Summary:

On 2 December 2024, Members of Parliament (MPs) approved the proposition submitted by the Minister of Finance to add a chapter to the draft 2025 finance law that will allow the government to borrow funds from the Central Bank of Tunisia (BCT). 

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The addition to the finance law allows the BCT to grant loan facilities to the public treasury with a maximum amount of 7 billion dinars, granted without interest and repayable over 15 years, including a three-year grace period. 

The parliamentary vote followed a meeting between President Kais Saied with Zouheir Nouri, the BCT Governor, during which the President emphasized the importance of reviewing the legal framework governing BCT in order to better align its objectives with the country’s economic priorities. 

MPs had previously proposed a law that would remove from the BCT the exclusive power to set interest rates and monetary policy as well as the management of gold and foreign exchange reserves.  

Outlook: 

The government resorting to the BCT to finance the state budget points to the critical economic situation Tunisia faces as the loans will predominantly be used to repay prior loans. 

In passing this latest measure, Tunisian MPs are aligned with President Saied and the government’s intent to resort to internal debt instead of accepting the International Monetary Fund (IMF) deal which the President and his supporters have described as tantamount to a “foreign diktat.”  

However, economic experts continue to warn that ongoing recourse to the BCT to finance the budget will likely lead to negative effects on the economy, such as increased inflation and a decline in the value of the dinar, in addition to an increase in public debt. 

The government’s current economic strategy focuses on hydrogen and renewable energy exports, support of start-ups, communal enterprises and self-entrepreneurship. However, some economists have described the strategy as lacking in concrete, near-term results and instead risks economic stagnation at a minimum, and, potentially, a much more serious currency and solvency crisis. 

Moreover, foreign investment, while critical to paying off debt, is gathering criticism in sectors like hydrogen over potential environmental damage and the extractive nature of these industries on the Tunisian economy.  

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