Summary:

On 5 October 2022, the Central Bank of Tunisia announced a 25 basis point increase in interest rates as a means to combat inflation that is exacerbating the country’s growing financial crisis. The benchmark lending rate rose to 7.25% and the benchmark savings rate rose to 6.25%. While the Central Bank chose not to change rates at a meeting earlier this year, the compounding challenges in the Tunisian economy – including a credit rating downgrade, rising inflation, and widespread food and fuel shortages – prompted action by the Central Bank.

Outlook:  

The Central Bank’s announcement of interest rate increases cited inflation as a primary driver of the rate increases, however, some commentators have theorized that Tunisian monetary authorities may be looking increasingly to the domestic credit market as a source of funding. With the prior downgrade of Tunisia’s sovereign credit rating by Fitch Ratings to ‘CCC’ and increasing investor skepticism about the country’s political future, the Central Bank may be looking inward for the credit needed to drive the import-dependent economy.