Chedly Ayari, Governor, Central Bank of Tunisia (CBT): Interview

Interview: Chedly Ayari

How can the fluctuation in the dinar/dollar exchange rate be adjusted?

CHEDLY AYARI: Tunisia’s exchange rate policy framework seeks to secure external financial equilibrium through the preservation of the real value of the Tunisian Dinar, which should reflect the fundamentals of the Tunisian economy and maintain international competitiveness. To achieve this, the CBT can intervene to regulate the market. Its interventions are made at the interbank exchange rate level. Moreover, since 2011 a reform of the exchange market is under way with a view to reinforcing its capacity to determine the fair value of the Tunisian Dinar and provide the necessary liquidity to the economy. In September 2014 this led to an agreement whereby market-makers are obliged to systematically quote the market with a maximum spread of 30 pips. Furthermore, there is a project to reduce the margin below 30 pips. Foreign exchange auctions will also be introduced as a new intervention tool for the CBT, to give more weight to the market in determining the value of the Tunisian Dinar.

What measures can be taken to protect the economy against capital flight?

AYARI: Measures should be taken in order to prevent capital flight, including security measures to stabilise the country and institutional measures like the law on public-private partnerships, the law on competition and the law on investment. Fiscal reform is also fundamental to ensuring greater fairness and efficiency. A last important measure will be the promotion of money transfers, especially regarding migrant remittance fees. To contain capital flight since 2011, no particular instructions have been given to restrict transfers abroad. In line with Tunisia’s international commitments, mainly current convertibility, the CBT’s policy was to remind all intervening actors of the best practices to rationalise and optimise the use of foreign currency without affecting investor confidence.

How can inflation be controlled to ensure a stable increase of domestic prices?

AYARI: Since early 2012, inflation in Tunisia has reached a higher level because of a disturbance in the distribution channel, a depreciation of the dinar against the main foreign currencies, the high price of oil on the international market from 2002 to mid-2014, as well as salary increases in 2012 and 2013.

Since 2012, the CBT has ended its accommodative policy and decided to introduce different measures to contain inflation. In total, from August 2012 to June 2014, the CBT has raised its policy rate four times. Further steps were taken by all parties to cope with inflationary pressure, including taking better control of distribution channels and freezing regulated product prices. Due to such efforts and falling oil prices, inflation began to decline in the second half of 2015 and ended the year at 4.1% year-on-year. It is expected to drop further in the coming months due to lower customs duties and VAT rates, along with lower pressure from food prices and the introduction of a mechanism to automatically adjust energy prices.

How is access to credit for small and medium-sized enterprises (SMEs) being eased?

AYARI: In Tunisia, different mechanisms have been created to make funds available to SMEs. One option is bank credit lines, with some banks already offering SME-specific credit lines. SMEs can also use leasing solutions, which have the advantage of not requiring guarantees and being quicker in terms of response. In 2014 Tunisia created a new support fund for SMEs with a TD100m ($45.9m) budget. Managed by the Bank for Financing SMEs, it is primarily used for debt restructuring and reinforcing equity capital. A support budgetary line of TD200m ($91.7m) was also created in 2015 dedicated to refinancing, rescheduling and operating loans granted by banks to SMEs.