Tunisian central bank chief sees lower inflation; FX reserves 'more comfortable'
London - Tunisia's inflation rate is likely to fall to 5.2-5.3 percent by the end of the year from 5.5 percent last month, curbing upward pressure on interest rates, the country's central bank governor said on Monday.
Source : https://www.emouaten.com/english/Tunisian-central-...
Equilibrium levels for the dinar exchange rate are around 1.6 per dollar and 2.18-20 per euro, Chadli Ayari told Reuters in an interview on the sidelines of a conference, similar to or slightly weaker than current levels.
He also detailed plans to raise up to $1.5 billion through a U.S.-guaranteed dollar bond, a Japanese-guaranteed "samurai" yen-denominated bond and an Islamic finance bond, or sukuk.
Tunisia's central bank held its benchmark interest rate at 4.5 percent last month and noted inflationary pressures were easing. [ID:nL6N0LW1TH]
"We were able to stabilise inflation and push it to lower levels, we are ambitious and think it will decrease to 5.3 or 5.2 percent by the end of the year," Ayari said, warning that wage increases might yet push up inflation levels.
Interest rates "are satisfactory for the time being, but if and when the need arises to adjust the rates upwards, I will do it - so far there is no need to do it," he added.
Three years after the uprising that toppled long-time ruler Zine El-Abidine Ben Ali and heralded the start of the Arab Spring, Tunisia is heading for elections later this year after ending a political crisis that damaged its economic stability and threatened to upset its transition to democracy.
Tunisians have become more confident in the dinar currency, Ayari said. The dinar, which the central bank operates on a managed float system, is trading around 1.5806 per dollar after hitting a one-year high of 1.5569 earlier this month. It is trading around 2.18 per euro.
Ayari saw equilibrium for the currency a little lower than current levels.
"We are not far off an equilibrium rate of exchange," Ayari said. "Against the dollar, 1.6 is very close to equilibrium and for the euro, I think 2.18-20 would be closer to equilibrium, but there are no fixed things about that."
"We should not let it go up endlessly, it's very expensive to have a strong currency," he added.
Central bank data showed Tunisia's foreign exchange reserves at 12.74 billion Tunisian dinar ($8.05 billion), at end-January 2014, with an upward trend in the past few months.
"We were able to replenish our stock of reserves, it is no longer a headache for me - I am more comfortable but will still stay watchful," Ayari said.
A caretaker government has taken over to run Tunisia until elections later this year. Challenges include reducing a wide budget deficit, securing enough external financing and tackling subsidy reforms and public spending cuts demanded by its international lenders.
Ayari said even a 1 percent narrowing in Tunisia's budget deficit, currently around 8 percent of GDP, would be beneficial.
"We should push it downwards ... As long as it does not increase, that would be good."
In order to fill the financing gap, Tunisia hoped to issue the planned dollar bond, samurai bond and sukuk this year, Ayari said, with progress on the U.S.-guaranteed bond likely when Prime Minister Mehdi Jomaa goes to Washington this week.
The U.S.-guaranteed bond could total up to $1 billion, depending on the size of U.S. support, but initial plans for a sukuk totalling up to $1 billion were likely to be scaled back to "a few hundred million dollars", Ayari said.
Ayari told Reuters last month that the sukuk would launch in April or May, but said on Monday that the issuance process was complex and would likely take longer.
"We hope to do (all the issues) in 2014," he said.($1 = 1.5835 Tunisian Dinars)
http://news.yahoo.com/tunisian-central-bank-chief-sees-lower-inflation-fx-154641032.html;_ylt=AwrBEiELcTpTh2cAQD7QtDMD
He also detailed plans to raise up to $1.5 billion through a U.S.-guaranteed dollar bond, a Japanese-guaranteed "samurai" yen-denominated bond and an Islamic finance bond, or sukuk.
Tunisia's central bank held its benchmark interest rate at 4.5 percent last month and noted inflationary pressures were easing. [ID:nL6N0LW1TH]
"We were able to stabilise inflation and push it to lower levels, we are ambitious and think it will decrease to 5.3 or 5.2 percent by the end of the year," Ayari said, warning that wage increases might yet push up inflation levels.
Interest rates "are satisfactory for the time being, but if and when the need arises to adjust the rates upwards, I will do it - so far there is no need to do it," he added.
Three years after the uprising that toppled long-time ruler Zine El-Abidine Ben Ali and heralded the start of the Arab Spring, Tunisia is heading for elections later this year after ending a political crisis that damaged its economic stability and threatened to upset its transition to democracy.
Tunisians have become more confident in the dinar currency, Ayari said. The dinar, which the central bank operates on a managed float system, is trading around 1.5806 per dollar after hitting a one-year high of 1.5569 earlier this month. It is trading around 2.18 per euro.
Ayari saw equilibrium for the currency a little lower than current levels.
"We are not far off an equilibrium rate of exchange," Ayari said. "Against the dollar, 1.6 is very close to equilibrium and for the euro, I think 2.18-20 would be closer to equilibrium, but there are no fixed things about that."
"We should not let it go up endlessly, it's very expensive to have a strong currency," he added.
Central bank data showed Tunisia's foreign exchange reserves at 12.74 billion Tunisian dinar ($8.05 billion), at end-January 2014, with an upward trend in the past few months.
"We were able to replenish our stock of reserves, it is no longer a headache for me - I am more comfortable but will still stay watchful," Ayari said.
A caretaker government has taken over to run Tunisia until elections later this year. Challenges include reducing a wide budget deficit, securing enough external financing and tackling subsidy reforms and public spending cuts demanded by its international lenders.
Ayari said even a 1 percent narrowing in Tunisia's budget deficit, currently around 8 percent of GDP, would be beneficial.
"We should push it downwards ... As long as it does not increase, that would be good."
In order to fill the financing gap, Tunisia hoped to issue the planned dollar bond, samurai bond and sukuk this year, Ayari said, with progress on the U.S.-guaranteed bond likely when Prime Minister Mehdi Jomaa goes to Washington this week.
The U.S.-guaranteed bond could total up to $1 billion, depending on the size of U.S. support, but initial plans for a sukuk totalling up to $1 billion were likely to be scaled back to "a few hundred million dollars", Ayari said.
Ayari told Reuters last month that the sukuk would launch in April or May, but said on Monday that the issuance process was complex and would likely take longer.
"We hope to do (all the issues) in 2014," he said.($1 = 1.5835 Tunisian Dinars)
http://news.yahoo.com/tunisian-central-bank-chief-sees-lower-inflation-fx-154641032.html;_ylt=AwrBEiELcTpTh2cAQD7QtDMD
Source : https://www.emouaten.com/english/Tunisian-central-...