Excessive recourse to internal financing will have negative impact on economic balances (BCT)
27/10/2020 23:56, TUNIS/Tunisia

(TAP) - "The excessive recourse to internal financing will have negative repercussions on economic balances and on the banking sector which will participate in efforts to mobilise resources," the Central Bank of Tunisia (BCT) said in a statement after its Executive Boart meeting Tuesday.

It added that banks' subscription to Treasury bonds will exert increased pressure on their liquidity, prompting higher recourse to BCT refinancing.

The BCT Executive Board stressed «the need to control the impact of excessive recourse to domestic financing which will impact macroeconomic stability, in addition to its direct and indirect effects on inflation and the total volume of refinancing.

The Board reviewed at the meeting the draft supplementary budget law for 2020 and problems that arise in terms of additional financing needs.

The draft supplementary finance law for 2020 highlights a budget deficit that far exceeds the impact of the COVID-19 crisis, it noted.

This will intensify recourse to domestic financing that will reach 14.3 billion dinars, against 2.4 billion dinars provided for in the Finance Act 2020, said the BCT.

The Board stressed that these needs "require the mobilisation of financial resources in a very short time and in a context characterised by difficult access to the international financial market, particularly with the downgrading of Tunisia's sovereign rating and the high cost on this market due to the scarcity of liquidity".

For the BCT, the COVID-19 crisis and the indebtedness of countries are behind the scarcity of liquidity, since international investors are increasingly reluctant to take risks in emerging economies.

In this context, the BCT recalled its efforts over the last three years through the adoption of a proactive monetary policy, which has led to lower inflation and an improvement in internal and external balances.

The Executive Board also highlighted to the exceptional efforts of the BCT, during the last period, to support state's efforts in its fight against the COVID-19 pandemic.

It also stressed the "crowding out effect", besides the possibility of an external imbalance and the deterioration in the value of the dinar.

The Board reiterated its commitment to fulfill its mission as assigned by the legislator, namely maintaining price stability and contributing to financial stability in accordance with the law on the statutes of the BCT.

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