March 18, 2020 / 9:56 PM / 9 days ago

UPDATE 1-Tunisia lets firms defer loans, propose new funds in face of coronavirus

(Adds details and background)

By Tarek Amara

TUNIS, March 18 (Reuters) - Tunisia’s central bank will allow firms to postpone paying loans for a period of six months to face the repercussions of the coronavirus outbreak, the bank said in statement on Wednesday.

The central bank on Tuesday cut interest rates by 100 basis points to 6.75 pct, the first cut in nine years, as the economy faces the risk of recession.

It follows sharp interest rate cuts in leading economies as the virus has shut down swathes of activity. Tunisia, where tourism makes up nearly a tenth of gross domestic product, has closed all its air, sea and land borders.

The central bank said the decision to allow firms to postpone paying loans aims to preserve the economy and protect jobs.

It added that these companies benifiting from the delay will also have access to new loans.

Tunisia has cut its economic growth forecast for this year to 1% from the 2.7% envisaged in the 2020 budget, Prime Minister Elyess Fakhfakh said this month. He added that the coronavirus is one of main reasons for this decline.

Tunisia has struggled to put its economy back on to a sound footing, with years of weak growth, declining public services, fiscal deficits and mounting debt.

An International Monetary Fund loan programme expires in April and the new government, formed in February after months of political wrangling following October’s election, has said it is seeking to renew it. (Reporting By Tarek Amara; Editing by Sandra Maler and Alistair Bell)

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