening trade deficit has eroded Tunisia’s foreign currency reserves, which now cover only about 85 days’ worth of imports.
The country has been praised as the only democratic success among the nations where “Arab Spring” revolts took place in 2011. But successive governments have failed to trim trade and budget deficits and create economic growth.
The rate rises have not been popular in Tunisia, where the UTICA business union said last year they hit the competitiveness of companies and impeded the investment needed to create jobs.
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