Central bank Governor Chadli Ayari said Tunisia may sell U.S.-backed bonds this year to shore up public finances as militant attacks take a toll on the country.
The U.S. has agreed “in principle” to guarantee the bonds, Ayari said in an interview in Cairo. Ayari added that he doesn’t rule out cutting interest rates to support growth as long as the drop in the inflation rate persists.
The size of the issuance hasn’t been determined but it could be about $500 million, Ayari said. It’s “very possible” for the Finance Ministry to tap the market by the end of the year, he said.
U.S. backing has helped countries such as Tunisia and Jordan lower borrowing costs after popular uprisings and conflicts in parts of the Arab world widened budget deficits and slowed economic growth.
The government expects Tunisia’s economy to grow 1 percent this year, the slowest pace since 2011, after militants killed scores of tourists in attacks in the capital and at a beach resort. Tunisia, the first country to witness an Arab Spring uprising, had previously avoided much of the turmoil that engulfed nations including Egypt, Libya, Yemen and Syria.
Finance Minister Slim Chaker said in July the government would seek to keep the budget deficit at 5 percent of economic output.
The yield on Tunisia’s $1 billion Eurobonds due in 2025 has climbed about 0.6 of a percentage point to 6.22 percent since it first traded in January, data compiled by Bloomberg show.
Ayari said the next move in the central bank’s interest rates would be a cut.
“But we are still looking at the economic, price and consumption indicators and will take some time to determine their direction,” he said.
The central bank kept the benchmark rate at 4.75 percent in August.
Bloomberg
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