Tunisia’s central bank has decided to maintain its benchmark interest rate at 7.5%, signaling a cautious approach to monetary policy as the country continues to grapple with economic instability and inflationary pressures. The move reflects a balancing act between supporting domestic demand and containing price growth, especially in a context of fragile public finances and limited access to international credit markets.
The central bank cited the recent decline in inflation as one of the key reasons for its decision. Tunisia’s annual inflation rate eased to 7.3% in April, down from 7.5% in March, marking a gradual retreat from the double-digit levels experienced in 2022. Food prices and energy costs, previously major contributors to headline inflation, have shown signs of moderation. However, core inflation—which excludes volatile items—remains sticky, highlighting ongoing structural imbalances in the economy.
This rate pause comes amid broader uncertainty in Tunisia’s economic outlook. The country has been facing protracted fiscal challenges, high unemployment, and weak private sector investment. While the central bank’s decision offers short-term relief to borrowers and businesses, it also underscores the limitations of monetary policy in addressing deeper economic issues such as structural reforms, fiscal discipline, and political uncertainty.
In recent months, the government has intensified efforts to secure external financial support, including a long-delayed deal with the International Monetary Fund. Negotiations have been stalled due to disagreements over austerity measures, subsidy reforms, and labor market adjustments. Without a finalized agreement, Tunisia’s credit rating remains under pressure, and foreign investor confidence has yet to return in full force.
Currency depreciation has also been a concern. The Tunisian dinar has weakened against major currencies, increasing the cost of imports and adding to inflationary risks. However, the recent stabilization in foreign exchange reserves has provided some buffer against further depreciation, allowing the central bank to maintain policy rates without exacerbating currency volatility.
The rate decision is part of a broader attempt to preserve economic stability without triggering a sharp contraction in consumption or credit activity. Financial institutions and businesses welcomed the pause, viewing it as a sign that the central bank is responsive to market realities. However, concerns persist over the long-term sustainability of Tunisia’s debt levels and the need for comprehensive economic reforms.
Tunisia’s decision to hold interest rates steady reflects a prudent yet limited policy response in a highly constrained environment. While the easing of inflation provides some justification for this approach, the broader structural weaknesses in the economy require more than interest rate management. The outcome of ongoing negotiations with the IMF and the government’s ability to implement reforms will ultimately determine whether Tunisia can achieve a more stable and inclusive economic recovery.