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Financials

UPDATE 1-Tunisian central bank keeps key rate at 6.25%

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TUNIS, Oct 6 (Reuters) - Tunisia’s central bank held its key interest rate at 6.25 percent on Wednesday and said it was worried about an acute shortage of external financial resources, as the country suffers its worst financial crisis.

The central bank cut the rate in October 2020 by 50 basis points aiming to stimulate investment and push faltering growth. That followed a 100 basis point rate cut the previous March responding to the coronavirus outbreak.

“The Bank expressed its concern regarding the severe shortage of external financial resources against important needs to complete the financing of the 2021 budget, which reflects the fear of international lenders,” the bank said in statement.

It added that in the absence of a new program with the International Monetary Fund, the country should push to activate bilateral financial cooperation agreements during the rest of the year.

The bank warned that financing the budget carries economic risks including boosting inflation, reducing its reserves and causing a drop in the value of local currency.

Experts say that a new government expected to be announced this week may resort to asking the central bank to buy treasury bonds to cover severe deficits. (Reporting By Tarek Amara Editing by Chris Reese, Kirsten Donovan)

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