Tunisia central bank cuts interest rate to 4.25 pct from 4.75 pct

 29 Oct 2015 - 13:52

Tunisia central bank cuts interest rate to 4.25 pct from 4.75 pct


Tunis: Tunisia's central bank said on Thursday it had cut its main interest rate to 4.25 percent from 4.75 percent to boost economic growth, as inflation rates fell.

Tunisia's central bank raised the rate to 4.75 percent from 4.5 percent in June 2014 to ease inflation pressures. But Inflation dropped to 4.4 percent in the first 10 months of this year, compared with 5.5 percent last year.

"After the recent trend of inflation, and to help the promotion of investment and the resumption of economic activity, the Council decided to cut the key interest rate 50 basis points
bringing it to 4.25 percent," the bank said in statement.

The bank does not target a particular inflation rate but says the highest that should be tolerated is 5 percent.

The central bank said next year will be a year of economic recovery. Tunisia expects gross domestic product to grow 2.5 percent in 2016 compared with 0.5 percent in 2015 and reach 5
percent growth in 2020.

Growth dwindled along with tourism, which provides 7 percent of GDP, after Islamist attacks in the capital and at a beach resort killed a total of 61 people.

Tunisia will start talks with the IMF in December or January on a new credit programme worth about $2 billion, Finance Minister Slim Chaker told Reuters this week. A $1.6 billion stand-by arrangement with the IMF is due to expire at the end of this year.

In addition, the government plans to issue international bonds worth up to $1 billion by January or February, and expects in the first half of next year to issue its first Islamic bond, raising 1 billion dinars.