* Banks must offset new consumer loans with reserves
* C.bank aims to curb inflation, limit luxury imports
* But move may have political impact before elections
* Some Tunisians angered by blow to living standards
* No sign of pressure from government, politicians
By Tarek Amara
TUNIS, Nov 14 Tunisia's central bank has clamped
down on a consumer loan boom - a step that may be prudent
economically but risks angering many Tunisians struggling with
unemployment and poverty, and could have political implications.
Since last month the central bank has required commercial
banks to hold back reserves equal to the amount of new consumer
credit they provide - effectively making it more expensive for
the banks to extend such loans.
Its motives are benign; it wants to rein in inflation by
preventing the economy from overheating, ensure bank loans go
primarily to productive projects, and limit imports of luxury
goods that have sapped Tunisia's foreign currency reserves.
Its actions may reassure foreign investors that the central
bank remains willing to make unpopular but economically
necessary policy choices in the wake of last year's Arab Spring
uprising, which toppled president Zine al-Abidine Ben Ali.
But the decision to curb consumer lending is politically
sensitive. The uprising was fuelled by mass frustration with
economic conditions; by restricting credit, the central bank
risks being seen by some Tunisians as part of the problem.
Voters' perceptions of the economy will shape the results of
parliamentary and presidential elections due next June, which
will determine the fate of the current government led by the
moderate Islamist Ennahda movement. Ennahda came to power
through Tunisia's first free elections in October last year.
Mohammed Banour, a 26-year-old technician at a
telecommunications company in Tunis, says he is one of the
people affected by the central bank's decision.
In the wake of the new reserve rules, his bank refused to
extend him a 20,000 dinar ($12,600) loan to pay for his wedding,
which he says may now have to be cancelled.
"I feel frustrated...My wedding date was expected to be
April 30 next year but it seems that this date will be delayed
or may be cancelled if I do not get a loan to cover wedding
costs," Banour said.
"I've been waiting to get a loan to buy furniture for the
house and pay the costs of the wedding hall and provide for the
needs of my fiancee. Now none of this looks possible."
Central bank governor Chadli Ayari says he realises the
bank's policy is painful for many Tunisian families, but that he
was forced to act to protect the economy, which faces a rise of
inflation and currency depreciation - factors which could
reinforce each other if they get out of control.
Inflation hit 5.7 percent in September; the central bank is
not targeting a particular inflation rate but the most that
should be tolerated is 5 percent, Ayari told Reuters.
"Inflation worries me very much. I will fight it with
monetary instruments," he said.
Another worry is the level of Tunisia's foreign currency
reserves, which fell to the equivalent of 94 days of the
country's imports in October, the weakest level in decades, from
120 days a year ago and 145 days two years ago.
Ayari said he was concerned that excessive consumer lending
could be spent on imports, draining reserves further.
"Credit growth is around 9-10 percent but 80 percent of that
growth goes on consumption and only 20 percent into equipment
and investment," he said.
"If credit growth was 15 percent but mostly went to
investment, I would not do anything."
So far, the government and powerful politicians do not
appear to be putting any pressure on the central bank to change
But mindful of public criticism, the central bank issued a
statement at the end of October stressing that its "ultimate
objective is not to put pressure on Tunisian households with
respect to their vital and basic needs." It promised that banks
would still be allowed to extend overdraft facilities against
customers' future salaries.
FRUITS OF REVOLUTION
The central bank's justifications for its policy carry
limited weight with Tunisians who have turned to banks to
finance purchases from computers to holidays and sheep to be
slaughtered for the recent Eid Al Azha festival.
After the economy shrank 2.2 percent last year because of
the turmoil caused by Ben Ali's overthrow, investment and
tourism have started reviving. The government predicts growth of
3.5 percent this year and 4.5 percent in 2013.
But because of high inflation and unemployment, officially
estimated at 17 percent, many Tunisians feel little improvement
in the economy.
At a bank in the capital's suburb of Lafayette on a recent
day, 40-year-old Wassil, a teacher, spent 20 minutes
unsuccessfully trying to persuade a bank manager to give her a
loan of 5,000 dinars to repair the walls of her house, which she
said had cracked after heavy rain.
"Prices have risen like crazy...My salary and my husband's
salary are no longer enough to meet living costs, and only pay
for food and study expenses for the kids," she said.
"Where are the fruits of the revolution?...We hate Ben Ali,
but the economic situation in his rule was not as bad as it is
now. Loans were easier."
Some private economists also criticise the central bank's
policy, saying it will hurt growth.
"Consumption is the locomotive of economic growth and should
not be reduced while the disruption of investment and exports
continues, because of the lack of clarity in the country's
political situation and the economic crisis in Europe," said
Moez Abidi, an economist and former central bank official.
Abidi also said the crackdown on consumer loans at banks
could force financing business to migrate to informal
moneylenders, which could end up hurting banks.
An official at Banque International Arabe de Tunisie, a
major commercial bank, said: "We do not support the decision to
restrict consumer loans - surely it will cut the bank's profits
and cause us embarrassment with our customers.
"But we are obliged to implement the rules, which we expect
to stop after there has been a clear decline of inflation."