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BCT decides to cut again its main interest rate to boost economic activity

Published the:  06/09/2011

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September 06, 2011 -  TAP - The Board of Directors of the Central Bank of Tunisia (BCT), which met on September 5, 2011 in Tunis, decided to cut, again, the main interest rate of the BCT by half a percentage point to bring it to 3.5%, while ensuring consolidation of the banking system resources through the preservation of the deposit rates on savings accounts.
This decision aims, according to a statement of the Central Bank, to stimulate economic activity and contribute to the realisation of investment plans by limiting the financial burden on businesses.
During its Monday meeting, the Board voiced concern about the continued negative growth caused by the decline of activity in some key sectors (non-manufacturing industries, services...) and the drop of both domestic and foreign private investment.
This negative growth results in stepping up pressure on the balance of payments and therefore contracting the currency reserves which fell, according to the Board of Directors of the BCT, to 11.067 MTD or the equivalent of 123 days of imports by the end of August 2011 against 147 days at the end of 2010.
The Board also noted the persistence of economic problems despite efforts made at the level of the monetary policy by the decline of the reserve requirement to its minimum level and the reduction of the main interest rate of the Central Bank.
This situation is the result of continuing social and security instability and the lack of visibility for operators and the difference in the rate of growth compared to the hoped-for opportunities in a global economic environment that does not prompt the mobilisation of external resources.
Regarding the activity of the banking sector, the tightening of liquidity continued in August, which required increased intervention of the Central Bank to inject 3,148 MTD against 2,953 MTD in July.
This intervention resulted, in parallel, in reducing the main interest rate of the BCT and lowering the average money market rate to 3.76% against 4.25% a month earlier.
The Board recommended, in light of these developments, further strengthening the pace of financing the economy via an active monetary policy, while ensuring the implementation of fiscal policies that promote greater speed in carrying out projects and financing public enterprises.