Tunisia has faced an extraordinary series of shocks over the past 10 years. The global financial crisis, the Arab Spring, and a trio of deadly terrorist attacks in 2015 all took their toll on the Tunisian economy. In that time, Tunisia has had seven prime ministers. “We have not a lot of political stability over the past 10 years,” says Marouane Abassi, governor of the central bank of Tunisia.
The central bank has, during that time, been perhaps the most stable and consistent organ of the Tunisian state.
As a result of external pressures, when Abassi, a former World Bank economist took over the role of governor, the Tunisian dinar was weak and inflation was well over 7%. “Our policy rate was 5% and inflation was at 7%,” says Abassi. “That meant the real interest rate was 200bp negative.”
Throughout 2018, Abassi raised the interest rate three times, bringing it to 7.75%. Inflation has begun to respond, dropping from 7.4% in September 2018 to 6.7% in September 2019.
Although the rapid rate hikes were no doubt painful in the short term, Abassi says he felt no political pressure. “Our responsibility is to maintain price stability and financial stability, and we are completely separate from the government,” says Abassi. “I speak with the finance minister, but I don’t take advice from him regarding my policy decisions.”
The rate hikes have also helped to stabilise the FX, strengthening the dinar against the dollar and allowing the central bank to build up its FX reserves.
Abassi has also presided over Tunisia’s progress in fighting money laundering. “We were on the FATF blacklist for lack of co-operation in fighting money-laundering,” says Abassi. “We prepared an action plan and, although it was not easy to implement, we were able to do so, and expect to be removed from the blacklist in October.”
The Tunisian economy has once more returned to positive growth. Conditions have been difficult, but Tunisia is in far better shape to address these concerns than it might otherwise have been thanks to Abassi’s disciplined approach.