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The Executive Board of the Central Bank of Tunisia held its periodic meeting on 16 and 19 February 2019 and examined the different issues scheduled in its agenda. At the beginning of its works, the Board reviewed recent developments of the economic, financial and monetary situation, in particular the conduct of money market and foreign exchange transactions; as well as the liquidity situation and the activity of the banking sector.
In this regard, the Board noted in particular an ongoing current account deficit of the external payments’ balance which continues to post record levels, reaching 11.2% of GDP in 2018 compared to 10.2% in 2017. Indeed, the positive evolution of tourist receipts and transfers of Tunisians abroad could not compensate for the worsening of the trade deficit, which negatively affected the net assets in foreign currency, going down to 84 days of import in 2018, compared to 93 days a year earlier.
As for inflation, the Board noted that monetary policy measures undertaken as from 2016 have contributed to a relative deceleration in the pace of inflation in January 2019, coming to 7.1% compared to 7.3% on average for the year 2018. Still, the Board has expressed its strong concern about the inflationary pressures’ outlook , particularly with regard to core inflation. The latter is expected to continue its upward trend over the coming period, given the expected evolutions of the inflationary indicators as a whole, which requires continuous monitoring of its sources and enhancing measures to counteract its worsening.
With regard to activity of the banking system’s follow up, the Board noted that while remaining at a fairly high level, the volume of banks' liquidity needs has registered some stability thanks to the measures taken to this end and has recommended to boost them further.
In the framework of follow up of activity of the Central Bank of Tunisia, the Board examined a report on the results of foreign currency reserves’ management during the year 2018 and pillars of the strategy to be adopted in this area over 2019.
The Board then reviewed the draft of the financial statements of the Central Bank of Tunisia as at 31 December 2018 and decided to forward them to the auditors and examined the recommendations of the Permanent Audit Committee and the report of the General Control of the bank.
The Board also reviewed and approved the first three-year Strategic Plan of the Central Bank of Tunisia (2019-2021), which aims mainly to establish a clear and transparent governance framework for monetary policy conduct, to implement a macro-prudential operational framework to prevent risks, strengthen the management of the payments ecosystem in order to reduce the use of cash in the economy, work towards a gradual lifting of exchange restrictions and improve data collection systems.
He then reviewed a draft budget of the Central Bank of Tunisia for the year 2019 in the light of the projects included in the first Strategic Plan.
After discussions and deliberations on the above-mentioned issues, the Board insisted that all relevant parties should intensify efforts to contain the trade deficit and its impact on the current payment balance, on the one hand, and on the level of foreign currency assets and the domestic foreign exchange market, on the other. The Board underlined that the pursuit of inflationary pressures represents a risk to the economy and a threat to purchasing power, which requires undertaking appropriate measures to reduce its negative effects, and has therefore decided to raise by 100 basis points the key interest rate of the Central Bank of Tunisia.