Summary:

On 17 October 2024, 27 Ministers of Parliament (MPs) proposed a new law that would change the status and the role of the Tunisian Central Bank (BCT), drawing concerns that the law could erode the institution’s independence. 

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The proposed law 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. 

The proposed law stipulates that BCT decisions concerning the revision of interest rates must be made in consultation with the government. It also includes that the BCT will be responsible for financing the repayment of foreign currency loans and their servicing by directly utilizing the BCT’s foreign currency reserves. 

Article 32 of the proposed law states that the Minister of Finance would request the BCT implement any decision approved by Parliament. 

In February 2024, the Parliament adopted a bill to allow the BCT to finance the government budget. The law stated that this was an exceptional approval to finance part of the budget deficit for the year 2024, but the recently proposed law would normalize similar activities. 

Outlook

The proposed project sparked criticism from economic and financial experts who fear that it will reduce the independence of the BCT and could result in further financial instability and inflation. Commentators also expressed concerns that the proposed law may lead to foreign currency reserves being overused to repay foreign debts to the detriment of importing essential goods.  

The proposed law appears broadly consistent with statements and policy efforts from President Kais Saied that the various branches of government must work in unison to develop and implement polices. However, this approach continues to draw criticism of those concerned about the centralization of government power under the executive.

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