- The Central Bank of Tunisia (BCT) did not understand that according to the 2016 law, it is independent from the executive power, but it cannot be independent from the state of which it is one of the important structures.
- The BCT did not understand that its independence aims to protect the economy and therefore the country against potential financial missteps of the executive power. The BCT did not understand that the monetization (financing) of the budget deficit, either directly or through banks, represents a significant financial error by the executive power.
- The BCT did not understand that the same 2016 law assigns it the role of financial advisor to the state. This role, apart from a few sentences in the BCT's board of directors' statements, has never been implemented and does not appear to have been one of the BCT's concerns.
- The BCT did not understand that its monetary policy should serve the economy. This means that before making any monetary policy decision, including increases in the key interest rate, the BCT must first evaluate its impact on economic growth, employment, and wealth creation. If the BCT persists in claiming that it is only responsible for fighting inflation, it proves that it has not understood. The result of the various increases in the key interest rate is clear: inflation is not under control, on the contrary, and in addition, we have a high unemployment rate, sluggish economic growth, and systematic wealth destruction.
- The BCT did not understand that during the severe Covid-19 crisis, the priority was to protect the economic fabric, especially SMEs, and preserve jobs, and that the exceptional conditions of the pandemic required exceptional monetary policy measures. However, once again, the BCT had not understood and repeatedly reminded us that its role was limited to controlling inflation, which it had not managed to do. Furthermore, the Covid-19 crisis resulted in the loss of tens of thousands of businesses and jobs, along with an economy trapped in prolonged stagnation.
- The BCT did not understand that its management of the Dinar's parity, characterized by constant artificial support of the Dinar, has resulted in an abyssal trade balance deficit and, consequently, a mountain of external debt that is not managed and appears to be beyond the control of the central authority. As in any country, the national currency is a key adjustment variable. It is indeed preferable to allow the national currency to depreciate rather than subject the economy to increasingly difficult-to-repair damage. The BCT did not understand that it cannot claim to be the champion of Dinar stability in a drifting economy. Artificial Dinar stability comes at an excessively high cost in terms of trade deficits, external debt, economic growth, and job creation.
- The BCT did not understand that successive increases in the key interest rate have ended up stifling investment and, consequently, economic growth and job creation. These increases have only served to enrich the banks further. The BCT claims to raise interest rates to control demand, but it has not understood that Tunisia suffers from a severe demand deficiency due to the collapse of the middle class and a significant loss of purchasing power. The monetary policy of the BCT has ultimately cooled down the three main drivers of growth: investment, exports, and consumption.
- The BCT did not understand that among the important roles assigned to it by the law, there is a role that is of paramount importance for the financing of the economy: banking supervision. With the scandals that arise here and there within our banking system, it is necessary to ask: where does the BCT stand in relation to these scandals? It should be known that banks are required to send the BCT quarterly, semi-annual, and annual reports. It should also be known that the BCT must hold at least two meetings per year with each bank to examine the situation of all credit files. The BCT has a role in continuous control of banks through documents and an on-site inspection role. Can the BCT claim that it was not aware of what was happening in the banks?
- The BCT did not understand that the quality of the banks' loan portfolios is a crucial element of prudent banking management. Allowing banks to engage so extensively with the government (in both local currency and foreign currency) and with state-owned enterprises has put the overall stability of the banks at serious risk. Direct loans to the government now account for more than 20% of all bank loans. Loans to state-owned enterprises, some of which are guaranteed by the government, now represent over 20% of all bank loans, totaling more than 40% of the banks' loan portfolios. With such a situation, banks are reporting impressive results that do not reflect the threats hanging over their loan portfolios.
- The BCT did not understand that the essential role of the banking system is to finance the economy and not the state budget deficit. Today, we are witnessing a serious phenomenon of exclusion of businesses that can no longer access bank financing because the government has taken up most of it, and the BCT allows this to happen.
- The BCT did not understand that making all these funds available to the state has allowed the executive power to indefinitely postpone reforms that are as essential as they are inevitable, thus depriving the country of an economic recovery that is becoming increasingly difficult to implement.
- The BCT did not understand that the monetization of the budget deficit, meaning the direct or indirect financing of the state budget deficit, is an injection of liquidity without corresponding value. What the BCT refers to as "open market operations," "tender offers," or "swaps" is, in reality, pure and simple money printing that leads to inflation and contributes to the disruption of the key economic balances in Tunisia. The BCT continues to deny its significant use of money printing.
- The BCT did not understand that its monetary policy is the root cause of the severe liquidity crisis currently affecting the banking system.
- The BCT did not understand that its monetary policy has significantly contributed to the 11 downward revisions of Tunisia's sovereign rating and the multiple downgrades of Tunisian banks' credit ratings.
- The BCT did not understand that it was not created to generate enormous profits at the expense of businesses and the economy in general. Instead, it was established to provide the country and the economy with an effective monetary policy.
This is where we stand today with an unsustainable public debt, state-owned enterprises in dire straits, an economy that no longer generates growth, jobs, or wealth. This is where we are today with a shrinking middle class and shortages of basic goods leaving consumers in total despair.
P.S. It's September 2023:
- Where is the BCT's annual report for the year 2022?
- What is the status of the new foreign exchange code promised for several years?
- How far along is the digital transformation of the BCT and the banks?