The IMF announced that about USD250mn will be disbursed to Tunisia. This is rather symbolic as it will add only about 5% to foreign exchange reserves (USD4.8bn) thus not really alleviating the liquidity issue reflected in their current level of import cover of 2.5 months. As economic growth is forecast to recover to +2.5% in 2018, imports should rise by +11% in 2018, putting even more pressure on the import cover ratio. As a result of the low liquidity, the Central Bank let the dinar depreciate; and inflation increased to +7.1% y/y in February. The govern¬ment’s willingness to reduce the fiscal deficit (-6.1% of GDP in 2017) was reaffirmed but little progress was seen in the past, since public spending is a sensitive topic in the country. Hence, the Central Bank started to tighten monetary policy, hiking the key policy rate to 5.75% (+75bp). However, the real interest rate is still negative. The extent of the current account deficit (-9% of GDP of 2018) shows that some rebalancing is needed.
