By Tarek Amara
TUNIS (Reuters) -Tunisia’s central bank on Friday raised its key interest rate by 75 basis points to 8% from 7.25% to combat high inflation, the bank said, marking the third hike this year.
Tunisia’s inflation rate jumped to a record 9.8% in November from 9.2% in October.
“Through this action, the Central Bank aims to help curb the upward trend in inflation,” the bank said in a statement.
The government expects inflation to average 10.5% in 2023, up from the 8.3% expected this year.
The last interest rate hike was in October when the central bank raised it by 25 basis points.
The bank also decided to raise the minimum interest rate on savings to 7.0%.
The bank said it is deeply concerned by the risks surrounding Tunisia’s monetary and financial balances, and underlines the need to guarantee external financing.
The current deficit widened to -7.8% of GDP at the end of November 2022, against -5.3% in the same period last year.
Hard times
The trade deficit is expected to be more than 25 billion dinars ($7.99 billion) for the whole of 2022, a record level that compares with 16.2 billion in 2021.
Tunisia, which is struggling to tackle its public finances, is seeking a loan from the International Monetary Fund in exchange for unpopular reforms including spending cuts, wage freezes and reductions in energy and food subsidies.
The IMF also called for further monetary tightening to tackle inflation.
Tunisia expects to reduce its fiscal deficit to 5.2% next year from 7.7% in 2022, driven by austerity measures, and has said it will reduce subsidy expenditure by 26.4% to 8.8 billion dinars.
It is also seeking to raise tax revenue by 12.5% to 40 billion dinars with the rate for somae jobs increasing to 19% from 13%.
The powerful UGTT union, with about 1 million members, has rejected the budget law, saying it would cause a social explosion.
Tunisia is also facing its worst political crisis since the 2011 revolution that brought democracy, after President Kais Saied seized power last year, dismissed parliament and started ruling by decree, in a move opponents called a coup
($1 = 3.1275 Tunisian dinars)
(Reporting by Tarek Amara; Editing by Barbara Lewis, Kirsten Donovan)
