Kais Saied, the 7th President of Tunisia, has urged the central bank to finance the budget directly by buying state bonds, citing that the central bank is a public institution.
On Friday, the President of Tunisia said that the 2016 law should be reviewed to help the central bank finance the budget directly. Previously, Tunisia’s Central Bank governor Marouane El Abassi warned against the move.
Kais Saied visited the Central Bank of Tunisia on Friday. He reiterated the need to distinguish the bank’s role in eradicating inflation and its role in financing the budget.
Marouane El Abassi warns
In 2020, Marouane El Abassi reportedly warned against the Tunisian government plans. Marouane El Abassi said that the government asking the central bank to buy treasury bonds can be risky to the economy of the country, can cause high inflation, and a decrease in the value of Tunisia’s currency.
However, the Tunisian President said that “the budget financing law, under which the bank cannot grant loan facilities or acquire bonds issued by the state, should be reviewed.”
In 2016, the Central Bank of Tunisia reportedly enacted its new law. Under the law, the Central Bank of Tunisia said it cannot buy state bonds.
According to critics and experts, amending the 2016 law can threaten the bank’s independence. Critics also said that the state might intervene in monetary policies amid the growing fiscal deficit, scarcity of financial resources, and problem in foreign borrowing.
Tunisia’s economic crisis
Tunisia has been facing an economic crisis since 2011. The inflation-ravaged and heavily indebted country has been facing multiple issues, including political problems.
Kais Saied also rejected the terms of a $1.9 billion loan agreement negotiated between Tunisia and the International Monetary Fund (IMF) in 2022. The Tunisian president reportedly said that he would not accept “diktats,” rejecting the idea of subsidy cuts and speaking against the sale of state-owned companies. He said that subsidy cuts can lead to massive protests in the country.
Antony John Blinken, the 71st United States secretary of state, has been urging Tunisia to present a revised plan in order to receive the loan.