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Tunisia to Start Difficult Economic Reforms Soon, Says Central Bank Governor

A customer stands in front of empty shelves for some coffee products inside a supermarket in Tunis, Tunisia September 3, 2022. (Reuters)
A customer stands in front of empty shelves for some coffee products inside a supermarket in Tunis, Tunisia September 3, 2022. (Reuters)
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Tunisia to Start Difficult Economic Reforms Soon, Says Central Bank Governor

A customer stands in front of empty shelves for some coffee products inside a supermarket in Tunis, Tunisia September 3, 2022. (Reuters)
A customer stands in front of empty shelves for some coffee products inside a supermarket in Tunis, Tunisia September 3, 2022. (Reuters)

Tunisia will soon enact difficult economic reforms that have been delayed for years, the central bank governor said on Saturday, adding that financial authorities were trying to keep the dinar currency stable.

Tunisia this month reached a preliminary agreement with the International Monetary Fund (IMF) for a $1.9 billion rescue package that could be finalized in December.

Tunisia has been in need of international help for months as it grapples with a crisis in public finances that has raised fears it may default on debt and has contributed to shortages of food and fuel.

The IMF agreement is also critical to unlock bilateral aid from country donors that want reassurance Tunisia will put its finances on a more sustainable footing.

The reforms are expected to include reducing food and energy subsidies, in addition to reforming public companies and reducing public sector wages in real terms, according government officials.

"In times of crisis, we find serious solutions. We did not take difficult reforms for years. During this period, we will," Marouan Abassi, the central bank governor, told reporters.

He added that Tunisia aimed to keep the dinar stable and to give clarity to investors.

Opposition politicians and Tunisia's powerful UGTT labor union have warned of a "social explosion" if painful reforms are implemented.

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Türkiye Inflation Exceeds Forecasts, Tempering Rate Cut Expectations

Türkiye Inflation Exceeds Forecasts, Tempering Rate Cut Expectations
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Türkiye Inflation Exceeds Forecasts, Tempering Rate Cut Expectations

Türkiye Inflation Exceeds Forecasts, Tempering Rate Cut Expectations

Turkish annual inflation fell to 49.38% in September while the monthly rate was much higher than expected at nearly 3%, setting the stage for later than expected interest rate cuts by the central bank.

At 50%, the central bank's policy rate is now higher than the annual consumer price index (CPI) for the first time since 2021, marking a milestone in an aggressive tightening cycle meant to correct years of easy money and soaring prices.

But after prices came in higher than expected last month, boosted in part by education-related costs, some analysts said the bank was unlikely to be able to ease policy until December at the earliest and possibly not until next year.

The "data makes an interest rate cut this year look very unlikely to us," said Capital Economics in a note.

Month-on-month inflation was 2.97%, according to the Turkish Statistical Institute, above a Reuters poll forecast of 2.2%. Annual CPI was also higher than the poll forecast of 48.3%.

In August, monthly CPI was 2.47%, with the annual rate at 51.97%. The central bank is closely watching the monthly rate for signals of when to begin an easing cycle, though it has only dipped below 2% once this year, in June.

Last month, a Reuters poll showed a growing minority of analysts expecting a first cut next year, with the consensus settled around November and expectations of at least 20 points of easing by the end of 2025.

But Haluk Burumcekci, founding partner at Burumcekci Consulting, said the September data did not signal an imminent cut. Even if October inflation is in line with the central bank's guidance, he said, "it may not be sufficient" for a November cut.

-TIGHT POLICY

The domestic producer price index was up 1.37% month-on-month in September for an annual rise of 33.09%, the data showed.

The lira was slightly firmer at 34.18 against the dollar.

Annual inflation in September was driven by a 97.9% rise in housing prices, with education prices up 93.59%. The key food and non-alcoholic drinks sector prices were up 43.72%, below the overall level.

Last month the central bank held rates steady at 50% for a sixth straight month, saying it remained highly attentive to inflation risks. But it removed a reference to potential tightening, seen as a first signal that easing would eventually come.

The bank, which has hiked rates by 4,150 basis points since June last year, sees inflation falling to 38% at the end of this year and 14% next. In the medium term programme, the government sees end-2024 inflation of 41.5%.