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Abdelkader Boudriga addresses in the interview that he gives us in a learned and very professorial way, with the rigor that one knows him, the state of the Tunisian economy, the difficult equation inflation-deficit of the accounts public-interest rate-growth … Should we increase the BCT's key interest rate, should we follow the recommendations of the IMF which paradoxically placed us in a situation of "abusive support"? As many questions as answers. Interview
What diagnosis of the health status of the Tunisian economy?
For some time, several indicators are in the red. First of all, the rate of inflation reached historical levels, at 7.7%, a level that has been maintained since April 2018. Given the effects of monetary policy ( BCT policy rate) can only have an impact on inflation after four to five quarters.
The unemployment rate also remains at a high level (15.4%) despite a slight improvement compared to the first one. quarter 2018. As for the public deficit, it remains worrying, especially with the low tax revenues recorded during the first five months of 2018. I think it will be difficult to respect the level agreed in the 2018 FL, set at 4.9%.
The imbalances in public finances could lead to a worsening of public debt in view of the evolution of commodity prices and the cost of energy induced by price developments worldwide and the depreciation ogrammed Tunisian Dinar (also suggested by the FM). This is all the more serious as the financing of the State will be mainly through external debts because of the weakness of national savings which has never reached such low levels (10%).
weakness of the national savings, on the one hand, and the increase of the financing needs of the State inevitably led to the increase of the volume of the liquidities injected by the BCT which exceeded the 14 billion dinars end of May 2018 despite all the measures taken to rationalize and limit the level of refinancing causing liquidity problems and pressure on the money market rate (MMR) which has reached the upper limits of the BCT's key rate. [19659004] Finally, the level of foreign exchange reserves has for several months a bearish trend to reach 74 days of import at the end of May 2018. This low level is still worrying but is not very alarming in itself in my opinion. First, during the 2000s we experienced lower levels without major difficulties. Secondly, the foreign exchange reserves will be bailed out over the next few months under the combined effect of the release of funds from the IMF and the World Bank (+ $ 700bn) and the good prospects of the tourist season.
At the same time Meanwhile, it is important to remember that we reached this low level of foreign exchange reserves because of speculative expectations of the depreciation of the dinar . Under such conditions, economic operators manage their exchange rate risks by advancing disbursements and delaying the repatriation of revenues. Added to this are investment strategies in foreign currencies that contribute to the accumulation of assets in foreign currency (19459006) (a sort of dollarization of the economy ), especially outside banking channels. It is therefore these behaviors that contribute to exerting pressure and on foreign exchange reserves and on the level of the exchange rate of the dinar against the dollar and the euro.
The depreciation of the dinar against the main currencies is justified by the persistence of macroeconomic imbalances (inflation, trade balance, foreign exchange reserves …). The IMF suggests a correction of the nominal exchange rate of around 15% to restore competitiveness, promote exports, and improve attractiveness. I think such a correction is not appropriate now and should not be considered viable.
First, it is not certain that an improvement in the exchange rate This may have a very positive impact on exports or attractiveness (no serious study in the Tunisian context has made it possible to establish this link clearly). On the other hand, such a severe correction of the dinar would contribute more to the soaring prices and fuel demands for wage increases and will lead to new rounds of inflationary pressures that will call in turn new demands for depreciation.
In addition, a severe correction will accentuate the differences between the standard of living in Tunisia and abroad, which will encourage more and more talents and young people to leave the country. We will meet in a few years with a country drained of its skills, where it is not good to live, except for expatriates and international donors. At worst, the country will experience periods of instability and turbulence. A situation that we know the beginning but not the exit.
This does not prevent that there are signs of recovery, especially with a growth rate that showed, in the first quarter of 2018, a significant improvement and could reach 3% thanks to a fairly good agricultural season and a good tourist season
Similarly, there has been an improvement in exports. In my opinion, this improvement is the result of the outlook for global growth rather than the depreciation of the dinar. The improvement in exports has also led to an improvement in the trade balance with a current account deficit of 4.6% of GDP for the first five months of 2018 compared with 5.4% for the same period in 2017. [19659004] Overall, there are indicators in the red but also signs of recovery. What is more worrying is the problem of the effectiveness of public policies. It is up to the government to put them in place, particularly with regard to controlling inflation, which, as we know, is not only of monetary origin; it is also the distribution channels, the informal sector and smuggling.
To do this, we need a real mix of monetary and fiscal policies as well as government actions to manage the situation. But the political wait-and-see and the dealings that come with it, with the approach of the summer and the pressures of the IMF could make us lose more time as regards the effective revival.
The IMF support to Tunisia is crucial
Historically, there was no reason to resort to IMF support in 2012. It would have delayed this recourse a little more. After 6 years of mistakes, the IMF whistled the end of recess and it could end this support because we did not honor our commitments.
Knowing that the IMF is also partly responsible since the financing and support mechanisms that were put in place during this period did not, in my opinion, suit post-revolution Tunisia. The IMF has proposed a series of reforms that are amply justified from an economic policy point of view, but whose effectiveness depends on the ability of governments to undertake these reforms and to make them accept and implement.
was not possible in the context of a country in democratic transition, in political and social transformation with governments that are not stable and efficient. Technically, the IMF has always known that the painful reforms are inapplicable in the short term and given the political ecosystem that prevails in Tunisia since 2012, no government without effective stability was able to do so.
We were in a kind of "abusive support" from the Fund. In trying to help us, the support of the fund has placed us in a comfortable position which has had the effect of delaying the reforms rather than accelerating them, of not negotiating well with the social partners, of making plethoric recruitments, of afford the privilege of delaying painful decisions. It is only by coming out of this situation of ease and comfort that we will decide to take the necessary measures.
In the end, do you think that the State has enough margin, means to revive the Tunisian economy?
For the medium term, we must move to a value creation economy and break with the economy of rent. This model of rent economy is no longer viable because it is not a creator of value and jobs (quality jobs) that can guarantee a decent life for all Tunisians.
policy makers to design effective public policies that can improve the situation of Tunisia while creating value. And as a result, it will be possible to increase wages, invest in human resources, distribute wealth, create jobs … It is therefore necessary to put in place a longtermist vision that promotes creativity, innovation and values. know-how, intangible capital and the convergence of technologies
To do this, we must know that the future of Tunisia depends on its young people between 25 and 35 years old, who must be encouraged and reassured that 'they engage in wealth creation, innovation and they do not leave the country. It's time to think about a true "retention of skills" policy across the country that alone can guarantee a better future for all of us.
Creative solutions must be found to be creative to make the recovery a success economic, because today the surrounding political ecosystem and public governance are deficient, the mechanisms of decision-making and control can not be effective, which constitutes a serious handicap.
For the short term, the priority is to fight against inflation and avoid at all costs a new correction of the dinar which must remain a red line. If we give in on the exchange rate and suffer a devaluation of 15%, according to the latest IMF conditions, it will be catastrophic.
Is the policy of increasing the exchange rate? interest rate and bring down the dinar is timely? What are the impacts?
A negative interest rate is bad for the economy. Knowing that theoretically, for a situation of equilibrium, this rate must be at least close to zero. But it is not the historical rate that counts, it is rather the anticipated rate of inflation, that is to say if we think that by the end of December 2018, the inflation rate will continue to rise. increase, we must act to avoid more serious slippage. In fact, some analyzes find, under the effect of the good tourist season and the increase of the price of oil and raw materials at the world level, that it is very probable that we undergo inflationary pressures during the 6 months to come and therefore, prices will continue their upward trend, if nothing is done in the meantime.
Contrary to these predictions, I personally think that the rate of inflation will not increase because the reasons for inflation are not just monetary. The rise in prices is mainly due to the decline of the dinar, the proliferation of the informal sector and contraband, the lack of price controls and distribution channels and especially the provisions of the 2018 Finance Act with the recovery inflation rate and the increase of consumption rights. It is therefore possible, if efforts are made in this direction, to stabilize the rate of inflation by the end of the year.
At the same time, necessarily the increase in the interest rate Director has implications for the cost of financing small and medium-sized enterprises (SMEs), the activity of the most sensitive sectors, bank financing including automotive and real estate and the purchasing power of Tunisians. 19659004] Today, it is not appropriate to raise the key interest rate because I think we will not have inflationary pressures. Raising interest rates will not have the desired effect if it is not accompanied by other fiscal measures, but especially by an action on the non-monetary origins of inflation.
Anchor expectations The main channel consists of the role of the government, especially in price control and the establishment of effective public policies.
Under the current conditions of the country, is what, as expected, a growth rate of 3% is achievable at the end of 2018?
Growth must be achieved in value-creating sectors that can create jobs, including services, embedded technologies, new technologies, nano, computing …
I think a growth rate of 3% is achievable, because it will be driven by two indicators: the improvement of exports and tourism all two by the resumption of global demand and a sustained return to favorable inflation rates. In addition, if the phosphates sector continues to improve, we could even achieve more than 3%.
The problem is how to achieve 5 or 6% growth when we know that the potential of our economy does not exceed not 3 to 3.5% growth? The rest requires productivity gains. This can be feasible if we adopt new technologies and digitization, and if we focus on human capital, the spirit of innovation and creativity. This requires a lot of work to keep our talents and retain them …
In this sense, until today nothing has been done to promote substantial productivity gains that allow to release energy and to project in the future. Worse, factor productivity has declined over the last 6 years
At the same time, I do not believe that growth will be affected by the increase in the BCT's key interest rate. Because I do not believe that consumption, as an engine of growth, will be affected although the increase in this rate has a negative impact on individuals. Neither the exports nor the investment. Only the real estate sector could be affected by the twofold effect of the tightening of credit conditions and the fiscal provisions of 2018.
Successive increases in the BCT's key rate (+ 1.75% in two months) and the widening of the bands of variations will have the consequence of increasing the TMM which will exceed at this rate the 8% over the next months and, in turn, it will increase the credit. For a real estate loan of 100,000 D repayable over 15 years, the impact is 125 D per month, or 6.25% loss of purchasing power for a household with a 2000D income. This will eventually revive wage demands, reduce disposable income and thus impact both inflation and growth
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