Decrease in Interest Rates: A Risky Move for Tunisia's Economy
The Arab Institute of Business Leaders (IACE) has warned that a decrease in interest rates could encourage further borrowing to finance imports, in a recent analysis note titled "BCT: Has the Time for Lower Interest Rates Arrived?".
Impact on Foreign Reserves
According to the IACE, such a decision by the Central Bank of Tunisia (BCT) would "increase demand for foreign currencies and put additional pressure on foreign exchange reserves", which are already weakened by the imbalance in external trade. The trade deficit has indeed widened to 16.7 billion dinars by the end of September 2025, compared to 13.5 billion dinars a year earlier, further weakening the dinar against the euro.
Current Account Deficit
Although the services surplus has slightly mitigated this deterioration, the current account deficit has continued to grow, rising from 1.2% of GDP in 2024 to 1.9% in 2025.
Foreign Exchange Reserves
Foreign exchange reserves, which covered the equivalent of 106 days of imports as of October 22, remain at a level considered "preoccupying" by the Institute, revealing "the fragility of the country's external position in the face of external shocks".
Risk of Inflation
A potential depreciation of the dinar would lead to an increase in imported prices and a new wave of inflation, warns the IACE.
Conclusion
In conclusion, the organization believes that it would be premature for the BCT to lower its key interest rate further, despite progress made in controlling inflation. The IACE is particularly concerned about the inflationary risks associated with the 2026 budget bill, which provides for monetary financing of the state budget to the tune of 11 billion dinars.
Preserving Economic Stability
"In a still vulnerable economy, increased recourse to Central Bank financing facilities argues for a monetary status quo in order to preserve the stability of the dinar and contain inflationary risks," concludes the note.
