Annual Report 2019
July 2020
Note of the Governor
Note of the Governor
03/08/20209
Over 2019, Tunisia could have carried on with the upward trend of growth initiated since 2017, had it not been for the conjunction of a set of adverse factors, both domestic and external, leading to a weak growth rate of just 1% against 2.5% a year before.
In fact, the international environment was not lenient for our national economy, as world growth has been at its lowest level since the international financial crisis: 2.9% with respect to 2019. The main factors of this deceleration are related to uncertainties about trade and geopolitical tensions, as well as to the Brexit, hitting world trade very hard. Even largely accommodating monetary policies did not manage to give impetus to this anemic growth.
Aside from this complex external environment, the Tunisian economy was strongly influenced by a national context marked by extension the political transition phase and election dates, as well as by a persisting tense political and social climate. The delay of these electoral dates created a political vacuum of about six months, leading to economic reforms’ postponement.
Against this gloomy backdrop, growth suffered, particularly, from the effect of the drop in external demand especially for manufacturing industries, the impact of adverse weather conditions on the olive for oil harvest, as well as persistent difficulties at the extracting industries’ level, affecting among others, the balance of current payments and public finances with a substantial shortfall which is dipping year-to-year. Economic growth was, nonetheless, rescued by the tourist sector which flourished over 2019, by resuming, overall, performances prior to 2011.
As for demand, private consumption ran out of steam, while investment and exports declined, affecting not only growth of the current period but also future growth, given, notably, that investment which has already been on a downhill slide over the previous decade, is still cut down by a savings rate which is still in fall: 8.8% of GNDI.
Besides, this weak economic performance did not help to significantly consolidate job creation, which, despite its recovery, is still not enough to absorb unemployment, the rate of which remains worrisome, in spite of a certain decrease: 14.9 % in 2019 against 15.5% a year before.
Yet, and despite indicators that are still alarming, it must be said that stabilisation efforts conducted over the previous years helped to prevent against a slippage of overall
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Note of the Governor
imbalances which would have deepened difficulties weighing down on an already limited budgetary and financial room for maneuver, particularly with a drop in the twin deficits. In fact, the current deficit came to 8.5% of GDP against 11.2% in 2018, in line, notably, with tourist receipts’ improvement by more than 35%, from one year to the next, and the 15% rise in transfers of Tunisians living abroad, aside from imports’ shrinking, tied to economic activity slowdown.
Likewise, and thanks to a considerable effort as regards collection of tax receipts, the budgetary deficit was reduced by 1.3 percentage point, coming to 3.5% of GDP, which had a positive impact on public debt ratios. However, public balance is still characterized by an excessive rigidity of current expenditure, notably, the "Salaries and wages" and "Equalisation" headings, which is likely to drive investment expenditure off, bearing in mind public finances’ budgetary constraints.
Thus, it should be recalled that the ongoing deterioration of the Tunisian economy’s basics particularly between 2017 and 2018 led the Central Bank to react in order to counterbalance macroeconomic balances slippage risks. The adopted approach aimed at bringing the real interest rate into a positive territory so as to favour inflation convergence towards its long-term average. This restrictive orientation of monetary policy which firmed up by the key interest rates’ raising, in February 2019 to 7.75%, strongly supported the deflationary process and succeeded in bringing the inflation rate from a maximum of 7.7% in June 2018 to 6.1% in December 2019.
At the prudential level, establishment, in November 2018 of a credit / deposit ratio at 120%, contributed to curbing banks’ needs for liquidity and bringing the overall volume of refinancing from 15.8 billion dinars at the end of 2018 to 11.5 billions at the end of 2019.
The different measures taken by the Central Bank of Tunisia contributed also to reducing demand for foreign currency and creating a new liquidity dynamics on the foreign exchange market which, boosted by a better monitoring of the external payments situation, helped to consolidate net assets in foreign currency, up from 84 days to 111 days of import, from one year to the next. These measures helped also to adjust the dinar’s downward track, breaking up, thus, with a virtually continuous depreciation circle initiated since the 2015 terrorist attacks. This resulted in a positive effect on external debt indicators.
On the other hand, the year 2019 was marked by a fostered resilience of the financial sector in favour of a better monitoring of credit and macro-financial risks following restrictive monetary policy and macro-prudential measures. However, macroeconomic conditions are still weighing down on the credit portfolio’s quality, which justifies the additional provisioning effort undertaken in 2019.
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Nevertheless, external balances’ improvement, resulting from the restrictive nature of monetary and budgetary policies since 2018 must not hide persisting vulnerabilities, notably at the energy balance’s balance level, which is ceaselessly deteriorating and dragging down the overall trade balance, in the absence of a viable transition strategy, aside from certain exporting sectors’ weak competitiveness.
In fact, recovery remains fragile and can only be preserved and boosted by striving rapidly to restore economic growth by implementing bold economic policies which come within the framework of overall structural reforms allowing for activity recovery notably in the foreign currency-generating sectors, namely phosphate and fuel. Notwithstanding these constraints, stabilisation efforts conducted by the authorities conferred Tunisia with a greater credibility internationally, notably with the IMF. This is demonstrated through the success of the fifth review of the Extended Facility Fund which was achieved in April 2019. Total disbursements with respect to this programme amounted to 1.6 billion dollars. However, slowness of the process to form the new Government hampered holding, over the last quarter of 2019, of the sixth review of the above-said programme and arose reflection around a new form of financial cooperation with the Fund.
Concurrently with financial assistance, the year 2019 also bore the mark of a significant fostering of technical cooperation, established thanks to the BCT’s close ties with its partners. This cooperation is intended to technical support over a wide range of activities covering the Bank’s main professions, as well as to accompanying implementation of the BCT’s first Strategic Plan, spanning the 2019-2021 period. The adopted approach in this regard reconciles the need to improve operational soundness with the requirements of the ecosystem where the Bank operates.
Besides, within its strategic approach and in line with financial technologies industry, the BCT has assigned to itself a "Facilitator" role with the Fintech ecosystem. In fact, the year 2019 was devoted to preparing the establishment of efficient mechanisms capable of promoting financial innovation in Tunisia, while preserving a sound operation of the financial system. This is how the Fintech Committee was created, within a participatory approach, and was in charge of getting the issuing Institute closer to the Startups community specialised in finance-oriented solutions. In addition, the regulatory SandBox was created, constituting a space for real tests and a managed- care environment to initiate innovations, aside from the financial inclusion Unit and the banking services consumers protection Unit which aims at favouring financial inclusion and protecting banking services’ users. This action is part of the triennial strategic plan, the aim of which is to promote good practices and reinforce economic actors’ confidence in the financial system, by covering all aspects of the Bank-Client relationship.
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Note of the Governor
Through these structures, and by means of a more pronounced opening up on its ecosystem notably the technological one, the Central Bank of Tunisia contributes to establishing a new financial culture spotlighting new payment modes which substitute for cash. The BCT aims, in this context, at achieving two objectives. The first one is relevant to modernising payment means towards more convenient ones for users. In his respect, the regulatory text on Mobile Payment establishment was promulgated in May 2020. The second objective consists in being endowed with a supplementary protection against money laundering and terrorism financing. Worth to be recalled, in this context, that considerable efforts were rewarded in October 2019 by Tunisia’s delisting from GAFI’s black list after 20 months of ranking, thanks, notably to the Tunisian Commission of Financial Analyses’ achievements.
For the year 2020, the rampant spread of the Covid-19 pandemic and the ensuing drastic containment measures have severely shaken markets and affected economic agents’ attitude, announcing entry of several countries in the world, including Tunisia, in a steep recession.
Faced up with this unprecedented crisis which fomented uncertainty, decision-making was not easy. In this tumultuous environment, the Central Bank has privileged financial stability considerations by being committed, with determination, alongside the Government, in a logic favouring rescue of productive entities and jobs, while keeping in mind the need to prepare the post-Covid 19 period and ensure that businesses preserve their sustainability and get ready to take profit from the new opportunities that are offered to them, both nationwide and worldwide. In this regard, the BCT took a number of measures intended to supporting households’ purchasing power and businesses’ viability, and decided to lower its key rate by 100 basis points, bringing it to 6.75%, while adapting its monetary policy’s operational facility (intervention mode, collateral policy, etc.) to meet the economy’s needs for liquidity with the sole objective of containing real threats surrounding the productive ecosystem and financial stability.
The Central Bank also postponed loan maturities for both individuals and professionals and granted exceptional financing to cover the operating cycle’s justified needs, completing measures taken by the Government, notably as regards the banking loans guarantee facility. Concurrently, support measures were accompanied by prudential norms’ easing up, notably the credits / deposits ratio to make the banking sector better support businesses. These measures were corroborated by the BCT’s decision, in March 2020, to suspend every distribution of dividends with respect to the financial year 2019 so as to face up to ultimate fallouts from the COVID-19 health crisis.
It needs to be reminded, moreover, that the BCT adopted, proactively, its activity continuity plan (PCA) in order to ensure basic missions and maintain vital services.
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In this framework, the BCT ensured continuity of payment services as per a process adapted to the total containment context and encourage remote operations. Thus, a national interoperable mobile payment platform was established with the intervening parties in a record time so as to make disbursement of social aids easier by endowing beneficiaries with digital wallets to receive these aids. This is how the BCT is striving to fully exploit the potential of technological tools as regards payments, expand the use of the digital channel to other governmental payments. This constitutes the key factor to the success of decashing and financial inclusion.
The approach adopted by Tunisia in managing the coronavirus crisis privileged rescue of human lives while making sure that the economic and social fabric is preserved. However, prospects for 2020 remain difficult and uncertain throughout the world, depending not only on the crisis duration and success of support measures over the containment period but also on the speed of recovery and the risk of a new wave of the pandemic. In this context, it becomes imperative that authorities adopt a recovery plan which is part of a national comprehensive and coherent strategy, conciliating the short- term urgency with medium and long-term aspirations.
This plan should focus on a rapid and sound resumption of economic activity, which has gone into hibernation for 3 months, notably the most COVID-19 affected sectors. It has to go first and foremost, through a resumption of the phosphate and fuel activity which are causing considerable shortfalls, as well as adjustment of the Tunisian economy’s structural vulnerabilities by boosting structural reforms. The latter should help to change the economic and social development model and reposition Tunisia within its regional and international environment deeply affected by the pandemic.
The above-mentioned non-exhaustive reforms are required but insufficient given the importance of challenges ahead. This is all the more so that Tunisia's financial resources are tight. As for the Central Bank, it will continue to watch over macro- economic stability, as an overriding determiner of the national economy’s resistance. On the other hand, the way out of the crisis will neither be easy nor imminent. Yet, the joint efforts of all intervening parties are needed to guarantee success of this challenge and provide evidence, once again, of our economy’s resilience to shocks, as it happened in the past, notably during the 2008 financial crisis, events during 2011 and the 2015 terrorist attacks, when our economy managed to stand up right and come out with minimal after-effects.
Marouane EL ABASSI Governor
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Contents
Contents
Note of the Governor
GOVERNANCE AND STRATEGY
- The Executive Board - Organization and human resources - International cooperation - Strategic plan 2019-2021 - BCT initiative to promote financial innovation in Tunisia - Risk management, control and compliance I- ECONOMIC, MONETARY AND FINANCIAL SITUATION
Chapter 1 – International environment Chapter 2 – National economic and financial environment Chapter 3 – External payments Chapter 4 – Money and financing of the economy II-MISSIONS OF THE BANK
Chapter 1 – Monetary policy Chapter 2 – Management of international reserves Chapter 3 – Payment systems and means Chapter 4 – Fiduciary circulation Chapter 5 – Banking supervision Chapter 6 – Financial stability Chapter 7 – Financial inclusion and protection of banking services’ users FINANCIAL SITUATION OF THE CENTRAL BANK
- Analysis of the financial situation and results - Financial statements and statutory auditors' report Table of contents
Annual Report 2019 1
Governance and Strategy
The Executive Board 03/07/2020 1. Structure of the Board
Structure of the Central Bank of Tunisia’s Executive Board was fundamentally reviewed on the occasion of promulgation of the law n° 2016-35 of 25th April 2016 fixing the BCT’s statute, giving, for the first time, the possibility for two academic professors to be members of the Board. With the appointment of two new members in June 2019: Mrs. Leila BAGHDADI and Mr. Adelmoumen SOUYAH, the structure of the Board becomes as follows.
- Mr. Marouane EL ABASSI : Governor, Chairman ; - Mrs. Nadia AMARA GAMHA : Deputy-Governor; - Mr. Salah SAYEL : President of the Capital Market Council; - Mrs. Kaouther GHOMRASNI BABIA : in charge of public debt management at the Ministry of Finance; - Mr. Lotfi FRADI : in charge of forecasts at the Ministry of Economic development; - Mr. NOURI Fethi ZOUHAIR and Mrs. Leila BAGHDADI : Two academic professors specialized in Finance and Economics; - Mrs. Selma BEN CHEIKH BELLAGUA and Mr. Abdelmoumen SOUYAH: Two members who previously held positions in banks and who have at least 10 years in banking and financial experience.
Photo of the BCT’s Executive Board meeting held on 30 August 2019
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Governance and Strategy
2. Attributions According to article 63 of the law n°2016-35 of 25 April 2016 on the BCT’s statute, the Board mainly exercises the following attributions:
It defines the BCT’s strategy and policies in the fields of monetary policy and financial stability; It sets the general rules of investing the BCT’s equity and of the management of foreign exchange and gold reserves, as well as the follow up of their application terms; It creates, issues, withdraws and exchanges banknotes and coins; It sets interest rates and commissions charged on the Central Bank operations.
3. Activities Over 2019, the BCT’s Executive Board held six statutory meetings. These meetings have mainly had on their agenda:
Raising by 100 basis points the BCT’s key interest rate in February 2019; Examining the auditors’ report on the Financial Statements of the Central Bank of Tunisia with respect to 2018 financial year, and on internal control procedures; Approval of the audited financial statements with respect to 2018 financial year and the allocation of related result; Approval of the Central Bank of Tunisia ‘s first three-year Strategic Plan (2019-2021); Setting the Central Bank of Tunisia’s budget for 2020 ;
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Organisation and human resources
06/07/2020
1. Organisational development Over 2019, the Organisation pursued, within the framework of a quality approach, its works focused on priority actions regarding the development of the Bank's activities. These works are summarized as follows: The Organisation has contributed to several projects to ensure better coordination and improve decision-making in the Bank, in particular concerning: the introduction of the new projects management mode in the Bank, the establishment of operating modes of domains, and the development of external communication by the Bank’s staff. • Based on field actions, the Organisation dealt with two issues concerning in-land branches by: . carrying out an organisational diagnosis on the adequacy of the staff in number, and quality and branches means in line with their workload, and recommending measures to optimise the in-land branches’ staff in order to preserve the quality of money processing and recycling, . Conducting a reflection on the role of in-land branches to examine to what extent these branches, which primarily manage a sovereign function of the Bank, can provide new Bank activities, other than the fiduciary, to contribute to decentralizing the Bank's services and offer better public access to these services within the regions. The diagnosis helped to summarize the current status of the decentralized operations currently carried out by the branches and to make suggestions for the development of their activities in the short and medium term. The Organisation contributed to the diagnostic work of the branches’ physical security in order to provide an opinion on the quality of branch security and the modalities of the security teams organisation. - Furthermore, and with regard to specific requests, the Organisation worked on the elaboration and improvement of certain procedures. It is in this context, for instance, that the procedure relating to the documents privacy, the review of the trade operations of the Money Museum, and the standardisation of the presentation of notes addressed to the Bank's Governing Board were elaborated. Doing so, the Organisation supports, in conjunction with the Bank's strategic orientations, the capacity of professions’ change for improvement, optimisation and reconstructing. It cooperates with the departments to meet a number of contextual and internal challenges and to accompany the new organisational dynamics as well as new management modes based on multidisciplinarity and transversality for a sound governance. 2. Human resources and social balance sheet The Central Bank of Tunisia’s staff increased by 45 staff members in 2019 compared to 2018, up from 879 to 924 from one year to the next. This increase results from hiring 97 new recruits and taking up jobs for 7 students sponsored by the Bank and graduated from the Arab Maghreb Development Financing Institute (IFID), against the retirement of 59 agents.
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Governance and Strategy
The year 2019 was also marked by the launch of the reform of the statute of the Bank’s staff, the project of which is being finalized in the framework of the implementation of the Bank’s strategic plan (2019-2021). 2-1. Career management and development 2-1-1 Staff members The Central Banks total staff member set as of 31/12/2019 is broken down as follows:
Table 1: Breakdown of the Bank’s total staff number by position Categories Number Share in % Active Staff 886 95.9% of whom: Established staff 771 • Contractual agents (undetermined deadline) 3 • Contractual agents (determined deadline) 2 • Seconded staff at the Bank 7 • Trainees 103 Secondment 20 2.2% Non active service 18 1.9% Total Staff 924 100%
The breakdown of staff by gender, at the end of the same year, is presented as follows:
Table 2: Breakdown of staff by gender Gender Number Share in % Women 377 40.80 Men 547 59.20 Total 924 100.0
By age, 31.28% of the Bank’s staff are aged 50 years and more (a falling figure compared to 2018 which was 38.23%) while 28.25% are less than 35 years old. The age of the remaining staff (40.47%) ranges between 35 and 49 years.
Graphic 1: Breakdown of staff by age Men Women
from 55 to 60 years 110 53
from 50 to 54 years 83 43
from 45 to 49 years 77 37
from 40 to 44 years 84 33
from 35 to 39 years 82 61
from 30 to 34 years 60 56
from 25 to 29 years 41 76
less than 25 years 10 18
2-1-2 Recruitment and mobility a) Recruitment Over 2019, a competitive entrance examination helped the Bank to boost its staff through hiring 97 new recruits.
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The Bank has also hired five (07) students from the Arab Maghreb Development Financing Institute (IFID) and sponsored ten (10) new students who will be hired in 2020. b) Mobility Over 2019, thirty-five (35) requests for mobility between Bank’s departments and between the head office and in-land branches, were submitted by the Bank’s staff. 2-1-3 Training activity over 2019 Over 2019, the participation rate at training courses posted 40% of the overall staff. These trainings were broken down as follows: 54% for in-bank training, 28% for training abroad, 10% for training in Tunisia and 8% for training leading to certification. 2-1-3-1 Specialised training Training abroad Sixty (60) agents of the Bank have participated in training courses abroad. These courses were organised by international financial institutions such as the International Monetary Fund (IMF) and the Arab Monetary Fund (AMF), as well as foreign central banks. Training in Tunisia Seventy-nine (79) staff members took part in training courses in Tunisia organised by local training firms. In-bank training One hundred and sixty (160) staff members participated in three in-bank seminars presented by the Bank’s executives. 2-1-3-2 Training leading to certification Training at the Academy of Banks and Finances (ABF) Ten (10) agents were enrolled in the preparatory cycle and twelve (12) others in the medium- level cycle of the Academy of Banks and Finances (ABF), while two (2) other agents were enrolled in the courses of the Banking Techniques Institute (ITB). Master degrees Twelve (12) Bank agents were enrolled in the fifth and last certificate in the framework of the Executive Master in principles and practices of Islamic finance, organised by Paris-Dauphine University of Tunis in collaboration with the Central Bank of Tunisia. IFID Training Ten (10) students sponsored by the bank with respect to the 38th IFID promotion, were enrolled in the first year of study, while (10) students from the 37th IFID promotion were enrolled in the second year of study. 2-1-3-3 Educational projects Over 2019, the Bank received one hundred and two (102) trainees as part of different kinds of internships. Likewise, many universities took advantage of actions in the form of study visits and presentations followed by discussion. Besides, delegations from the Central Bank of Libya and the Central Bank of Madagascar were received within the framework of study visits at the Bank.
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Governance and Strategy
2-1-3-4 Meeting with training managers of French-speaking Central Banks The Central Bank of Tunisia organized on 25 and 26 June 2019 in Tunis and for the first time, the 15th meeting of Training Managers of French-speaking Central Banks on: “Challenges for training digitalisation within a Central Bank”. This meeting, that gathered fifteen (15) participants from twelve (12) central banks, was an occasion to discuss opportunities, threats and specificities related to the implementation of an approach of digitalization of the training activity for a central bank, in a forward-thinking perspective to anticipate transformations that may concern capacities building as a whole. 2-2. Remuneration policy The average remuneration in 2019 grew by 7.4% compared to 2018 due to the combined effect of wage increase enforcement and to the staff promotion effect, in ranking and job position. 2-3. Social policy 2-3-1 Loans to the staff At the end of 2019, the Social Fund’s available money dropped remarkably by 73% compared to 2018, down from 3.8 MTD to 1 MTD. This fall is mainly attributable to the increase in disbursements with respect to the different categories of social loans to the staff. 2-3-2 Retirement Over 2019, 59 agents retired, 47 of whom reached the retirement age, while 12 were admitted to early retirement. 2-3-3 Health insurance and social welfare 2-3-3-1 Curative healthcare Over 2019, reimbursements with respect to health insurance went on at a high pace compared to 2018, up by 6%. 2-3-3-2 Preventive healthcare and social assistance In keeping with its habitual preventive medical assistance, the Central Bank of Tunisia achieved, over 2019 with the help of two contractual doctors (a general practitioner and a cardiologist), a nurse and three contracted laboratories, the medical services indicated in the following table:
Table 3: Medical services Description Number of agents Analyses 684 Visits 573 Electrocardiograms 370 Vaccinations 229 (97 Head office + 132 Branches)
The Bank has also organized campaigns to raise awareness of blood donation as well as of diabetes. Besides, and within the framework of food safety, unannounced visits to the Bank’s kitchen and restaurant, and bacteriological screening programmes were carried out by specialised laboratories over 2019.
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International cooperation 07/07/2020 25/06/2019 Over 2019, international cooperation was characterized by the consolidation of financial cooperation with international monetary institutions. The year 2019 was also marked by notable strengthening of technical cooperation, thanks to privileged BCT relations with its technical partners, intended to support implementation of its first Strategic Plan for the 2019-2021 period. Besides, the BCT, in charge of the work of the Permanent Secretariat of the Board of Governors of the Arab Maghreb Union Countries’ Central Banks since November 2018, played a major role in giving concrete forms to the action plan decided by the Governors of Maghreb Central Banks, at the 8th session of their meeting held in Tunis in November 2018. On the other hand, the BCT’s strong presence at international and regional events abroad and the organisation of high-level events in Tunis were an occasion to exchange opinions and to share experience.
1. International Cooperation
1-1 Financial cooperation with monetary organisations
1-1-1. Financial cooperation with the IMF
The international Monetary Fund’ (IMF) Executive Board approved, on 12 June 2019, the fifth review of the Extended Fund Facility (EFF) programme which was held from 27 March to 9 April 2019. The successful achievement of this review has allowed Tunisian authorities to release an amount worth 176.7824 million SDR (around 245 million dollars) with respect to the sixth tranche of the EFF, bringing thus total disbursements to 1,161.7133 million SDR (about 1.6 billion dollars). Nonetheless, the slow process of forming the new Government has hampered holding, over the last quarter of 2019, of the sixth review of the said programme and gave way to reflection on a new form of financial cooperation.
1-1-2. Financial cooperation with the AMF
Within the framework of the follow up of the implementation of the reforms programme, supporting a facility of the promotion of small and medium-sized businesses, contracted with the Arab Monetary Fund (AMF) in 2018, covering an envelope of 18.5 million (AAD) Arab Accounting Dinar (corresponding to 76.5 million dollars), a fund’s mission was held from 23 to 27 September 2019. The fast implementation of the engaged reforms allowed the disbursement of the second and last tranche of the above-said facility for an amount worth 9.27 million AAD (38.6 million dollars).
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Governance and Strategy
2. Technical cooperation
2-1. Cooperation with technical partners
In addition to technical support on a wide range of activities covering the Bank's main professions, namely Banking Supervision, Monetary Policy and Foreign Exchange Market, the year 2019 was characterized by an influx of technical assistance to support the implementation of projects included in the BCT's first Strategic Plan. To do so, the BCT adopted a proactive approach guaranteeing an efficient allocation of this pool of skills adapted to the requirements of projects, whether strategic or operational. The following graphic sums up support of Tunisia’s main technical partners in terms of project number:
Graphic 1: Technical partners’ support to BCT projects 2019-2021
10
9 1 8
7 1 6 4
5
4 8 1
Number 3 6 2 1 2 4 3 1 2 2 2 1 0 GIZ WB IFC EBRD SECO-BCC IMF KFW CwA
Operational projects Strategic projects With GIZ: German Development Agency BM: World Bank IFC: International Financial Company under the World Bank Group EBRD: European Bank for Reconstruction and Development SECO: State Secretariat for the Swiss Economy IMF: International Monetary Fund KFW: German Development Bank CwA: Multi-donor Compact with Africa Fund
2-2. Bilateral cooperation with Central Banks As a concrete expression of its willingness to further deepen the bilateral sharing of experiences in various skills’ fields, the Central Bank of Tunisia signed two conventions: a general cooperation convention with the Banque de France, on 28 March 2019, in the margins of the symposium organised on the occasion of the euro’s 20th anniversary in Paris,
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A cooperation convention with the National Bank of Ukraine (NBU), on 5 September 2019, covering in particular monetary policy, foreign exchange regulations, transformation and communication, in addition to all other aspects related to Central Banks’ activities. It is therefore judicious to note that the participation of BCT executives in study visits to the Bank of Spain, has given impetus to a cooperation that will soon be formalised by signing a convention between the two sister-institutions. 3. Works of the Board of Governors of Arab Maghreb Union Central Banks The year 2019 was marked by the implementation of the decisions taken during the 8th session of the Board of Governors of the Arab Maghreb Union Countries’ Central Banks on 17 November 2018 in Tunis. The Central Bank of Tunisia played the role of a catalyst of works of the technical committees relating to "Fintech and Cryptocurrency", "Financial Inclusion", "Participatory Finance" and "Combating Money Laundering and Terrorism Financing", in particular by providing them with international expertise and digital infrastructure. The remarkable efforts made by the Permanent Secretariat to reinforce the necessary synergies between the five Central Banks of the Maghreb region were crowned by the organisation of the meetings of Technical Committees in March and November 2019. These high-level events, backed by international expertise, laid the first foundations for effective cooperation. This is reflected, in particular, in the development of surveys and studies on opportunities presented by digital financial services, notably in favour of financial inclusion. Also, the sharing of experiences on the central banks’ role to back up the efforts of authorities to face up money laundering and terrorist financing’s threats, and the creation of an exchange space on good practices to boost participatory finance and contain the problems faced by Islamic banks in the Arab Maghreb. 4. Participation and representation of the BCT at events abroad Concurrently with international cooperation’s dynamic, the BCT intensified, in 2019, its participation in international and regional events as well as in those organised by its bilateral and multilateral partners. As usual, the Central Bank of Tunisia participated, in April and October 2019, in the spring meetings and annual meetings of the IMF and the World Bank held in Washington, as well as the annual meetings of the Arab financial institutions held in Kuwait on April 25 of the same year. On the other hand, the BCT, with a view to strengthening its presence in Africa, participated in the meetings of the Bureau of Association of African Central Banks in Dakar in March 2019, the 26th Annual General Meeting of Afreximbank Shareholders in Moscow in June 2019 and the annual meetings of the Association of African Central Banks in Kigali in August 2019. In addition to participating in annual meetings and events, the BCT opted for strong representation at conferences organised by sister central banks or major technical partners, of which notably:
The Third Middle East and Africa Fintech Forum, organised by the Central Bank of Bahrain, on 21 February 2019.
The high-level conference on: Digital transformation : Balancing Fintech opportunities and risks : Implementing the “Bali Fintech Agenda » , the « Global Green Finance Conference » and the 2nd edition of « Africa Blockchain Summit », organised by Bank Al Maghreb in Rabat in March, October and November 2019.
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Governance and Strategy
The symposium on the occasion of the Euro’s 20th anniversary, on “Euro Zone: staying the course through uncertainties” organised by the Banque de France in March 2019.
The 7th annual conference of the BCC programme funded by the Secretariat of State for Economic Affairs (SECO) on: Interaction of fiscal and monetary policies », organised in Geneva in September 2019.
Furthermore, 2019 ended with the BCT participation in the annual conference of the European Institute of the Mediterranean (IEMed) on: Financial integration and inclusive development: A view from the Mediterranean Countries”, organised jointly by the IEMed, Bank of Spain and the OECD on 13 December 2019, in Madrid.
5. Events organised by the BCT
With a view to embodying the culture of openness to its external environment, the BCT organised in partnership with the German Cooperation (GIZ), in August 2019, a meeting with Tunisians Living Abroad about "Diaspora-financing the economy: new approaches for a win-win partnership". This event was the ideal framework to renew and strengthen ties with Tunisians skills living abroad in a context of partnership and networking.
On another level and in its ongoing approach to promote and support digital financial services, the Central Bank of Tunisia organised, jointly with the World Bank, on 23 April 2019, a high- level workshop about: "Digital Payments and the New Economy" allowing participants to highlight the opportunities offered by the development of digital payments as a vector of financial inclusion in Africa and the Maghreb.
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Strategic Plan 2019-2021 01/07/2020
In the framework of carrying out the strategic projects which fall within the triennial 2019-2021 plan, the Transformation Unit prioritised 42 projects chosen by the above-said plan, taking account of their sizes, achievement deadlines and complexity. After having established this prioritisation, a first range, including (20) strategic projects, was set and the related project sheets were conveyed, by the Unit, to the appointed sponsors of these projects, so as to inquire about the different components of these projects and the planning of their achievement. 1. The strategic project management system The adoption of a strategic projects management system1 is intended to improving soundness and efficiency, tied respectively to results and use of resources, representing the two complementary constituents of performance. This system, drawing from the PMBOK62’s ISO 21500 norm, is a prerequisite for the good conduct of projects, as well as achievement of the triennial 2019-2021 plan’s objectives. This system is broken down into 4 components as mentioned in the graphic below:
Graphic 1: The strategic projects management system
strategic projects' governance parttern
strategic strategic projects' projects' SYMPROS management monotoring process platform
change-backing actions
1-1. Strategic projects’ Governance Model The project-oriented management system is established in such a way as it can coexist with the hierarchical management system. This matrix-type organisation, which ensured that the sponsor and the project manager are two separate departments, aims primarily at breaking up silos which may
1It is one of the triennial 2019-2021 plan’s 42 strategic projects, under the name of Sympros. 2 Project Management Body of Knowledge. Annual Report 2019 17
Governance and Strategy hamper the good operation of the Bank's activities. In this regard, strategic projects’ governance is different from the operational one and draws up relationships between different actors and authorities as defined in the graph below:
Graphic 2: strategic projects’ Governance Model1
Management Executive Board Strategic Steering Committee Committee Secretariat (agenda,
Minute…)
)
Monthly reporting Project Sponsor
Follow-up and the project
coordination Presentation (frequency to Committee be determined according to
. Project manager Project Committee . Other departents if need . Project Team . External service provider . Client department(s)
1-2. Strategic projects monitoring Platform Setting up Online Project is part of an overall approach to improve project management methods. Thanks to this strategic projects monitoring platform named "PS²", which is configured and adapted to BCT needs, the Strategic Steering Committee (COPIL) as well as the Project Management Office (PMO) can consult in real time: . A Dashboard reflecting projects’ progress as reported by project managers, . A centralised and consolidated view of projects’ plannings, . Every documentation of strategic projects.
1-3. Backing-up actions: or how to bridge the gap between planning and execution?
In order to bridge the gap between planning and execution, a whole back-up programme was established through the Transformation Unit’s collaboration with the Bank’s different departments: . Training on project management, strategic projects’ topics and soft skills coaching, . Prospection of technical assistance offers for the sound execution of strategic projects, . Review of the procurement process in order to optimise purchase operations.
1 COPIL: Strategic steering committee /PMO: Project management office / COPROJ: project Committee. Annual Report 2019 18
BCT initiatives to promote financial innovation in Tunisia 02/07/2020
In its strategic approach, in line with the financial technologies industry, the BCT took the role of "Facilitator" with the Fintech ecosystem. The year 2019 was devoted to preparing the implementation of sound mechanisms capable of promoting financial innovation in Tunisia, while preserving a sound operating of the financial system. 1. The Fintech Committee: Launched since 9 January 2019, the Fintech Committee has notably undertaken the following actions: • Organisation of ten meetings with Fintechs in the presence of representatives of the BCT’s relevant departments to talk over several Regtech, E-KYC, Big Data, E-wallet, instant payments solutions etc…; • Organization of a Proof of Concept related to digitisation of bilateral transfers between the BCT and a Central Bank from the Maghreb in the presence of a Tunisian Fintech and by using the blockchain technology; • Participation in works of the programme to assess the maturity of digital economy in Tunisia led by the Ministry in charge of digital economy and assisted by the World Bank.
2. The regulatory Sandbox Being a framework for direct and small-scale innovations’ real testes, in a controlled environment, the BCT aims, by launching a regulatory Sandbox, at favouring financial inclusion, financial stability and protection of banking and financial services’ users. It is in this context that the BCT organised, on 11 December 2019, a consultation meeting with the innovation ecosystem in Tunisia, attended by World Bank experts as well as the ecosystem’s different intervening parties. This was the occasion to outline the regulatory Sandbox’s operating modalities and collect remarks on the approach adopted by the BCT. In order to make this participatory approach concrete, an email address « [email protected] » was dedicated to receiving the Fintech ecosystem’s proposals. On the other hand, the official launch ceremony of the BCT’s regulatory Sandbox was organized on 20 January 2020 with the participation of all intervening parties. 3. The WEB site Following the national call for bids launched in August 2019, an editor was chosen for the conception and development of a logo “BCT-Fintech”, a website and a Fintech database management application. Towards the end of 2019, the Fintech Committee finalised the web content and validated the web-site which must be subject to invasion of-privacy tests before start of production. The "BCT-Fintech" logo was registered in INNORPI on 21 January 2020. 4. The BCT-Lab Following the national call for bids launched over December 2019, a company was chosen to arrange and lay out the BCT-Lab within 90 days. Covering an area of 300 m2 and made up of a
Annual Report 2019 19
Governance and Strategy modern technical platform and meeting and pitch space, the BCT-Lab will be used to digitalise the Bank's internal processes and watch over technological innovation. 5. Coordination and cooperation initiatives • Maghreb Committee of Fintechs: Under the Supervision of the Board of the Arab Maghreb Central Banks’ Governors, the Maghreb Committee of Fintechs met over 2019 twice. The first meeting of the Committee, organised over March 2019, was devoted to elaborating a "Maghreb Agenda of Fintechs ". On the occasion of the second meeting of the Committee, organised in the margins of the Maghreb Union anniversary, projects scheduled in the Committee’s agenda, of which the feasibility study to create a trans-Maghreb transfers platform, were discussed. • Regional Fintech task force: Created by the Arab Monetary Fund, this task force is made up of representatives of Arab central banks and commercial banks, Fintechs and experts from diverse regional and international institutions. This task force constitutes a dialogue platform on questions related to the Fintech sector’s development in the Arab region and the risks inherent to new technologies. To do so, two sub-task forces were constituted, namely: An advisory and organisational sub-task force in charge of elaborating the orientations of a strategy capable of boosting financial innovation in the Arab region.
A technical sub-task in charge of carrying out a survey on digital identity and E-KYC with a view to issuing guidelines to provide regulators with a better understanding of these issues and have a clear idea on best international practices.
Annual Report 2019 20
Risk management, control and compliance 03/08/2020
1. Risk management
Since its recent creation, the operational risk management structure has endeavoured to develop, on a priority basis, an appropriate framework for the risk management practice at the Bank, lined up with both good practices at central banks and international standards. These works focused on establishing the risk management facility’s main components and its underlying processes, of which notably: formalisation of an operational risk management policy which defines operational risks’ concepts and management approach, intervening parties’ roles and responsibilities and the risk appetite policy. elaboration of a draft charter fixing the structure, the roles and operating modalities to be created. the constitution of a network of risk correspondents and setting their attributions. After completion of relevant projects, the regulatory texts governing operational risk management facility will come into effect over 2020. Within a pragmatic approach and by means of an outstanding work with the Bank’s officials, the risk management structure strived to: establish incident notification and incident base mechanisms. raise the awareness of managers and operational staff about their first responsibility with respect to operational risk management. encourage incident reports to look for their causes and prevent against their recidivity. respond to incident notification via risk correspondents and heads of departments, by providing the required support to document and understand the transactional processes, decisions and conditions having incurred a given risk. analyse and follow up incident resolution via interviews and workshops with operational staff and relevant parties, and submit, if needs be, a report to be examined by a committee presided over by the Bank’s Governing Board in case of incidents deemed of high risk. follow the action plan and inform the Bank’s Governing Board of incurred risks and the required joint actions to improve the Bank’s resilience. The risk management structure has also started to elaborate the risk cartography related to the Bank’s branches’ activities as a pilot area. With respect to the year 2019, four reports were elaborated on operational risks. An annual report of the incidents that the Bank was subject to sets the background of risks at the Bank and highlights the profile of the institution’s risks generated by its activities, its information system and particularly exposed transactions.
Annual Report 2019 21
Governance and Strategy
The risk management structure ambition is to carry on with its works aiming to, draw up an even risk measurement methodology, be better equipped, within the perspective of fostering the approach’s coherence and help to better value the contribution and benefits of risk management and therefore ensure a sounder governance of the Bank.
2. Internal audit
In order to face up to the Bank’s strategic concerns, the internal audit function has to be permanently adapted to its institution’s organisational evolutions, so as to be set up as a highly performing activity capable of meeting the expectations of the Bank’s Governing structures. In this regard, the year 2019 was marked by the internal audit department’s restructuring. As a result, it was entrusted, in addition to its current attributions as regards internal audit and on-site inspection, with missions related to quality control of internal audit missions’ works and the quarterly follow up of recommendations, as well as audit missions of the information systems’ security. Governed by a solid regulatory framework, constituted by the internal audit chart, the permanent internal audit committee’s chart and the BCT’s internal auditors’ code of ethics, internal audit is ceaselessly improving its regulatory framework. In this respect, and over 2019, internal audit published two regulatory texts, namely the “Methodological framework of the process to implement and follow up the Bank’s internal and external audit” and the “Internal audit Manual” which will serve as a practical guide for the Internal Audit Activity. Description of internal audit activities’ achievements over the financial year 2019 is as follows: . Insurance-generating activities Over 2019, internal audit accomplished 23 audit and inspection missions: 14 insurance missions, 3 consulting missions and 6 cash offices and branches inspection missions
. Other activities
Follow up of recommendations
With respect to 2019, internal audit carried out three quarterly follow-up sessions (June, September and December). Worth of note that the overall annual achievement rate of recommendations, for all risks, during the three sessions is estimated, on the initial basis of June 2019, at about 42.6% (corresponding to 144 out of 338) against 12.5% in 2018 ( corresponding to 41 out of 327). Secretariat of the Permanent Audit Committee (PAC) Over 2019, internal audit organised six PAC meetings relevant, on the one hand, to internal audit’s own activity and its obligation of accountability to the PAC as per its chart, and on the other hand to the PAC’s assistance in examining external auditors’ activity, planning and implementation of their tasks. Relationships with external service providers and miscellaneous activities • Coordination with External Auditors • Coordination of the International Monetary Fund (IMF)’s mission on the Bank’s back-up facilities assessment. • Co-organisation of the regional seminar on « internal audit and control » by the Central Bank of Tunisia Institute jointly with the International Banking and Financial Institute (IBFI) of the Banque de France , held on 18-20 June 2019 in Tunis.
Annual Report 2019 22
. Ressources Like the previous years, internal audit has seen to implementing internal auditors’ training plan with a view to improving their knowledge and skills. In this context, team members participated in 4 training actions abroad and 5 in Tunisia, as well as in a one-week practical training at a foreign Central Bank. Likewise, internal auditors are currently enrolled in the “Certified Internal Audit” certification programme. In order to enhance its human resources, 3 executives graduated in accountancy and finance joined the internal audit over 2019.
The BCT’s internal control system
The BCT’s internal control system is part of an overall facility structured around three control functions: . Permanent control which is organised as follows: Control of managerial hierarchy in each activity of the Bank. It corresponds to operational controls which consist in ensuring a sound implementation of rules as defined by the procedures and methods into force. Control carried out by functions dedicated to control and follow up, namely the risk management unit, the management control unit, the information system security unit, the cash offices control unit, and control and follow up units. . Periodic control exercised by internal audit which ensures, periodically, and according to a risk-based annual audit programme, not only compliance but also accuracy and efficiency of permanent control. . External control which is achieved by two external auditors, members of Tunisia’s Order of Chartered Accountants, appointed upon decision of the Bank’s Executive Board.
3. Compliance
The compliance function was created at the Central Bank of Tunisia in 2019, when establishing the Bank’s three-year strategic plan and reviewing its organisational structures. This function has the priority mission of establishing a set of internal comprehensive compliance measures, based on external legal and regulatory requirements and on good practice standards tied to exercising a central bank’s activity. In this framework, and all over the year 2019, compliance function works focused, in a first step, on elaborating an action plan to finalise the internal regulatory framework relating to different relevant compliance domains. Thus, a particular attention was given to the two following questions: - Endowing the Central Bank of Tunisia with an internal regulatory framework as regards combating money laundering and terrorism financing. This was carried out through adoption of Service Note n° 2019-34 of 25 December 2019, related to internal norms to manage the money laundering and terrorism financing risk. This framework has become essential, taking account of international standards, even though the Central Bank of Tunisia is not considered as a subject person as per law n° 2015-26 of 7 August 2015 related to combating terrorism and money laundering repression and its activity involves relations, as per law n° 2016-35 of 25 April 2016, setting its statutes, with nothing but clients specified in a limited way by the said law.
Annual Report 2019 23
Governance and Strategy
Reviewing the Central Bank of Tunisia’s procurement procedures within the broader objective of pushing forward management of the Bank’s purchases policy. On the other hand, the access to information issue was also part of these works, by means of internal organisation norms and measures which aim at ensuring the Central Bank of Tunisia’s compliance with the relevant legal and regulatory system, while dealing, under the terms of the law, with difficulties arising from the legal classification of requested information or the ones resulting from the necessary preservation of information repositories’ rights In a second step, it is envisaged to continue deploying actions assigned to this function, taking account of its scope of responsibility and the one of other control structures of the Bank. These include, among others, ethical standards as well as follow up and assessment of non-compliance risks inherent to diverse professions of the Bank.
Annual Report 2019 24
Part I: Economic, monetary and financial situation
Chapter 1 – International environment 08/07/2019 1-1. International situation 29/07/2020 Against a backdrop of protracted uncertainties tied to trade policies and the Brexit, rising geopolitical tensions and persisting weaknesses in certain major emerging economies, world growth reached, over 2019, its lowest level since the 2008-2009 international financial crisis: 2.9% against 3.6% a year before. Economic activity deceleration was particularly accentuated in the manufacturing sector while rising trade and geopolitical tensions weighed down on corporate confidence, hence on investment decisions, as well as on trade of goods and services worldwide, increasing by just 0.9% against 3.8% in 2018. On the opposite, the services sector continued to show resistance, helping thus to maintain dynamism on the job market, with a world unemployment rate standing at 5.4% for the third year in a row. On the other hand, and amidst this context of activity slump and uncertainties combined with a widely monitored inflation in most countries, notably industrialized ones, central banks have conducted more accommodating monetary policies which contributed not only to curbing the world economic activity’s deterioration but also to supporting international capital markets and maintaining favourable financial conditions on the whole. Thus, major advanced and emerging countries’ Stock exchange indexes closed for the year 2019 on a strong increase, driven mainly by eased up trade disputes between the United States and China. In fact, the American indexes Dow Jones and Nasdaq, in particular, grew by 22.3% and 35.2%, respectively, from the end of 2018 to the end of 2019, thanks to the good performance of growth and employment in the United States which had positive repercussions on its main partners’ capital markets, notably the Japanese one with an 18.2% increase in the Nikkei index, as well as European Stock exchange markets, particularly the one of Paris where the Cac40 index went upwards by 26.4%. As for international foreign exchange markets, they were marked, over 2019, by a slight depreciation of the euro against the US dollar, coming to 1.121 dollar at the end of December, against 1.147 dollar a year before, in line with the sustained activity pace in the United States, as well as investors’ confidence in the Fed’s monetary policy’s credibility.
Graphic 1-1: Trends in certain international environment indicators
4.5 8.0
3.5 6.0 4.0 World growth (left scale) 2.5
2.0
1.5 0.0 In In % 0.5 -2.0 Worldwide inflation (left scale) -0.5 -4.0 -6.0 -1.5 -8.0 World trade of goods and services -2.5 -10.0 in volume (right scale) -3.5 -12.0 2016 2017 2018 2019 2020*
* IMF forecasts (April 2020) Source: IMF World Economic Outlook (April 2020)
Annual Report 2019 27
Chapter 1
1-1-1 Economic activity The world economy was hit by persisting protectionist measures that characterized commercial relationships worldwide, as well as by ongoing geopolitical tensions, notably in the Middle East, besides a tough Brexit and the manufacturing sector’s poor performance, particularly the automobile one. In fact, additional customs barriers and a worn out investment were the main factors that curbed the evolution of manufacturing activity. In this context, economic growth ran out of steam in advanced countries, coming to 1.7% against 2.2% in 2018. This meant, notably, industrial production slowdown in the wake of shrinking external demand and decreasing investments, affected by a climate of uncertainty in line with rising trade and geopolitical tensions, despite household consumption’s sound performance, sustained by a dynamic job market.
Table 1-1: Trends in certain economic indicators worldwide Economic growth Unemployment Description (in real terms & in %) (in % of working population) 2018 2019 20201 2018 2019 20201 WORLD 3.6 2.9 -3.0 5.4 5.4 .. Developed countries 2.2 1.7 -6.1 5.1 4.8 8.3 of which : United States 2.9 2.3 -5.9 3.9 3.7 10.4 Japan 0.3 0.7 -5.2 2.4 2.4 3.0 United Kingdom 1.3 1.4 -6.5 4.1 3.8 4.8 Euro Zone 1.9 1.2 -7.5 8.2 7.7 10.4 of which : - Germany 1.5 0.6 -7.0 3.4 3.2 3.9 - France 1.7 1.3 -7.2 9.0 8.5 10.4 - Italy 0.8 0.3 -9.1 10.6 10.0 12.7 Emerging & developing Countries2 4.5 3.7 -1.0 ...... of which : - China 6.7 6.1 1.2 3.8 3.6 4.3 - Russia 2.5 1.3 -5.5 4.8 4.6 4.9 - India 6.1 4.2 1.9 ...... - Brazil 1.3 1.1 -5.3 12.3 11.9 14.7 - Morocco 3.0 2.2 -3.7 9.8 9.2 12.5 - Tunisia 2.7 1.0 -4.3 15.5 14.9 .. Sources: IMF World Economic Outlook (April 2020), Ministry of development, investment and international cooperation and the National Statistics Institute. 1Forecasts. 2For this group of countries and as per estimates of the International Labour Organization, the unemployment rate varied in 2019 between a minimum of 3.1% in South East Asia and the Pacific and a maximum of 12.1% in North Africa.
Particularly, in the United States growth suffered a loss of momentum over the second half of 2019, affected, mainly, by the prolonged uncertainty of its trade policy and the drop in oil prices having discouraged investment in energy, while private consumption continued to perform well, driven mainly by a sustained improvement of employment and public expenditure incurred by the American Administration within the framework of its budgetary recovery programme instituted since 2018. In total, expansion of the American economy came to 2.3% against 2.9% in 2018. In the Euro Zone, weakening demand from its main partners, along with world trade deterioration, on the one hand, and the Brexit-related political uncertainties that prevailed throughout the year 2019, on the other hand, were the main factors that exacerbated activity slowdown, notably in manufacturing industries. Besides, structural challenges as well as
Annual Report 2019 28
International environment regulatory and ecological constraints have brought about more pressure on the promising branches of European industry, mainly the automobile one. As for the domestic market, local demand, supported by weak unemployment rates and favourable trends in salaries, was the main growth driver. Thus, the Euro Zone’s real GDP made a 1.2% progress against 1.9% in 2018. In the emerging and developing countries, activity slowdown was more pronounced (3.7% vs. 4.5%). In fact, several major economies belonging to this group experienced economic difficulties over 2019, mainly India where the growth rate was down to 4.2% against 6.1% a year before, in line, notably, with domestic demand deceleration, and to a lesser degree, China (6.1% vs. 6.7%), the economy of which was seriously hit by fallouts from the trade dispute with the United States which affected manufacturing activity, investments and trade. On the other hand, economic growth in the Middle East and North Africa (MENA) region virtually stagnated on the whole (0.3% vs. 1% in 2018), following intensified geopolitical tensions, political uncertainties and social unrest which affected some countries of the region. Particularly, the Middle East countries’ economies suffered from the double effect of security tensions in the Persian Gulf and the decline of oil prices, notably Iran (-7.6% vs. -5.4%) and Saudi Arabia (0.3% vs. 2.4%).
Graphic 1-2: Trend in certain economic situation Graphic 1-3: Trend in certain economic situation indicators in developed countries indicators in emerging and developing countries
8 8 8 8 6 6 6 6 4 4 4 4 2 2 2 2
0 0
-2 -2 0 0 In In %
-4 -4 % In -2 -2 -6 -6 -4 -4 -8 -8 -6 -6 -10 -10 -12 -12 -8 -8 -14 -14 -10 -10 2016 2017 2018 2019 2020* 2016 2017 2018 2019 2020*
Output growth Output growth Inflation Inflation Volume of imports of goods and services Volume of imports of goods and services Volume of exports of goods and services Volume of exports of goods and services *IMF forecasts (April 2020) *IMF forecasts (April 2020)
For the year 2020, the world growth would experience its worst recession as from the Great Depression, due to the health crisis tied to spread of COVID 19 which would hard hit the world economic activity. 1-1-2 World trade
Both trade tensions’ exacerbation and the climate of extended uncertainty they brought about throughout the year 2019 were the causes underlying decline of both investment and demand for capital goods which are subject to an extensive trade worldwide.
Thus, the volume of world trade of goods and services grew, over 2019, at its weakest pace since the end of the subprime crisis (0.9% vs. 3.8% a year before). World trade of goods also followed a similar trend (0.9% vs. 3.7%).
Annual Report 2019 29
Chapter 1
In value, world exports of goods denominated in dollar shrunk by 1.8% against a 5.9% progress a year before, in line with stagnation of traded quantities, combined with a drop in prices. As for terms of trade, they virtually stagnated for developed countries against a deterioration by 0.7% in 2018, while they were on a downward trend in emerging and developing countries (-1.3% vs. 1.5%), in the wake of the decrease in most commodity prices. Concerning world exports of services, they showed some resilience to an adverse world environment, thanks to the good performance of activity notably in the tourist sector which grew by about 4% in 2019. In total, world exports of services rose slightly by 1.1%, involving 5,841 billion dollars. For the year 2020, world trade would experience a sharp tightening related to the economic shock generated by COVID-19 pandemic and its impact on the world production. 1-1-3 International investments Affected by uncertainties about economic and trade policies, as well as by rising geopolitical risks, foreign direct investments (FDI) continued to decrease over 2019, although at a less pronounced pace than a year before (-1% vs. -5.6%), down to 1,394 billion dollars. This shrinking originates from developed countries, while flows towards developing countries, accounting for more than half of the world flows, remained stable. In fact, developed countries’ FDIs came to 643 billion dollars, corresponding to their lowest historical level, down by 6% compared with the previous year. This slump concerned, mainly, the European Union (EU) where flows decreased by 15%, posting 305 billion dollars in 2019, in line notably, with the collapse of FDIs in the Netherlands (-98%), following not only a disinvestment operation, but also their shrinking in the United Kingdom (-6%), in line with the Brexit. Nonetheless, the United States remained the leading recipient country of FDIs worldwide, though at a virtually stable package of about 251 billion dollars. As for developing economies, FDI flows remained unchanged at 695 billion dollars. However, this trend hides disparities between the regions, with increases of 16% in Latin America and the Caribbean and 3% in Africa against a 6% shrinking in Asia’s developing countries. Concerning North Africa, in particular, FDIs decreased by 11%, down to 14 billion dollars, following a sharp decline in Morocco (-45%). It is worth to be mentioned that Egypt remained the largest FDI recipient in the region with flows worth 8.5 billion dollars, driven mainly by the fuel and gas sector. As for corporate merger-acquisition operations worldwide, they declined by 40% over 2019 to 490 billion dollars, corresponding to their weakest level since 2014. Except for Africa, this drop affected all regions, in particular the European Union (-56%), involving an amount of 158 billion dollars and in North America (-19%) with a package of just 180 billion dollars. By sector of activity, merger-acquisitions shrunk, notably, in the services sector, corresponding to 56%, down to 207 billion dollars followed by the manufacturing sector with a 19% drop, totaling 249 billion dollars. For 2020, FDIs are expected to decline due to businesses’ reluctance to investment in a context marked by sharp uncertainties and by shrinking world economic activity. 1-1-4 Monetary policies
Faced up with the world economic slowdown and the absence of inflationary pressure, monetary policies were widely eased up in both developed and developing economies. This involves the biggest change of monetary policies since the world financial crisis. In particular, in the United-States, the historically low unemployment rate and the close- to- target inflation helped the American Federal Reserve to reverse its monetary policy’s course
Annual Report 2019 30
International environment and lower its key interest rate for the first time since December 2008. Thus, between July and October 2019, federal funds’ reference rate was reduced three times by 75 basis points in total, bringing it to a 1.50% -1.75% range, so as to boost economic growth which started to slow down starting from the second half of the year. Likewise, the European Central Bank (ECB) decided, in September 2019, to create a new monetary recovery added to the already widely accommodating policy faced up with economic activity deceleration and an inflation significantly below the 2% target. This involves measures to reduce banks’ deposit rate from -0.4% to -0.5%, while keeping the main refinancing rate at 0% and lending facilities’ marginal rate at 0.25%, besides the resumption of quantitative easing along with the restart, since November of the same year, of net purchases under the asset purchase programme at a monthly pace of 20 billion Euros.
1-1-5 Public finances
Unlike monetary policies which reacted quite rapidly against the economic situation’s deterioration, budgetary policies were relatively reluctant in most countries due, mainly, to high levels of sovereign debt which limited their room for manoeuvre. For all advanced countries, the budgetary deficit widened slightly over 2019, posting 3% of GDP against 2.6% a year before. This trend is particularly attributable to the public finances’ situation in the Euro Zone, the public accounts’ deficit of which went up from 0.5% to 0.7% of GDP, from one year to the next, following notably, reduction in direct taxation in certain member countries like France and the Netherlands. On the other hand, the United States continued to yield a significant federal budget deficit, corresponding to 5.8% of GDP against 5.7% in 2018, in line with the ongoing financing of the US Administration’s tax incentive programme in its final year.
Table 1-2: Trend in certain financial indicators worldwide Current account Inflation Budget balance balance (variation of consumer Description (in % of GDP) (in % of GDP) prices in %) 2018 2019 20201 2018 2019 20201 2018 2019 20201 Developed countries 0.7 0.7 0.1 -2.6 -3.0 -10.6 2.0 1.5 0 .5 of which : United States -2.4 -2.3 -2.6 -5.7 -5.8 -15.4 2.4 1.8 0.6 Japan 3.5 3.6 1.7 -2.4 -2.8 -7.1 1.0 0.5 0.2 United Kingdom -3.9 -3.8 -4.4 -2.2 -2.1 -8.3 2.5 1.8 1.2 Euro Zone 3.1 2.7 2.6 -0.5 -0.7 -7.5 1.8 1.2 0.2 of which : - Germany 7.4 7.1 6.6 1.9 1.4 -5.5 2.0 1.3 0.3 - France -0.6 -0.8 -0.7 -2.3 -3.0 -9.2 2.1 1.3 0.3 - Italy 2.5 3.0 3.1 -2.2 -1.6 -8.3 1.2 0.6 0.2 Emerging & developing countries -0.1 0.1 -0.9 -3.7 -4.7 -8.9 4 .8 5.0 4.6 of which : - China 0.4 1.0 0.5 -4.7 -6.4 -11.2 2.1 2.9 3.0 - Russia 6.8 3.8 0.7 2.9 1.9 -4.8 2.9 4.5 3.1 - India -2.1 -1.1 -0.6 -6.3 -7.4 -7.4 3.4 4.5 3.3 - Brazil -2.2 -2.7 -1.8 -7.2 -6.0 -9.3 3.7 3.7 3.6 - Morocco -5.3 -4.1 -7.8 -3.7 -4.1 -7.1 1.9 0.0 0.3 - Tunisia -11.2 -8.5 -7.5 -4.82 -3.52 -4.3 7.3 6.7 6.2 Sources: IMF World Economic Outlook (April 2020) and the Ministry of Finance 1Forecasts. 2 Excluding privatization and grants.
Annual Report 2019 31
Chapter 1
In emerging and developing countries, the budgetary policy was more expansionary in 2019, with a deficit reaching 4.7% of GDP, on average, against 3.7% a year before, particularly in China, where measures to revive demand by a decrease in the VAT within a context of economic slowdown meant an increase in the budget deficit to 6.4% against 4.7% in the previous year. In 2020, budgetary deficits should widen in both advanced countries and emerging and developing ones, in line with major measures taken by the States in order to limit the health crisis effects and prevent a deep slowdown in their economies.
1-1-6 Inflation
The decrease in international commodity prices, notably the ones of energy, and the moderate increase in wages, favoured an easing of inflation worldwide, coming at 3.6% in 2019. In developed countries and in spite of eased up monetary policies, lower energy prices and weak inflation of services fees helped to contain the trend in consumer prices which was limited, in all of these countries, to 1.5% against 2% in 2018. Inflation in emerging and developing countries accelerated slightly (5.0% vs. 4.8%) in line with the recovery measures taken by some major emerging countries to support their economies. For 2020, inflation should grow at a slower pace on the whole due to tightening of world demand and regression of the international prices of commodities, in particular, energy. 1-2. Capital markets 23/06/2020 1-2-1 Stock exchange markets
Over 2019, the MSCI world index, which measures main international Stock exchange market’s performance, progressed by more than 24%: its fourth strongest increase since its creation in 1969. Building on its progress initiated in the previous year, the Dow Jones soared by 22%, while the Nasdaq and the S&P 500 posted their best performance since 2013, leaping by 38% and 29%, respectively. In Europe, the FTSE 100 increased modestly by 12%, while the CAC 40 index, backed up by French growth resistance compared with its German counterpart, and the DAX closed for the year on a 26 % increase. In Asia, the best performance was ensured by the Shanghai Stock Exchange market which rebounded by 35% while the Japanese index Nikkei, supported by the BoJ's ultra- accommodating policy, won 21%. The sustained performance of Stock exchange markets drew its sources from very low interest rates worldwide, the progressive de-escalation of the Sino-American world trade and the dissipation of risks of a tough Brexit after the December 2018 legislative elections, won by Boris Johnson. International Stock exchange markets also took profit from a particularly strong digital dynamics over 2019 maintained by the GAFAs and the innovation race which revived hope in regenerating economic models and productivity sources. 1-2-2 Bond markets
The year 2019 was cadenced by political, geopolitical and economic uncertainties. It was also marked by a reinforced comeback of major central banks with monetary easings to tackle a sluggish economic growth in developed countries. The combination of these factors brought about a massive rush to safe havens, leading to a devastating drop in bond yield rates and even a reversal of the yield curve in the United States and an additional plummeting of European bond yield rates into negative territories.
Annual Report 2019 32
International environment
In the United States, the 10-year benchmark yield rate closed for the year at 1.90%, down by 80 bp compared to its level recorded at the beginning of the year (2.60%). As a sign of major fears about growth prospects in the United States, yields’ drop was accompanied by a reversal of the yield curve which took concrete form through the decrease in 2-year yield rates below 3-month monetary rates. Over the third quarter, the American yields curve was back to normal, in the wake of investors’ eased up fears and publication of relatively positive indicators showing a certain resiliency of the American economy. In Europe, the 10-year benchmark return reached a low of -0.71% on 28 August 2019, against 0.16% in the beginning of the year. Easing of investors' fears helped it to bounce back, closing for the year at -0.19%.
Graphic 1-4: Trends in 10-year American and German yield rates over 2019
In %
0.40
2.68 2.72 2.66 3.00 0.20 2.60 2.59 0.24 2.39 0.18 2.26 2.50 0.00 1.92 1.92 2.00 1.54 -0.20 -0.10 -0.18 1.50 -0.19 -0.23 -0.26 -0.40 1.00 -0.45 -0.60 0.50 -0.58
-0.80 0.00 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
GE 10-year yield rate US 10-year yield rate
1-3. International foreign exchange and gold markets Despite the drop three times in the Fed's key interest rates over 2019, the dollar kept up on an upward trend, reaching its highest level of the year, 1.0879 USD for one EURO in the beginning of October against 1.1344 in the beginning of the year, taking profit of its safe haven status. However, the commercial agreement announced by both the United States and China and the election of a majority conservative government in Great Britain which enhanced chances to ratify the Brexit, eased up fears on markets. This brought about a tracing of dollar’s drop, closing for the year at 1.1213 USD for one EURO. As for the Japanese yen, it started the year on a negative note, making a loss of more than 2% of its value against the dollar, up from 109.69 to 112.19 JPY on 24 April 2019. The yen suffered pressure due to the BoJ’s ongoing strongly expansionary monetary policy in order to avoid growth slowdown. The yen succeeded then to recover, taking profit, again, of its safe haven status, faced up with upheavals of Sino-American trade tensions and deteriorated growth prospects worldwide. It reached its highest level of the year against the dollar, 105.30 on 12 August 2019. After the lull in Sino-American trade tensions, the yen retroceded a part of its gains, closing for the year at 108.61, close to its opening level.
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Chapter 1
Graphic 1-5: Trends in the EUR/USD and the USD/JPY foreign exchange rates in 2019 114.00 1.16 1.1543 1.1465 112.19 112.00
1.14 110.00 109.97 109.74 1.1266 108.00 107.79 1.12
106.00 1.1132 1.1129
104.00 1.10 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19
USD/JPY EUR/USD
As for gold, and in spite of the spectacular increase in world stock markets, the best year for gold was 2019, winning 18% for the whole year, amidst monetary deflation and low interest rates environment. Gold opened the year at 1,284.59$ per ounce and closed it at 1,517.27$ per ounce. 1-4 Commodity prices 29/07/2020 In a context characterized by a weakening world economic activity based on growing uncertainties about the rise of trade and geopolitical tensions, reflected notably by a slowdown of the world industrial activity, international commodity prices went downwards, on the whole, over 2019. In fact, the global commodity prices index, established by the World Bank (WB), dropped by 8.4% against a 13.4% increase in 2018, due mainly to lower prices of energy (-12.7% vs. 27.8% a year before) and of metals (-9.9% vs. 6.6%), and to a lesser degree, those of foodstuff (-3.8% vs. 0.3%).
Graphic 1-6: Trend in commodity prices indexes
140 130 120 Energy index 110 100 Foodstuff index 90 Metal price index 80 70 60 50 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: World Bank commodity prices
Over 2020, a more pronounced drop is expected in most commodity prices, notably energy, in line with the sharp slowdown, and even the shrinking of the world economic activity and fears of a recession phase induced by the spread of the Coronavirus pandemic.
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International environment
1-4-1 Foodstuff International foodstuff prices went downwards over 2019, following abundant harvests as opposed to a shrinking demand, especially for cereals and vegetable oils, as well as the appreciation of the US dollar. As per estimates of the United Nations’ Food and Agriculture Organization (FAO), world cereal production was consolidated over 2019-2020 campaign, reaching a record level of 2,719 million tonnes, up by 2.3% compared to the previous harvest, owing mainly to a more important corn production in West Africa and Ukraine. In particular, and in spite of a rise in prices over the second half of 2019, the average annual price of wheat decreased by 3.9%, coming to 201.7 dollars per tonne. This fall is due, to a large extent, to the accumulated world reserves of this product, following more abundant harvests than expected in China, Russia and Ukraine. However, world prices of rice went upwards overall, throughout 2019, driven by a strong demand from the Far East and East Africa countries. Thus, prices closed for the year at 432 dollars per tonne, in December, against 404 dollars in the same month of 2018.
Graphic 1-7: Monthly trends in world prices of wheat (In dollars/tonne)
400
350
300
250 2018
200 2019
2017 150
100 January February March April May June July August September October November December
Source: World Bank Commodity Prices
On the other hand, vegetable oil prices went downwards over 2019, mainly, palm oil (-5.8%), soybean oil (-3%) as well as groundnut oil (-2.4%), resulting from a more substantial output than expected in Malaysia and a fall in import demand from India. Concerning olive oil, the international market experienced an unbalance between supply and demand, in line with two important successive harvests and a high level of stocks, which led to a drop in prices. For the 2019-2020 campaign, the European Commission estimates the world production of olive oil at 3,121 million tonnes, 70% of which (1,989 million tonnes) are produced in the European Union (EU). Outside the EU, olive oil production is expected to reach 1,133 million tonnes, in progress by 24% compared to the 2018-2019 campaign following mainly, a higher production in Tunisia, reaching 350 million tonnes (+150%) and in Turkey: 225 thousand tonnes (+16%).
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Chapter 1
Table 1-3: Average prices of foodstuff (In dollars/tonne)
Averages for the Variations in % period Places of Products Dec.2018 Dec.2019 quotation 2019 Dec,2019 2018 2019 2018 Dec.2018
Wheat Gulf ports U.S. 209.9 201.7 211.3 210.9 -3.9 -0.2
Rice Thailand 420.7 418.0 404.0 432.0 -0.6 6.9
Oils :
.Soybean Dutch ports 788.3 764.8 727.9 820.6 -3.0 12.7
.Palm Malaysia 638.7 601.6 535.0 769.9 -5.8 43.9
.Groundnut Europe 1,446.2 1,411.8 1,434.6 1,457.9 -2.4 1.6
Sugar Brazil 385.8 365.7 370.0 362.9 -5.3 -1.9
Source: The World Bank Commodity Prices
Over the first quarter of 2020, international foodstuff prices declined due mainly to a sharp drop in prices at export, especially vegetable oils, tied partly to fears that the Coronavirus (COVID-19) epidemic would affect global demand. 1-4-2 Industrial raw materials Over 2019, prices of industrial raw materials plummeted, following weakening global demand, in line with industrial production slowdown due to the decrease in external demand from industrialized countries and China, in addition to the upsurge of trade tensions and the US dollar’s appreciation. This drop affected, notably, industrial inputs of agricultural origin and metals, as well as phosphate. Concerning cotton, the average annual price decreased by 14.8% compared to its level recorded in 2018, due to the rise in world stocks by 4%, reaching 26.8 million tonnes over the 2019-2020 season, along with higher production in main producing countries, of which India, the United States and West Africa. On the other hand, metal prices dropped by 9.9% in 2019 due to the decrease in demand, mainly from China which takes up about half of world demand of metals, in line with its economic growth slowdown and the adoption of a new environmental regulation since 2018, aside from the trade dispute with the United States. Hence, the decrease in prices affected mainly zinc (-12.7%), lead (-10.9%) and copper (-8.0%).
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International environment
Table 1-4: Average prices of industrial raw materials (In dollars/tonne)
Places of Averages for the period Variations in % Products quotation Dec.2018 Dec.2019 2019 Dec.2019 2018 2019 2018 Dec.2018 Cotton Liverpool 2,014.6 1,716.9 1,900.0 1,671.8 -14.8 -12.0 Natural rubber Singapore 1,565.3 1,640.4 1,436.5 1,657.5 4.8 15.4 Copper London 6,529.8 6,010.1 6,075.3 6,077.1 -8.0 0.0 Tin London 20,145.2 18,661.2 1,9259.6 17,141.1 -7.4 -11.0 Zinc London 2,922.4 2,550.4 2,616.3 2,272.5 -12.7 -13.1 Lead London 2,240.4 1,996.5 1,972.3 1,900.5 -10.9 -3.6 Phosphate Casablanca 87.9 88.0 99.2 72.5 0.1 -26.9 Source: The World Bank Commodity Prices
As for phosphate, the average annual price stagnated in 2019 compared with 2018, posting about 88 dollars per tonne, despite the downward trend of prices throughout this year, coming to 72.5 dollars in December: their lowest level for 12 years, in the wake of the Coronavirus outbreak crisis which led to a consumption shrinking in China.
Graphic 1-8: Monthly trends in world phosphate prices (In dollars/tonne)
150
100 2018
2017
2019 50 January February March April May June July August September October November December
Source: The World Bank Commodity Prices
1-4-3 Crude oil The international oil market was characterized, in 2019, by a supply exceeding demand, meaning an increase in production that swamped a consumption already threatened by the world economic activity slowdown, in spite of the implementation, since January, of the decision taken in December 2018 by the OPEC member countries and their allies (mainly Russia), to reduce their output ceiling by 1.2 million barrels per day. As a consequence, the average annual price of the barrel of Brent, in particular, dropped by 9.9% after a 30.7% increase in 2018. Needed to be reminded that over the first four months of the year, crude oil prices increased, posting 71.20 dollars for the barrel of Brent, in April 2019, against 56.46 dollars in December
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Chapter 1
2018, up by 26.1%. This upward trend is attributable to supply tightening combined with the American sanctions against Iran and political instability in Venezuela and Libya.
Table 1-5: Trend in average prices of crude oil on the international market (In dollars/barrel)
Variations in % Dec. Dec. Description 2017 2018 2019 2018 2019 2018 2019 Dec.2019 2017 2018 Dec.2018 54.39 71.07 64.03 56.46 65.85 30.7 -9.9 16.6 Brent 50.91 64.82 57.01 48.95 59.80 27.3 -12.0 22.2 US light Source: The World Bank Commodity Prices
However, starting from May 2019, fuel prices went downwards, in response to the expected slowdown of world economic growth faced up with supply abundance linked to the unprecedented increase in shale oil production in the United States. Therefore, the price of the barrel of Brent reached an average of 64.27 dollars between April and August 2019 against 74.85 dollars in the same period a year before. Nonetheless, signs of prices recovery showed up towards the end of the year, notably at the end of December, following the OPEC and its allies’ new decision to further reduce their production ceiling by 500 thousand additional barrels per day in order to boost oil prices. In fact, the price of the barrel of Brent reached, in December, 65.85 dollars against 56.46 dollars a year before, up by 16.6%. Over the first quarter of 2020, oil prices collapsed, resulting from supply glut faced up with a sharp fall of demand due to spread of the new world Coronavirus pandemic, in addition to failure to reach an agreement between Saudi Arabia and Russia during a meeting between OPEC and its allies held on 6 March 2020, which aimed at reducing oil production so as to readjust the market. Thus, at the end of March 2020, oil prices posted 22.71 dollars for the barrel of Brent and 20.17 dollars for the US light.
Graphic 1-9: Monthly trend in world Brent prices (In dollars/barrel)
90
80 2017 70
60 2019 2018 50
40
30
20
10
0
Source: The World Bank Commodity Prices
Annual Report 2019 38
Chapter 2 – National economic and financial environment 26/06/2019 29/07/2020 2-1. Overview Following a progressive recovery initiated in 2017, the national economy posted, in 2019, its weakest growth since 2011, which was just 1%. This reflects, in particular, the external and internal shocks having impacted main productive sectors. In fact, economic growth was affected, notably, by both a decrease in olive oil harvest and the impact of lower external demand from the Euro Zone on exporting manufacturing industries. Furthermore, fuel activity did not stop shrinking, which affected external balances as well as public finances. However, the tourist activity continued to recover and the one of phosphate and by-products carried on with its gradual resumption. As for demand, growth was hit by a weakening domestic demand. In fact, consumption, which has remained the main growth driver since 2011, maintained its deceleration at constant prices (1.2% in 2019 vs. 1.7% in 2018), particularly for private consumption (1.5% vs. 2.1%) against a slight improvement of public consumption (0.3% vs. 0.2%), in line with salary increases in the civil service. On the other hand, GFCF posted a decrease (-2.8% vs. 2%) which meant an ongoing downward trend of the investment rate, coming to 17.7% of GDP against 18.6% in 2018, in line with national savings’ slowdown which were limited to 8.9% of GNDI against 9.6%, a year before. Nonetheless, net exports’ contribution to growth was positive, reflecting, mainly, the decrease in imports in line with the decline of economic activity. Moreover, and in spite of a weak growth, 2019 was characterized by a monitoring of macroeconomic imbalances, especially at the level of the external sector, public finances and monetary sphere. Thus, the external sector’s current deficit dropped to 8.5% of GDP against 11.2% in 2018. This trend reflects, mainly, the improvement of both tourist receipts by 35.9% and transfers of Tunisians living abroad by 19.5%, in addition to a stabilization of the trade deficit despite the energy growing imbalance. Consequently, and in line with a firmed up balance of in capital and financial operations, net assets in foreign currency progressed, posting 111 days of import at the end of 2019, against 84 days in the previous year. Concurrently, the dinar’s foreign exchange rate’s downward trajectory has been adjusted since 2017 with an appreciation by 9.1% against the euro and by 7% against the dollar compared with the end of 2018. Monitoring the current balance’s deficit and a favorable foreign exchange effect helped to decrease the outstanding balance of the external debt, down from 72.8% to 65.5% of GNDI, from one year to the next. However, financing needs remain important, notably with a reimbursement of the debt service coming to 14.5% of current receipts against 11.9% in 2018. As for the public finances’ situation, it continued its consolidation following, notably, the improvement of tax collection against a certain progress of expenditure, particularly of salaries and wages. This helped to reduce the budgetary deficit from 4.8% to 3.5% of GDP, from one year to the next.
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Chapter 2
Concerning the job market, the unemployment rate dropped from 15.5% in 2018 to 14.9% in 2019. However, this rate remains high, notably for higher education graduates (27.8% vs. 28.8%). In the monetary sphere, the Central Bank of Tunisia carried on with its restrictive monetary policy, initiated in 2018, in order to face up to intensified inflationary pressures. The measures adopted by the issuing institute helped to contain inflation at 6.7%, on average, in 2019 against 7.3% a year before. These measures also contributed to easing needs for bank liquidity backed up by the expansive effect of banknotes and coins in circulation and foreign currency inflows, in line with the balance of payments’ improvement, particularly, tourist receipts and worker remittances. Hence, the overall refinancing volume went down from 15.8 billion dinars at the end of 2018 to 11.5 billion dollars at the end of the following year. The year 2020, which should have been the year of national economic recovery, recorded a negative inflection in its economic situation-related indicators, particularly starting from March, in line with fallouts from the COVID-19, raising concerns about a dramatic drop of economic growth, and consequently a review of global economic and financial balances. In fact, the pandemic caused an unprecedented paralysis of the economy, affecting both supply and demand, in particular from the Euro Zone. In this context of strong uncertainties, and in spite of limited monetary and budgetary room for manoeuvre, the Central Bank of Tunisia decided to act proactively by implementing a series of exceptional measures to support the Government’s action in order to limit the epidemic’s repercussions on economic activity and support businesses, as well as the most affected social categories. These measures, combined with the explosion of sanitary expenditure will weigh down heavily on global balances and will result in an important increase in financing needs and a worsening of indebtedness and the budgetary deficit.
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National economic and financial environment
Table 2-1: Trend in main Tunisian economy indicators (In MTD unless otherwise indicated) Variation in % Description 2017 2018 2019 2020* 2019 2020* 2018 2019 Accounts of the Nation -GDP growth in previous year prices 2.0 2.7 1.0 -4.3 *Agriculture & fishing 1.8 11.3 0.8 4.1 *Agriculture and fishing excluded 2.1 1.8 1.0 -5.3 -GDP (in current prices) 96,298 105,268 113,844 114,421 8.1 0.5 -Gross national disposable income (GNDI) 98,333 107,411 116,104 - 8.1 - -GNDI per capita (in dinars) 8,599 9,298 9,905 - 6.5 - -Overall consumption 89,624 97,096 105,729 115,879 8.9 8.6 *Public consumption 20,114 21,003 23,360 25,136 11.2 9.4 *Private consumption 69,510 76,093 82,369 87,454 8.2 8.3 -Average propensity to consume 91.1 90.4 91.1 - 0.7 - (consump./GNDI) in %1 -Gross national savings 8,709 10,315 10,374 - 0.6 - -National savings rate (in % of GNDI)1 8.9 9.6 8.9 - -0.7 - -Gross fixed capital formation (GFCF) 18,139 19,554 20,140 12,534 3.0 -37.8 -Investment rate (in % of GDP)1 18.8 18.6 17.7 18.5 -0.9 0.0 Prices -Consumer price index (base 100 in 2015) 109.1 117.1 125.0 6.7 . Foodstuff and beverages 108.5 116.4 124.4 6.9 . Other than food products and services 109.4 117.4 125.2 6.7 Employment - Created jobs (in thousand jobs) 43.3 27.6 58.8 -Unemployment rate in %1 15.5 15.5 14.9 -0.6 External payments -Rate of coverage (exports/imports in %)1 68.8 68.3 69.3 1.0 -Balance of trade deficit (FOB/CIF) 15,595 19,023 19,409 2.0 -Tourist receipts 2,831 4,141 5,628 35.9 -Worker remittances 4,574 5,035 6,015 19.5 - Current deficit2 9,870 11,761 9,736 -2,421 . In % of GDP1 10.2 11.2 8.5 -2.7 -Net capital inflows 2 9,868 13,414 15,165 1,750 -Balance of the general balance of payments2 -2 1,653 5,825 3,568 -External debt service ratio (in % of current receipts)1 14.2 11.9 14.5 2.6 -Rate of external indebtedness (in % of GNDI)1 63.9 72.8 65.5 -7.3 Public finances -Tax burden (in % of GDP)1 21.9 23.1 25.2 25.4 2.1 0.2 -Equipment and loan granting expenditure 5,855 6,143 6,240 7,286 1.6 16.8 -Budget deficit in % of GDP1/3 6.1 4.8 3.5 3.0 -1.3 -0.5 Monetary indicators4 - M3 aggregate 74,484 79,409 86,093 8.4 .Liquidity rate of the economy (M3/GDP) in %1 72.0 72.5 72.4 -0.1 -Net claims abroad2 -2,385 -4,114 9 4,123 of which : .Net assets in foreign currency2 12,885 13,974 19,465 5,491 .In days of import5 93 84 111 27 -Net claims on the State2 19,939 20,805 22,134 1,329 -Financing of the economy 81,648 89,215 92,367 3.5 Sources: Central Bank of Tunisia, Ministry of Finance &the National Statistics Institute (INS) *Forecasts 1 Variations in percentage points. 4Financial system. 2Variations in MTD. 5 Variations expressed in days. 3 Exclusive of debt amortisation, income from privatisation and grants.
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Chapter 2
2-2. Sectorial analysis of economic growth 29/07/2020 The national economic growth posted just 1% in 2019 against 2.7% a year before. This level, which is still low, is due to the accumulation of adverse factors, both domestic and external, affecting the added value of several activity sectors, particularly a weak demand from the Euro Zone which had a negative impact on export-oriented manufacturing industries, lower olive oil harvest, besides difficulties in the fuel sector. Thus, the agriculture and fishing sector’s added value posted a flat 0.8% evolution in 2019, against 11.3% a year before, following the decrease in olive for oil production, down to about 700 thousand tonnes of olives over the 2018-2019 campaign, corresponding to 140 thousand tonnes of oil, against 325 thousand over the previous campaign. This decrease could be offset by the record cereal production level (23.8 million quintals against 14.1 millions in the previous campaign). Hence, this sector contributed by just 0.1 percentage point to economic growth in 2019 against 1.1 point in 2018. As for manufacturing industries, their added value fell by 0.7% in 2019 against +1.1% in the previous year. This is mainly due to shrinking activity of mechanical and electrical industries (-1.5% against a commensurate progress a year before) and the one of textile, clothing and leather (-3% vs. 1.5%), in line with contracting demand from the Euro Zone, as well as the significant slower growth of agro-food industries (0.6% vs. 4%) owing to the sharp drop of olive oil production. However, chemical industries recovered (3.4% vs. -3%) concurrently with a better national production of crude phosphate. On the other hand, non-manufacturing industries continued to shrink: 1.8% over 2019 against -1.7% in the previous year, in line with fuel production downturn. In fact, the oil-extracting and natural gas sector’s activity maintained its downward trend (-8.1% vs. -3.1% in 2018), in line with the natural depletion of main fields, the weak exploration and prospection activity, as well as successive technical stoppages in certain fields. This drop concerned crude oil production which was limited to 1,664 thousand tonnes against 1,796 thousand in 2018 and natural gas production, down to 1,554 kilotons oil equivalent against (Ktoe) 1,763 Ktoe a year before. The building and civil engineering sector dropped by 0.4% in 2019, while it increased by 0.5% in the previous year. Yet, the mining sector recorded a significant recovery (21.1% vs. -17.1% in 2018), following the increase in phosphate production, reaching 4.1 million tonnes against 2.8 million a year before. However, this level remains below produced quantities in 2010: 8 million tonnes and initial forecasts of about 6 million tonnes. Thus, the industrial production general index fell by 3.1% in 2019, against -0.5% a year before. This trend is due to manufacturing industries’ shrinking production (-3.5%), notably the ones of textile, clothing and leather (-3.5%) and mechanical and electrical industries (-2%), as well as the drop in energy products’ extraction (-7.8%). As for market services, they carried on with their upward trend, although at a less rapid pace than the one of 2018 (2.2% vs. 3.2%). Hence, their contribution to growth posted just 0.9% percentage point against 1.3 point in the previous year. This trend is driven by the tourist sector’s growth (6.8% vs. 8.3%) which reflects the ongoing improvement of different activity indicators, particularly non-resident entries which reached 9.4 million people against 8.3 million in 2018, 1.4 million of which are Tunisians living abroad, overall tourist bed-nights (30 million vs. 27 million bednights) and tourist receipts which amounted to 5.6 billion dinars: up by 35.9% in 2019 against 46.3% a year before and by 27.6% excluding the foreign exchange effect against 29.1% in the previous year. Likewise, financial services’ added value rose by 4.6% against 4.9% a year before. Besides, both the trade and communications sectors posted a weak evolution despite a certain consolidation (1.1% and 3.7% against 1% and 3.1%, respectively). On the opposite, the transport
Annual Report 2019 42
National economic and financial environment sector declined by 2.4% against a 3.2% progress in 2018, meaning notably a drop in trade and deceleration of passengers’ air traffic (7.5% vs. 21.6%), involving 11.7 million passengers. As for non-market services, they speeded up somehow in 2019 (1% against 0.4% in the previous year), after two years of stabilisation, in line with salary increases in the public sector.
Table2-2: Trend in the added value by sector of activity in real terms and contributions to economic growth Contribution to economic Added value growth growth Description (in %) (in percentage points) 2018 2019 2020* 2018 2019 2020* Agriculture and fishing 11.3 0.8 4.1 1.1 0.1 0.4 Industry 0.1 -1.1 -4.9 -0.1 -0.2 -1.1 Manufacturing industries 1.1 -0.7 -8.1 0.2 -0.1 -1.2 of which : -Agricultural industries & foodstuff 4.0 0.6 2.5 0.1 0.0 0.1 -Building materials, ceramics and glass industries -2.1 2.0 -4.0 0.0 0.0 -0.1 -Mechanical & electrical industries 1.5 -1.5 -15.0 0.1 -0.1 -0.8 -Textile, clothing, leather & footwear industries 1.5 -3.0 -16.0 0.0 -0.1 -0.4 -Chemical industries -3.0 3.4 2.2 0.0 0.0 0.0 Non-manufacturing industries -1.7 -1.8 1.2 -0.1 -0.1 0.1 of which : -Mining -17.1 21.1 3.0 -0.1 0.1 0.0 -Oil and natural gas -3.1 -8.1 12.0 -0.1 -0.2 0.3 Market services 3.2 2.2 -8.3 1.3 0.9 -3.5 of which : -Trade 1.0 1.1 -10.0 0.1 0.1 -0.9 -Transport 3.2 -2.4 -15.0 0.2 -0.2 -1.0 -Communications 3.1 3.7 2.3 0.1 0.1 0.1 -Tourism 8.3 6.8 -30.0 0.3 0.3 -1.5 -Financial organisations 4.9 4.6 3.0 0.2 0.2 0.2 Non-market services 0.4 1.0 1.7 0.1 0.2 0.3 GDP at market price 2.7 1.0 -4.3 2.7 1.0 -4.3 Sources: National Statistics Institute, The Ministry of Development, Investment and International Cooperation. *Forecasts
For the year 2020, initial forecasts accounted for an improvement of growth, driven mainly by the good performance of the market services activity, notably tourism, and a good agricultural season with a record harvest of olive oil, aside from entry into operation of Nawara field and the ongoing progressive recovery of the phosphate and by-products’ activity. Nevertheless, the outbreak of the COVID-19 pandemic which constitutes a new challenge for the national economy will have a negative impact on economic growth. Fallouts from this crisis would be noticeable in different sectors such as tourism and air and maritime transport, and more particularly, the main exporting sectors affected by a shrinking foreign demand and disturbed procurement channels. This decline will also affect domestic market-oriented sectors given the productive apparatus ‘paralysis, in the wake of containment period measures and uncertainties surrounding the pandemic’s spread. 2-3. Global demand 29/07/2020 Economic growth slowdown over 2019 reflects main growth drivers’ weakness, particularly investment, export, and to a lesser degree, consumption. Therefore, the contribution of domestic demand to growth was negative by 3.1 percentage points against a positive contribution of 1.8 point a year before.
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Chapter 2
This trend was offset by a positive contribution of net exports to growth (4.1 percentage points against 0.9 point in 2018), reflecting mainly a more significant slowdown of imports than the one of exports.
Graphic 2-1: Contributions of different global demand components to economic growth 6
4
2
0
-2 In In % -4
-6
-8
-10 2015 2016 2017 2018 2019 2020*
Total investment Private consumption Public consumption Net exports GDP growth Domestic demand *Forecasts Source: BCT calculations based on data of the Ministry of Development, Investment and International Cooperation.
2-3-1 Domestic demand Domestic demand shrunk, in constant prices, by 2.7% in 2019 after a 1.6% increase in the previous year, in line with investment decline and consumption slowdown. The national final consumption grew by 1.2% in real terms, against 1.7% in 2018, bringing its contribution to growth to 1.1 percentage point against 1.5 point a year before and an average of about 2.8 points between 2011 and 2018. In current prices, final consumption progress came to 8.9% against 8.3% in 2018. This brought the average propensity to consume from 90.4% to 91.2% of GNDI, from one year to the next. By component, this deceleration affected private consumption, while public consumption improved modestly. In fact, private consumption posted a deceleration in current terms (8.2% vs. 9.5% in 2018) as well as in constant terms (1.5% vs. 2.1%). This trend, which has gone on since 2015, reflects economic activity weakness and persistence of unemployment at high levels. This weighs down on households’ purchasing power, particularly amidst a context of a quite high inflation, although being progressively under control. As for public consumption, it made a progress in nominal terms (11.2% vs. 4.4%) and, to a lesser degree, in constant terms (0.3% vs. 0.2%), in line with progress of the State’s operating expenditure (11.6% vs. 10.5%). Particularly, salaries and wages, which constitute the most important heading of budgetary expenses, rose by 13.5%, in 2019, to about 16,767 MTD, corresponding to 14.7% of GDP, owing to salary increases, while equalisation charges shrunk by 2.3%, especially those of fuel (-6%), in line with the drop in international prices of crude oil especially starting from June. Gross fixed capital formation (GFCF) slowed down remarkably in current prices (3% vs. 7.8%) and dropped in constant prices (-2.8% vs. 2%). Taking account of stock variation, investment shrunk by 7.6% against an increase by 18.8% in 2018. Thus, the investment rate continued to decrease, down from 18.6% to 17.7% of GDP, from one year to the next. In fact, despite multiple reforms as regards the business climate, the investment situation is still vulnerable given the economic situation’s downturn and political and social instability justifying the weak dynamism of national and foreign private investment. Moreover, foreign direct investment flows went downwards by 9.6% in 2019, accounting for just 2.2% of GDP. As for
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National economic and financial environment public investment, the State’s capital expenditure posted a weak 3.3% evolution with a share of just 5.4% of GDP, in line with the delay in executing certain large-scale public projects. 2-3-2 External demand
Exports of goods and services slowed down significantly in current terms (10.4% vs. 20.5% in the previous year) and dropped slightly in constant terms (-0.9% vs. 4.1%). In particular, exports of goods, which rose by 7% at current prices and shrunk by 5% at constant prices, were seriously affected by weak external demand mainly from the Euro Zone, affecting manufacturing industries negatively. Exports also suffered from the effect of olive oil harvest’s remarkable shrinking, as well as difficulties experienced in the fuel and phosphate sectors. However, this trend was partially attenuated by higher receipts from services, notably the ones of tourism which made a 35.9% progress in current terms and 27.6% excluding the foreign exchange effect. Imports of goods and services made a 5.7% progress in current prices and a 7.3% drop in constant prices against respective increases of 19.6% and 1.6% in 2018, due to shrinking purchases of different product groups excluding the one of energy which is the cause of a good part of the structural trade deficit. In particular, the evolution of the balance of raw materials and semi-finished products’ deficit and, to a lesser degree, the one of capital goods mean industrial activity and investment weakness.
Table 2-3: Trends in resources and uses at previous year prices (In %) Description 2017 2018 2019 2020* GDP at market prices 2.0 2.7 1.0 -4.3 Imports of goods and services 3.5 1.6 -7.3 -33.1 Total resources = total uses 2.5 2.3 -2.2 -15.1 Final consumption 1.9 1.7 1.2 0.3 - Public 0.3 0.2 0.3 1.2 - Private 2.4 2.1 1.5 0.3 GFCF 0.3 2.0 -2.8 -40.8 Domestic demand 1.8 1.6 -2.7 -7.0 Exports of goods and services 4.6 4.1 -0.9 -33.3 * Forecasts. Source: Ministry of Development, Investment and International Cooperation
For the year 2020, worsened fallouts from the COVID-19 pandemic on economic activity foreshadow a significant shrinking of GDP which will affect different components of global demand. In fact, at the domestic demand level, uncertainty and drop in different economic agents’ income will weigh down on investment, which will plummet significantly, as well as consumption, particularly the private one. As for exports, they will collapse owing to stoppage of exporting businesses’ activity during the containment period and an expected slow resumption, in line notably, with prospects of persisting flat external demand and of the health situation’s impact on tourist activity and its related activities. On the other hand, the ongoing decline of activity in non-manufacturing industries will be worsened by the fall in oil prices which will have an impact not only on exports’ value but also on fields’ profitability and investments in this sector. 2-4. Structure and financing of investments 20/05/2020 2-4-1 Structure of investments Gross fixed capital formation (GFCF) posted a slowdown, over 2019, at current prices (3% vs. 7.8% a year before), reaching 20,140 MTD. This trend reflects a drop in investments in community facilities (-13.3% vs. 0.5%) and their considerable deceleration in non- manufacturing industries (4.9% vs. 32.8%) offset by better investments in agriculture and
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Chapter 2 fishing (11.3% vs. 2.8%), manufacturing industries (10.5% vs. 9.1%) and market services (4.4% vs. 2.7%). Thus, and excluding community facilities, the share of which in overall GFCF went down from 15.1% to 12.7%, from one year to the next, contributions of different sectors improved. This progress concerned, particularly, non-manufacturing industries (19.5% vs. 19.2% in 2018), agriculture and fishing (7.2% vs. 6.7%) and certain market service branches, notably, transport and housing, the shares of which amounted to 16.4% and 19.9%, respectively, against 13.6% and 18.7% a year before.
Table 2-4: Trends in gross fixed capital formation by sector of activity (in current prices) Value in MTD Variation in % Structure in % Description 2019 2018 2019 2018 2019 2018 Agriculture and fishing 1,303 1,450 11.3 6.7 7.2 Industry 6,037 6,462 7.0 30.9 32.1 - Non manufacturing industries 3,745 3,930 4.9 19.2 19.5 - Manufacturing industries 2,292 2,532 10.5 11.7 12.6 Market services 9,258 9,665 4.4 47.3 48.0 Community facilities 2,956 2,563 -13.3 15.1 12.7 Total 19,554 20,140 3.0 100.0 100.0 * Forecasts. Source: Ministry of Development, Investment and International Cooperation
2-4-2 Financing of investments National savings posted a weak 0.6% evolution, after an increase by 18.4% in 2018, in the wake, notably, of weak economic growth which weighed down on domestic savings. On the opposite, the external sector’s net contribution improved somehow, following, particularly, the 19.5% progress made by transfers of Tunisians living abroad, up to 6 billion dinars, despite the increase in expenditure with respect to factor income, notably external debt interest. State savings went up from 1,460 MTD to 2,749 MTD, from one year to the next, following core receipts’ improvement which helped to offset the progress of operating expenditure and the ones of debt interests. However, excluding the Central Government’s contribution, savings dropped by about 13.9%, coming to some 7,625 MTD, in line with economic activity weakness which has affected businesses, both public and private, as well as households.
Table2-5: Domestic financing of investments (In MTD unless otherwise indicated) Variations in % Description 2017 2018 2019 2020* 2019 2020* 2018 2019 Global GFCF 18,139 19,554 20,140 12,534 3.0 -37.8 - In % of GDP 18,8 18,6 17,7 11,0 Stocks variation 441 2,522 245 -915 Total financing needs 18,580 22,076 20,389 11,320 -7.6 -43.0 (GFCF + stock variation) National savings 8,709 10,315 10,374 ,, 0.6 .. - In % of GNDI 9.8 9.6 8.9 .. Domestic financing rate - National savings/GFCF (in %) 48.0 52.8 51.5 .. - National savings/total financing needs (in %) 46.9 46.7 50.9 * Forecasts. Source: Ministry of Development, Investment and International Cooperation
In this context, the savings rate was just 8.9% of GNDI, over 2019, against an investment rate of 17.7% of GDP, meaning a financing gap between investment and savings of about 8.6% of
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National economic and financial environment
GDP and of 8.8% taking account of stocks variation. Thus, national savings’ resources ensured about half of domestic financing needs. The remaining part was mainly financed by recourse to external indebtedness, which is making a significant progress, and to a lesser degree, by net foreign investment flows.
For the year 2020, GFCF is expected to plummet in most sectors as well as in national savings. Yet, financing needs should ease up somehow. 2-5. Job market and wages 23/05/2020 The national economy’s weak performance over 2019, along with a growth rate of just 1% did not help to significantly firm up job creation, which , notwithstanding its recovery, is still not enough to absorb the high unemployment level, the rate of which remain alarming, despite a certain decrease; 14.9% against 15.5% in 2018. Economic activity slowdown which Tunisia has been experiencing since 2011, the delay in implementing strategic structural reforms and the inadequacy between job seekers’ educational background and businesses’ needs constitute the main factors of unemployment persistence. In addition, the job market is still characterized by disparities between regions, gender and educational level, affecting particularly in-land regions, women, as well as higher education graduates. Moreover, Tunisia is characterized by a weak activity and employment rate, reflecting a small-sized economy unable of fully using its labour input. In this context, and given the inability of currently deployed job facilities to reduce youth unemployment significantly, a new national employment strategy was launched over May 2019, comprising a series of programmes, mechanisms and budgets which aim at improving the integration rate in the job market and reviewing the unemployment rate downwards through establishment of an action plan targeting youth employment over the 2020-2030 period. Stimulating private initiative turns out to be at the core of the national employment- oriented strategy and encompasses mechanisms to accompany young entrepreneurs and tools to finance social economy and private companies operating in the training and preparation for the job market sector. This strategy will allow for the digitalisation, development and improvement of information and communication quality in employment bureaux. On the other hand, the National Employment Fund has adopted new modalities1 related to contracts and the job market’s active programmes in order to preserve beneficiaries’ rights while specifying conditions to benefit from these modalities. 2-5-1 Job market In an economic context marked by limited structural reforms and a weak economic performance, along with a higher age group of the working population and an increase in additional job applications, the unemployment rate stood at a high level, particularly for higher education graduates who continue to be the most affected ones, although their unemployment rate was dropping (27.8% in 2019 vs. 28.8% in 2018), due to inadequacy between the learning acquired and the job market’s needs. This creates a structural imbalance between job supply and demand. Concerning net job creation, it more than doubled, up from about 28 thousand job positions in 2018 to about 59 thousand ones in 2019, thanks, notably, to resumption in sectors having suffered destructions in 2018. In this framework, the agriculture and fishing sector recovered modestly, with creation of 2.5 thousand job positions after two years in a row of job losses (-12.2 thousand jobs in 2017 and -14.2 thousand in 2018), supported by a good cereal harvest over the 2018-2019 campaign.
1 Decree n°2019- 542 of 28 May 2019 setting the National Employment Fund’s programmes, conditions and modalities to benefit from them.
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Likewise, in the extracting industries sector (mining and energy), 5.8 thousand jobs were created in 2019 against losses of 0.1 thousands in the previous year, concurrently with the increase in national production of crude phosphate (4.1 million tonnes against 2.8 million a year before). In manufacturing industries, net job creation was just 3.6 thousand jobs against 8.7 thousands in 2018. This trend is notably attributable to job losses in the textile, clothing and leather industries (-12.1 thousand against 9.1 thousands), affected by lower external demand from the Euro Zone against a recovery of net job creation in the agrofood industries sector (11% vs. -1.7%). In the services sector, net job creation posted 32.2 thousand jobs against 10.7 thousands in 2018. This progress is relevant to most sectors excluding the one of trade (-13.6 thousands against -7.8 thousands). Particularly, the tourism sector continued to create jobs over 2019, though at a less rapid pace than a year before (net creations of 10.3 thousand jobs against 17.3 thousands), reflecting activity recovery in this sector initiated notably since 2017.
Table 2-6: Net job creation (In thousands) Description 2016 2017 2018 2019 Agriculture and fishing 0.9 -12.2 -14.2 2.5 Mining and energy 4.8 -3.6 -0.1 5.8 Construction and public works 13.5 20.7 8.9 11.8 Manufacturing industries -7.0 19.0 8.7 3.6 Transport and communications 0.5 -0.9 4.4 4.3 Tourism 8.7 15.5 17.3 10.3 Other market services 13.2 1.9 8.2 10.3 Administration 0.1 2.9 -5.6 10.2 Total 34.7 43.3 27.6 58.8 Source: National Statistics Institute
Breakdown of unemployment by gender shows strong disparities between women and men, with unemployment rates reaching, respectively, 21.7% and 12.1% at the end of 2019 against 22.9% and 12.5% a year before. Also, regional breakdown of unemployment1 shows disproportions between districts and different governorates of the same district. In fact, as in the past, unemployment is still higher in the Western regions of the country than in the eastern ones and is more pronounced in the southern regions of the country than the northern ones. Hence, the unemployment rate stood at levels lower than the national average in the Centre-East (10.2%) and North-East (10.6%) regions, while it was exceeded in the South-West and South-East regions (24.8% and 22.2% respectively), the North- West (20.3%), Centre-West (17.5%) ones, as well as in Tunis District (15.9%).
1 Figures of the geographic breakdown of unemployment are relative to the second quarter of 2019.
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National economic and financial environment
Table: 2-7: Main employment indicators (In thousands unless otherwise indicated) Variation in % Description 2016 2017 2018 2019 2018 2019 2017 2018 - Working age, 15 years and more 8,639 8,745 8,834 8,899 1.0 0.7 - Total active population 4,069 4,119 4,153 4,190 0.8 0.9 - Global activity rate (in %)* 47.1 47.1 47.0 47.1 -0.1 0.1 - Employed Labour force 3,437 3,480 3,508 3,566 0.8 1.7 - Employment rate (in %)* 39.8 39.8 39.7 40.1 -0.1 0.4 - Job creation 34.7 43.3 27.6 58.8 -36.3 113.0 - Unemployed workforce* 632 639 645 624 0.9 -3.3 - Global unemployment rate (in %)* 15.5 15.5 15.5 14.9 0.0 -0.6 of which : Unemployment rate among higher education graduates 31.6 29.9 28.8 27.8 -1.1 -1.0 (in %)* *In percentage points. Source: National Statistics Institute
As for demographic trends, the increase, at virtually the same pace, in working age population and active population meant maintaining the activity rate, over 2019, at a level close to the one of the previous year: 47.1%. Likewise, the increase in job creation helped the employment rate, which reflects an economy’s capacity to make use of its workforce resources, to rise, up from 39.9% to 40.1% from one year to the next. Following these trends, the number of unemployed workforce reached 624 thousand in 2019, down by 3.3% compared to its previous year level. Among these jobless people, about 256 thousands are higher education graduates, corresponding to 41% of total.
Graphic 2-2: Trend in some indicators relative to the job market
4500 19
4000
3500 17
3000
2500 15
2000 (In %)
(In (In thousands) 1500 13 1000
500
0 11 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Employed labour force (Left scale) Unemployed labour force (Left scale) Unemployment rate (Right scale)
For the year 2020, economic activity shrinking due to spread of the coronavirus pandemic in Tunisia will undoubtedly have negative effects on the job market. On this occasion, a series of social and economic measures were taken by the government to preserve job positions and guarantee employees’ salaries of which, notably, establishment of a financing line in the form of aids to employees who were temporarily laid off and exceptional financing in the form of premiums to vulnerable social classes, aside from deferred payment of bank loans maturities. Besides, other measures were adopted to preserve the economic fabric and continuity of
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Chapter 2 businesses, notably small and medium-sized businesses and liberal professions, such as deferred payment of taxes, the National Social Security Fund (CNSS)’s maturities and debts at banking and financial institutions, as well as rescheduling fiscal and customs debts. 2-5-2 Wages: Against a backdrop of quite high inflation and in order to preserve wage earners’ and retired people’s purchasing power, negotiations between the Government and its social partners went on, over 2019, and ended up with increases in the private and public sectors’ legal salaries. Thus, the 48-hour minimum guaranteed inter-professional wage (SMIG) was raised from 378.560 dinars to 403.104 dinars. The 40-hour regime one went up from 323.439 dinars to 343.892 dinars. As for wages of workers paid by the hour for the 48-hour regime, they benefit from 1.938TD per each hour worked. The ones of 40-hour regime benefit from 1.984 TD per each hour worked. Likewise, the minimum guaranteed agricultural wage (SMAG) was raised, up from 14.560 dinars to 15.504 dinars per working day. Concurrently, the “technical skill premium” paid, added to SMAG, to specialised agricultural workers and to qualified ones was raised to 826 and 1,555 millimes, respectively, which brought the respective salaries per working day to 16.330 dinars and 17.059 dinars. As for the public sector, negotiations led to granting the second and third tranches of salary increases in favour of civil servants, local authorities’ and administrative public institutions ‘employees, the first tranche of which has entered into force since December 2018. This salary increase spans two years (effective from 1st July 2019 and 1st January 2020) and ranges between 30 dinars and 50 dinars.
Table 2-8: Trends in minimum legal salaries (In dinars unless otherwise indicated)
Variation in % November June August May Description 2015 2017 2018 2019 Aug.2018 May.2019 June 2017 Aug. 2018 Guaranteed minimum inter-professional wage (SMIG) -Hourly SMIG (in millimes) . 48-hr / week 1,625 1,717 1,820 1,938 6.0 6.5 . 40-hr / week 1,671 1,763 1,866 1,984 5.8 6.3 -Monthly SMIG . 48-hr / week 335.000 357.136 378.560 403.104 6.0 6.5 . 40-hr / week 289.639 305.586 323.439 343.892 5.8 6.3 Guaranteed minimum daily agricultural 13.000 13.736 14.560 15.504 6.0 6.5 wage (SMAG) Source: Official Journal of the Tunisian Republic
2-6. Public Finances 1 26/06/2020
Public finances for FY19 were characterized by the ongoing reforms aiming to stabilise deficits in an economic context marked by growth slowdown. The measures taken aimed at firming up resources and rationalizing public expenditure.
1 Ministry of Finances.
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In particular, the major orientations of the 2019 finance law focused on strengthening internal resources by improving resources collection through tax amnesty as well as the fight against tax evasion by taking measures to limit the size of the informal sector, rationalising cash payments and lifting professional secrecy. These efforts, deployed in terms of public finances, yielded an important budgetary deficit decrease, corresponding to 3.5% of GDP against 4.8% a year before. Concurrently, the public debt rate decreased, down to 72.2% against 77.9% a year before. Furthermore, a supplementary finance law was adopted to adjust the budget gaps compared with the initial finance law and to readjust the indebtedness rate. It is worth noting that these gaps come mainly from an increase in the civil service’s wage bill, the rise in fuel subsidy due to the non-application of all fuel prices’ adjustments provided by the initial finance law and the delay of entry into effect of Nawara oil and gas field. 2-6-1 State budget resources Over 2019, the State budget’s total resources rose by 11.9%, posting 42,254.3 MTD. This trend results mainly from an important mobilisation of core resources which increased by 15.8% and from the slight tightening of borrowing and Treasury resources which grew by 0.8%, reaching 9,887.5 MTD. The budget structure remains marked by the preponderance of core resources overall, up to 76.6%, corresponding to 2.6 points compared to last year. This structure reflects the State’s budgetary orientations which, for another year, aim at restructuring receipts towards a firming up of the core resources’ share, notably tax ones in order to reduce recourse to borrowing.
Table 2-9: State budget balance (In MTD unless otherwise indicated) Variation in % Description 2018 2019* 2020** 2019 2020 2018 2019 Core resources and grants 27,942.3 32,366.8 35,979.0 15.8 11.2 Tax receipts 24,503.3 28,900.9 31,759.0 17.9 9.9 Non-tax receipts 3,439.0 3,465.9 4,220.0 0.8 21.6 Borrowing and Treasury resources 9,808.6 9,887.5 11,248.0 0.8 13.8 Total resources 37,750.9 42,254.3 47,227.0 11.9 11.8 Expenditure excluding debt principal 32,624.4 35,857.5 39,311.0 9.9 9.6 Operating expenditure 23,680.0 26,426.0 28,263.0 11.6 7.0 Debt interests 2,801.9 3,191.5 3,762.0 13.9 17.9 Capital expenditure and net loans of the Treasury 6,142.5 6,240.0 7,286.0 1.6 16.8 Debt amortization 5,126.5 6,396.8 7,916.0 24.8 23.7 Total Expenditure 37,750.9 42,254.3 47,227.0 11.9 11.8 Primary balance excluding privatization and grants -2,253.5 -848.3 -20 In % of GDP -2.1 -0.7 0 Budget balance excluding privatization and grants -5,055.4 -4,039.8 -3,782.0 In % of GDP -4.8 -3.5 -3.0 * Provisional figures. ** Forecasts.
The year 2020 will be characterised by the ongoing stabilization policy. However, the budget balance will be highly affected by the unprecedented economic crisis linked to Covid 19 pandemic, the extent of which is yet to be determined.
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2-6-1-1 Core resources and grants Tax receipts accelerated, up by 17.9% against 15.7% a year before reaching 28,900.9 MTD. This upward trend emanates mainly from the increase in direct taxes (39.5%), in line with the increase in corporate tax (41.7%) in particular oil companies (41.1%), on the one hand, and to sound behaviour with respect to income tax (38.6%) in line with salary increase and the end of tax credit on the other hand. Added to that, the renewal of the social solidarity contribution and the imposition of an exceptional 1% contribution applied on banks, insurance and telecommunication companies, as well as companies operating in the oil field, and this for social security funds. Receipts from indirect taxes also increased (5.3%). This rise originates from the improved outcome of the value added tax (VAT) induced by the widening of application scope of VAT and the progress in customs fees in the wake of imports increase. Tax burden grew by 2.1 percentage points, posting 25.2% of GDP.
Table 2-10: Core resources and grants (In MTD unless otherwise indicated) Variations in % Description 2018 2019 2020 2019 2020 2018 2019 Tax receipts 24,503.3 28,900.9 31,759.0 17.9 9.9 - Direct taxes 9,065.3 12,648.4 13,662.0 39.5 8.0 *Income tax 6,359.1 8,813.2 9,651.0 38.6 9.5 *Corporate tax 2,706.2 3,835.2 4,011.0 41.7 4.6 - Indirect levies and taxes 15,438.0 16,252.5 18,097.0 5.3 11.3 of which *V A T 7,424.8 7,797.4 8,975.0 5.0 15.1 *Consumer duties 2,863.6 2,872.2 3,157.0 0.3 9.9 Non-tax receipts 3,439.0 3,465.9 4,220.0 0.8 21.6 of which *Gas royalty 605.4 322.7 550.0 -46.7 70.4 * Income from shareholding 631.5 1,067.7 1,389.0 69.1 30.1 *Privatization grants, and confiscated income 373.3 549.1 450.0 47.1 -18.0 Core resources and grants 27,942.3 32,366.8 35,979.0 15.8 11.2 Source: Ministry of Finances.
Totalling about 3,465.9 MTD, non-tax receipts over 2019, rose by 0.8% compared with last year. This was mainly due to an increase in income from shareholding which continued their upward trend: 69.1% in line with budgetisation of Central Bank of Tunisia’s profits and the increase in privatisation receipts, grants and confiscated income, in spite of the decrease in royalties of transcontinental gas pipeline following the contraction of the quantity of Algerian gas transferred via the Tunisian territory to Italy. For 2020, forecasts account for a more pronounced increase of non-tax receipts (21.6% vs. 0.8%) in the wake of the expected recovery of royalties on the gas pipeline linked to the extension of the agreement on the Algerian gas pipeline transiting from Tunisia for an additional 10-year period as of 1st October 2019, as well as the 30% increase in the income from shareholding due to the improvement of certain public companies’ performance. A trend which will be counteracted by a drop in income from privatisation, grants and confiscated income.
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National economic and financial environment
2-6-1-2 Borrowing resources In view of the increased financial needs to complete the State budget, the borrowing resources mobilised in 2019 increased by 4.8%, reaching 9,953.9 MTD. This increase concerned both external borrowings (3.5%) and domestic ones (8.5%). Public authorities have focused their recourse on the first financing mode, mobilizing external resources through the international capital market. As for the State's debt on the domestic market, it was characterised by the 356M EUR syndicated loan in foreign currency on the local market obtained in March 2019. Bonds equivalent to Treasury bonds accounted for 38.4% of the State's total local debt. The borrowing envelope mobilized in 2019 is made up of 26.5% of domestic borrowings and 73.5% of external borrowings. This structure reflects increased risks on the sustainability of public external debt and the need for a fiscal adjustment mechanism that would consist of tax collection arrangements’ firming up, in parallel with provisions to rationalise operating expenditure, particularly equalisation expenditure, and to resolve the structural difficulties linked to unproductive expenditure.
Table 2-11: Borrowings, and Treasury resources (In MTD unless otherwise indicated) Variation in % Description 2018 2019 2020 2019 2020 2018 2019 Domestic borrowings 2,433.1 2,639.5 2,400 8.5 -9.1 - 52-week Treasury bonds 26.6 436.2 250 1,539.8 -42.7 - Bonds equivalent to Treasury bonds 1,670.2 1,014.4 2,150 -39.3 111.9 - Others 736.3 1,188.9 - 61.5 -66.3 External borrowings 7,064.9 7,314.4 8,848 3.5 21.0 - Budgeted drawings 6,233.4 6,545.5 7,879 5.0 20.4 - Earmarked external borrowings 706.5 668.9 849 -5.3 26.9 - External loans retroceded to public enterprises 125 100.0 120 -20.0 20.0 Borrowed resources 9.498 9,953.9 11,248 4.8 13.0 - Treasury resources 310.6 -66.4 - - - Total 9,808.6 9,887.5 11,248 0.8 13.8 Source: Ministry of finances.
2-6-2 State budget expenditure Over 2019, the State’s overall expenditure increased by 11.9% against 10.1% a year before, posting 42,254.3 MTD. This trend emanates, mainly, from the ongoing increase in operating expenditure, especially those relating to the wage and equalisation headings, in addition to the rise in expenditure relating to debt interests. The structure of State expenditure remains dominated by Title I to the detriment of investment expenditure. 2-6-2-1 Expenditure excluding the debt service Expenditure excluding the debt service increased over 2019: 9.5% against 9.3% in the previous year, posting 32,666 MTD.
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Table 2-12: Expenditure excluding the debt service (In MTD unless otherwise indicated) Variations in % Description 2018 2019 2020 2019 2020 2018 2019 Operating expenditure 23,680.0 26,426.0 28,263.0 11.6 7.0 of which Salaries and wages 14,776.0 16,767.0 19,030.0 13.5 13.5 Equalisation 4,900.0 4,789.5 4,180.0 -2.3 -12.7 - Commodities 1,750.0 1,800.0 1,800.0 2.9 0.0 - Fuel 2,700.0 2,538.0 1,880.0 -6 -25.9 - Transport 450.0 451.5 500.0 0.3 10.7 Capital expenditure 5,944.5 6,140.0 7,166.0 3.3 16.7 of which : Direct investments 2,792.0 2,714.0 3,190.0 -2.8 17.5 Public financing 1,717.0 1,922.0 2,060.0 11.9 7.2 Net Treasury Loans 198.0 100.0 120.0 -49.5 20.0 Total 29,822.5 32,666.0 35,549.0 9.5 8.8 Source: Ministry of Finances.
As for operating expenditure, it grew by 11.6% in 2019 against 10.5%, a year before, posting 26,426 MTD. This level, which remains high, was however driven by the ongoing rise in the Government wage bill following the salary increases decided at the beginning of 2019, in addition to equalization expenditure, which nevertheless remain preponderant in line with the non-application of all prices adjustments, particularly for fuel as provided for by the initial finance law. In fact, the Government wage bill increased, over 2019, by 13.5%: up to 16,767 MTD representing, thus, the most important part of the operating expenditure, corresponding to 63.4% in spite of the adoption of a recruitment reduction policy and the non-renewal of measures relating to the creation of the ‘tax credit’ facility. As for equalisation expenditure, which is ranked second in the use of budget resources, it fell by 2.3%, down to 4,789.5 MTD, thanks, in particular, to the drop in the average price of the barrel of oil which went from 71 dollars in 2018 to 64 dollars in 2019 and to continued energy subsidies’ reforms. For the year 2020, the overall operating expenditure’s growth rate should decelerate, to post 28.263 MDT. In particular, equalisation expenditure is expected to slow down in line with the drop in oil prices. With regard to capital expenditure, it recorded a modest 3.3% increase, reaching 6,140 million dinars, which accounts for 29% of the overall investment. Compared to the State budget, this expenditure represented only 14.5% in 2019 against 15.7% in 2018. The functional budget breakdown shows the ongoing dominance of the social component with 54.1% of expenditure, while public services expenses and economy- related ones share the remaining part with 23.4% and 22.5%, respectively. Concerning 2020, and although it is difficult to draw down forecasts given the great uncertainty imposed by the health situation characterized by the expansion of Covid 19, we can affirm that the envelope planned for capital expenditure, which has increased by 16.7% to 7,166MDT, will
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National economic and financial environment not be achieved since public priorities, particularly of a health nature, make it necessary to sacrifice a part of this expenditure which will be of much importance as the pandemic situation persists and worsens. 2-6-2-2 Debt service Disbursements regarding public debt redemption, in principal and interest, for 2019, reached 9,588.3 MTD: a 20.9% increase against 13.2% a year before. This trend is mainly due to the increase in the external debt service by 50.5% (up by 61.2% in principal and by 23.4% in interest) mainly due to the reimbursement of the Qatari loan worth $250 million and another loan, US guaranteed, obtained on the international capital market for an amount of $485 million. As for domestic debt reimbursement, it dropped by 18.4%.
Table 2-13: Debt Service (In MTD unless otherwise indicated) Variations in % Description 2018 2019 2020 2019 2020 2018 2019 Domestic debt 3,399.4 2,772.5 5,061 -18.4 82.5 Principal 1,880.4 1,163.8 3,157 -38.1 171.3 Interests 1,519.0 1,608.7 1,904 5.9 18.4 External debt 4,529.0 6,815.8 6,617 50.5 -2.9 Principal 3,246.1 5.233 4,759 61.2 -9.1 Interests 1,282.9 1,582.8 1,858 23.4 17.4 Total 7,928.4 9,588.3 11,678 20.9 21.8 Principal 5,126.5 6,396.8 7,916 24.8 23.7 Interests 2,801.9 3,191.5 3,762 13.9 17.9 Source: Ministry of Finances.
As regards the year 2020, the scheduled payments regarding debt service should continue their upward trend although at a less pronounced pace: a rate of 21.8% and posting thus 11,678 MTD, 43.3% of which relating to the domestic debt with a 2.9% drop in external debt-related expenditure. 2-6-3 Financing the budget deficit and trends in the outstanding balance of public debt Following the firming up of the State's core resources, over 2019, and a better expenditures monitoring, the primary deficit excluding privatisation and grants reached 848.3 MTD or 0.7% of GDP against about 2,253.5 MTD or 2.1% a year before. Taking into account debt interests, the budgetary deficit excluding privatisation, grants and confiscated income posted 4,039.8 MTD or 3.5% of GDP against 4.8% a year before. In order to cover this deficit, the public authorities' action focused on a financing scheme ensured up to 34.9% by domestic borrowing, 13.6% by privatisation income, grants and confiscated income and 51.5% by external borrowings. Thus, the outstanding balance of public debt increased slightly compared to 2018, posting 82,350.1 MTD or 72.2% of GDP.
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Chapter 2
Table 2-14: Financing of the budget deficit (In MTD unless otherwise indicated)
Variations in % Description 2018 2019 2020 2019 2020 2018 2019 Net domestic financing 863.3 1,409.3 -757 63.2 -141 Domestic borrowings (+) 2,433.1 2,639.5 2,400 8.5 -9.1 Reimbursements (-) -1,880.4 -1,163.8 -3,157 -38.1 171.3 Treasury resources (+) 310.6 -66.4 - -121.4 - Net external financing 3,818.8 2,081.4 4,089 -45.5 96.5 External borrowings (+) 7,064.9 7,314.4 8,848 3.5 21.0 Reimbursement (-) -3,246.1 -5,233.0 -4,759 61.2 -9.1 Privatization grants and confiscated income 373.3 549.1 450 47.1 -18.0 Source: Ministry of Finances.
Over 2019, the outstanding balance of public debt increased slightly by 0.1%: up to about 82,350.1 MTD. Expressed in terms of GDP, this outstanding balance rather decreased, down from 77.9% to 72.2%, thus benefiting from the favourable trend of the dinar’s foreign exchange rate compared to main foreign currencies of indebtedness. By foreign currency, the breakdown of the outstanding balance of external debt is marked, in particular, by the preponderance of the euro share, which amounted to 55.7%. The shares of the dollar and the yen were 27.5% and 10.9% respectively, while the remainder corresponding to various other currencies.
Table 2-15: Outstanding balance of public debt (In MTD unless otherwise indicated)
2018 2019 2020 Description In In % In % In In % In MDT MDT of Total of Total MDT du Total Domestic debt 22,026.9 26.8 23,944.8 29.1 23,536.0 25.0 In % of GDP 20.9 21.0 18.5 External debt 60,267.9 73.2 58,405.3 70.9 70,532.0 75.0 In % of GDP 57.0 51.2 55.5 Total 82,294.8 100 82,350.1 100.0 94,068.0 100.0 In % of GDP 77.9 72.2 74.0 Source: Ministry of Finances.
For the year 2020, the increase in the volume of borrowings’ reimbursements, especially domestic ones, will put pressure on financing needs, despite the fact that forecasts account for a decrease in the budgetary deficit excluding privatisation and grants, posting 3% of GDP. This is expected to yield an increase of the outstanding balance of the State’s debt by 1.8 percentage point: up from 72.2% of GDP in 2019 to 74%, to post 94,068 MTD, 75% of which are of external origin.
Annual Report 2019 56
National economic and financial environment
2-7. Total indebtedness 23/06/2020 Total indebtedness1 decreased sharply in 2019, down to 1% against 14% in 2018. This trend is attributable, on the one hand, to the slowdown for the second year in a row, of the outstanding balance of domestic financing in line with monetary conditions’ tightening and to the decline of the stock of medium and long-term external debt, mainly affected by eased up foreign exchange rate of the dinar against main foreign currencies and by the remarkable increase in external debt service falling due in 2019 on the other hand.
Table 2-16: Trends in total indebtedness (In MTD unless otherwise indicated) Variation in % Description 2017 2018 2019 2017 2018 2019 2016 2017 2018 Domestic indebtedness (DI) 101,158 108,979 113,300 13.1 7.7 4.0 - State 23,441 24,155 25,490 14.0 3.0 5.5 - Other non-financial economic agents 77,717 84,824 87,810 12.8 9.1 3.5 From the financial system 97,566 105,533 109,762 13.6 8.2 4.0 - State 19,939 20,805 22,134 16.4 4.3 6.4 - Other non-financial economic agents 77,627 84,728 87,628 12.9 9.1 3.4 On capital markets 3,592 3,446 3,538 1.4 -4.0 2.7 - State 3,502 3,350 3,356 2.1 -4.3 0.2 - Other non-financial economic agents 90 96 182 -20.4 6.7 89.6 * Money market 15 15 14 -34.8 0.0 -6.7 - State 0 0 0 - - - - Other non-financial economic agents 15 15 14 -34.8 0.0 -6.7 * Bond market 3,577 3,431 3,524 1.6 -4.1 2.7 - State 3,502 3,350 3,356 2.1 -4.3 0.2 - Other non-financial economic agents 75 81 168 -16.7 8.0 107.4 External indebtedness (EI) 55,817 69,976 67,471 27.8 25.4 -3.6 - State * 42,705 54,565 53,685 29.8 27.8 -1.6 - Other non-financial economic agents 13,112 15,411 13,786 21.7 17.5 -10.5 Total indebtedness (TI) 156,975 178,955 180,771 17.9 14.0 1.0 - State ** 66,146 78,720 79,175 23.7 19.0 0.6 - Other non-financial economic agents 90,829 100,235 101,596 14.0 10.4 1.4 Sources: BCT, Capital Market Council (CMF) and Ministry of Development, Investment and International Cooperation. (*)The State’s external indebtedness including non-residents’ subscriptions to Treasury bonds. (**) End of period stocks including State resources held in its accounts at the BCT and used by the Treasury.
1 As a wide financing aggregate, total indebtedness (TI) encompasses all loans (traditional loans or issues on monetary and/or bond markets) obtained by resident non-financial economic agents, including the State, whether owed to residents or non-residents. Financing through capital securities issues or core funds consolidation is excluded from TI.
Annual Report 2019 57
Chapter 2
By economic agent, total indebtedness of both State and other non-financial economic agents posted a strong deceleration, over 2020, up by just 0.6% and 1.4%, respectively, against 19% and 10.4%, a year before. On the other hand, analysis by indebtedness source reveals a predominance of that of domestic origins with a share of about 63%, the remaining part was provided by external resources in the form of debt. 2-7-1 Domestic indebtedness Domestic indebtedness’ growth pace declined (4% vs. 7.7% a year before), reflecting a slower pace in that of other non-financial economic agents which rose by only 3.4% against 9.1% in 2018, while the State’s domestic indebtedness increased at a more sustained pace (5.5% vs. 3% in 2018). It is worth mentioning, in this context, the ongoing hegemony of the financial system which provided, in 2019, about 97% of total resources intended to financing of the State and all non-financial economic agents. As for domestic indebtedness of other non-financial economic agents from the financial system, it slowed down remarkably (3.4% vs. 9.1% with respect to 2018), unlike contracted funds on capital markets which posted a strong recovery imputable ,exclusively, to new debenture loans raised on the capital market involving a package of 101 MTD against 21 MTD in 2018. Unlike the previous years, mobilized funds on this market were the exclusive privilege of micro-finance institutions.
Graphic 2-3: Trend in total indebtedness by Graphic 2-4: :Trend in internal indebtedness by financing origin financing source
120.000 20 20 110.000 14.6 15.0 17.9 18 13.1 100.000 15 16 10.4 11.0 90.000 9.1 9.3 9.7 14.0 14 10 7.8 7.7 80.000 12.8 13.1 13.8 6.5 12 4.0 70.000 10.2 10.0 5
10.4 60.000 9.9 10
50.000 In %
8 In % 0 7.6 In In MTD 40.000 6.3 6 30.000 -5 4 20.000 10.000 2 -10 0.000 1.0 0
-15
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Domestic indebtedness (Left scale) From the financial system External indebtedness (Left scale) On capital markets Total indebtedness (Right scale) Domestic indebtedness
Concerning the State’s domestic indebtedness from the financial system, it grew at a speeded up progress pace by 6.4% in 2019 against 4.3% in 2018. This trend results mainly from the mobilization of State’s resources in foreign currency on domestic market from certain local banks, for a package worth 356 M€ with regard to budgetary support. As for State’s recourse to domestic capital markets, it recovered slightly (+0.2% vs. -4.3% a year before), due notably to the consolidation of banks’ securities-portfolio in Treasury bonds, the outstanding balance of which grew by 447 MTD at the end of 2019 against a 251 MTD decrease at the end of 2018. Hence, issues of this type of bonds, all categories included, involved an amount of 1,451 MTD in 2019 against reimbursements of 702 MTD, yielding thus a net subscriptions’ package worth 749 MTD (vs. 3,186 MTD, 2,844 MTD and 342 MTD, respectively in 2018).
Annual Report 2019 58
National economic and financial environment
2-7-2 External Indebtedness For the first time in five years, external indebtedness declined (-3.6% vs. +25.4% a year before) following the combined effect of the decrease in that of other non-financial economic agents (-10.5% vs. +17.5% in 2018) and the strong deceleration of the outstanding balance of the State’s external indebtedness (-1.6% vs. +27.8%). This trend is mainly due to the impact of the dinar’s appreciation against main foreign currencies 1 (+9.1% and 7% respectively against the Euro and the US dollar) and the amplification at the level of reimbursements of external debt service falling due in 2019 (9.3 billion dinars vs. 6.9 billion dinars in 2018). Drawings on medium and long term external borrowing capitals progressed by just 4.5%, posting 9.3 billion dinars.
Graphic 2-5: Trend in external indebtedness by economic agent
35
30 27.8 25.4 25 19.9 20 14.9 13.1 15 11.6 9.0 8.7 8.8 10
In In % 5.6 4.5 5
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -5 -3.6 -10
-15
State Other non-financial economic agents External indebtedness
It should be noted that drawings on external borrowings mobilized in 2019, concerned mainly the ones contracted with the Kingdom of Saudi Arabia (500 M$), the African Development Bank (120 M€), the European Union (300 M€), the International Monetary Fund within the framework of the sixth tranche of the Extended Fund Facility loan (216 M€) and finally on the international capital market, a debenture loan intended to budget support (695 M€). Furthermore, reimbursements carried out in 2019, mainly involved the principal of the Qatari debenture loan (250 M€) and the principal of the debenture loan on the international capital market guaranteed by the USAID (485 M$).
2-7-3 Main financing indicators
The total indebtedness ratio compared to GDP at current prices broke with the upward trend observed over the last five years, coming thus from 169.9% in 2018 to 158.8% in 2019, corresponding to a decrease by 11.1 percentage points. This drop concerned the ratio of both domestic indebtedness (99.5% vs. 103.5%) and that of external indebtedness (59.3% vs. 66.4%).
1 Foreign exchange rate at end of period of the EUR /TND (3.1402 in 2019 vs. 3.4272 in 2018). Foreign exchange rate at end of period of the USD /TND (2.7985 in 2019 vs. 2.9944 in 2018).
Annual Report 2019 59
Chapter 2
Table 2-17: Trend in main financing indicators (In % unless otherwise indicated) Description 2017 2018 2019 Total indebtedness/GDP in current prices 162.9 169.9 158.8 *State 68.6 74.7 69.6 *Other non-financial economic agents 94.3 95.2 89.2 Domestic indebtedness/GDP 105.0 103.5 99.5 *State 24.3 22.9 22.4 *Other non-financial economic agents 80.7 80.6 77.1 External indebtedness/GDP 57.9 66.4 59.3 *State 44.3 51.8 47.2 *Other non-financial economic agents 13.6 14.6 12.1 State domestic indebtedness/Domestic indebtedness 23.2 22.2 22.5 Domestic indebtedness of other non-financial economic agents/Domestic 76.8 77.8 77.5 indebtedness External indebtedness /GNDI 56.8 65.1 58.1 GDP in current prices (in MTD) 96,298 105,268 113,844 GNDI in current prices (in MTD) 98,333 107,411 116,103
Annual Report 2019 60
Chapter 3 –External payments 17/07/2020 06/07/2018 3-1. Balance of payments External payments evolved over 2019 amidst a difficult national situation, marked by elections at the political level and economic growth’s significant slowdown, strongly affected by a flat agricultural production and industrial activity pace’s deterioration. Aside from this context, exports were affected, among others, by the drop in demand of the euro zone’s main partners and the loss of certain branches’ competitiveness. The volume of exports regressed, hence, by 5.2%, a rate never reached for many years. Concurrently, the volume of imports followed a similar trend, down by 8.5%, relevant to virtually all product groups, despite the relative easing of the dinar’s foreign exchange rate against main foreign currencies, initiated starting from the end of the first quarter of the year. Moreover, and in the absence of a viable energy transition strategy, the energy deficit continued its deterioration, culminating to 7.8 billion dinars: around 40% of the overall trade deficit. However, the tourist sector’s good performance and worker remittances’ firming up helped to boost receipts in foreign currency and ease up pressure on the current account, the deficit of which remains high despite its considerable shrinking compared to the peak recorded in 2018. As for external financing, foreign investments’ level is still flat, penalised by a business climate marred by uncertainty, where recourse to external indebtedness became an imperative to offset the country's financial imbalances. In this context, the current account deficit dropped sharply in 2019 compared to 2018, down to 9.6 billion dinars: 8.5% of GDP against -11.8 billions and 11.2 % respectively. This trend is attributable to the significant firming up of tourist receipts (+35.9%), along with firmed up savings on salaries transferred by Tunisian workers living abroad (+19,5%). Concurrently, the trade deficit (FOB-CIF)’s worsening pace was strongly offset (+2%), compared to the previous years, posting 19.4 billion dinars, a level which remains, nonetheless, climactic.
Graphic 3-1: Trends in the balance of payments’ main balances
14,000 12.0 12,000 9.0 10,000 8,000 6.0 6,000 4,000 3.0
2,000
0.0 0
-2,000 -3.0
( In ( In % ) ( In ( In MTD) -4,000 -2.8 -6,000 -6.0 -8,000 -9.0 -10,000 -8.4 -8.5 -10.2 -12,000 -11.2 -12.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Current balance Capital and financial transactions' balance General balance Current deficit in % of GDP
As for financing, net capital inflows firmed up by 14.1% compared to 2018, amounting to about 13.6 billion dinars in 2019 following notably consolidation of the surplus balance of loan-borrowing capitals (+18.9%), while FDI inflows dropped by 9.6%. Mobilisation of these resources helped, in fact, to cover the current deficit and boost assets in foreign currency which reached 19,465 MTD, corresponding
Annual Report 2019 61
Chapter 3 to 111 days of import at the end of 2019. As a consequence, the general balance of payments yielded a surplus in strong expansion: 5,228 MTD (against +1,653 MTD a year before).
Table 3-1: Main balances of the balance of external payments (In MTD unless otherwise indicated) Description 2015 2016 2017 2018 2019 Current payments -7,552 -7,935 -9,870 -11,761 -9,637 Current deficit/GDP (in %) -8.9 -8.8 -10.3 -11.2 -8.5 Goods (FOB-FOB) -9,867 -10,323 -12,841 -15,747 -15,929 Services 594 687 739 1,897 3,470 Factor income & current transfers 1,721 1,701 2,232 2,089 2,822 In capital and financial operations 8,132 6,329 8,880 11,886 13,563 In-capital operations 441 204 445 340 403 Foreign investments 2,203 1,215 1,807 2,509 2,415 Other investments 5,488 4,910 6,628 9,037 10,745 Adjustment operations (net flows) 202 464 988 1,528 1,302 General balance 782 -1,142 -2 1,653 5,228 Net assets in foreign currency 14,102 12,935 12,885 13,974 19,465 In days of import 128 112 93 84 111
3-1-1 Current Balance The balance of current payments yielded, over 2019, a deficit of 9,637 MTD, corresponding to 8.5% of GDP (against -11,761 MTD and 11.2%, respectively, a year before). In dollar, this deficit also shrunk, down to 3,286 million dollars. This improvement is attributable to the strongly attenuated worsening pace of the trade deficit (FOB / FOB) compared to 2018, down to 15.9 billion dinars in 2019. Concurrently, the surplus balance of services and the one of the balance of factor income and current transfers firmed up significantly by 1,573 MTD and 733 MTD, respectively, reaching 3,470 MTD and 2,822 MTD in 2019. The rate of coverage of the trade deficit by tourist receipts and worker remittances recovered considerably, reaching 60% in 2019 (against 48.2% in 2018), however still far from the one recorded in 2010: 78%.
Graphic 3-2: Trend in the coverage rate of the trade deficit (FOB-CIF) by tourist receipts and transfers of Tunisians working abroad
95.6 20,000 100.0 78.0
15,000 61.1 57.7 58.8 60.0 75.0 55.8 52.3 49.9 47.5 48.2 10,000 50.0
5,000 25.0
0 0.0 ( In ( In MTD)
-5,000 -25.0 ( In % )
-10,000 -50.0
-15,000 -75.0
-20,000 -100.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Trade balance (FOB-CIF) Tourist receipts and worker remittances Ratio of tourist receipts and worker remittances / Trade deficit (FOB-CIF)
Annual Report 2019 62
External payments
For the whole of 2020, BCT forecasts, taking account of fallouts from the "Covid-19" health crisis, account for a current deficit which should ease up compared with 2019: 7.5% of GDP. This situation would be supported by the trade deficit’s shrinking by about 30% in line with imports’ regression at a more accelerated pace than the one of exports (-24% and -22.1% respectively). However, the balance of services should deteriorate drastically in 2020, in line mainly with the 60% collapse in tourist receipts. Moreover, worker remittances, strongly affected by recession which will affect main host countries in 2020, should drop by 15%. As for external financing, it should firm up in line with intensified drawings on MLT borrowing capitals for the needs of budgetary support and additional financing caused by the pandemic. 3-1-1-1 Trade balance Trends in the trade balance over 2019 bore the mark of the decelerated worsening pace of its (FOB / CIF) deficit expressed which widened by just 386 MTD or 2%, posting 19.4 billion dinars (against a widening by 22% or 3,428 MTD in 2018). As for trade, exports’ progress at a more accentuated pace than the one of imports (+7% and +5.4% respectively) helped to improve the coverage rate by one percentage point, amounting to 69.3%. However, trade expressed in dollar posted respective drops of 3.4% for exports and 4.9% for imports, leading thus to a shrinking of the trade deficit by 570 million dollars, down to 6,617 million dollars. .
Graphic 3-3: Trend in trade (2009-2019)
60000
50000
40000
30000
20000 (In (In MTD)
10000
0
-10000
-20000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Exports (FOB) Imports (CIF) Trade balance (FOB/CIF)
Table 3-2: Main foreign trade indicators (In MTD unless otherwise indicated) Description 2015 2016 2017 2018 2019 FOB exports 27,607.2 29,145.6 34,426.6 40,987.4 43,855.4 Variation in % -2.8 5.6 18.1 19.1 7.0 CIF imports 39,609.7 41,746.8 50,021.6 60,010.3 63,264.1 Variation in % -5.8 5.4 19.8 20.0 5.4 Trade deficit (FOB-CIF) 12,002.5 12,601.2 15,595.0 19,022.9 19,408.7 In % of GDP 14.2 14.0 16.2 18.0 17.0 Rate of coverage (in %) 69.7 69.8 68.8 68.3 69.3 Opening rate (in %) 79.4 79.0 87.7 95.9 94.1 Effort rate at export (in %) 32.6 32.5 35.7 38.9 38.5 Dependency rate (in %) 46.8 46.5 51.9 57.0 55.6 Penetration rate (in %) 41.0 40.8 44.7 48.3 47.5 Source: National Statistics Institute
Annual Report 2019 63
Chapter 3
In particular, the energy balance continued to deteriorate, yielding a deficit which widened by 1,577 MTD, up to 7.8 billion dinars: 40% of the overall trade deficit. This amplification is attributable to the ongoing growth of imports, notably natural gas, while exports virtually stagnated. Concurrently, the food balance’s deficit, which depends heavily on olive oil harvest’s performance, went up from 476 MTD to 1,398 MTD, from one year to the next. Sectorial breakdown of exports in 2019 shows a slowdown of manufacturing industries sectors’ sales (+10% vs. +17% in 2018) in line with the decrease in demand from the euro zone partners. This trend concerned this sector’s main branches, namely mechanical and electrical industries, textile, clothing and leather and the other manufacturing industries, the shippings of which progressed by 12.3%, 4.2% and 12.2% respectively (against 14.1%, 18.6% and 26.4% in 2018). As for extractive industries, sales of the mining, phosphates and by-products sector recovered relatively (+21.3% vs. -2.7% in 2018) following mainly progress of D.A.P exports (+29%). Exports of the energy sector increased by 3.9%, in line with the increase in sales of crude oil (+30.1%) while the ones of refined products declined by 34.8%. As for sales of the agriculture and agro-food industries sector, they regressed by 13% following, mainly, the sharp drop in olive oil sales (1.4 billion dinars against 2.1 billion a year before). Shippings of dates and fish products, progressed, however, although at a very timid pace (+4.8% and +1.2% respectively). Concerning analysis of imports by product group, purchases of energy products rose by 19.6%, in line mainly with the 69.9% increase in natural gas procurements which suffered from the combined effects of the increase in the average price of the Algerian gas (+3% in $) and the strong regression of the gas royalty paid with respect to the lump sum (-41%). Purchases of refined products also progressed (+16%) in line mainly with stoppage, in 2019, of Bizerta’s refinery’s activity. As for imports of foodstuff, they slowed down (+5.4% vs. +15.1% in 2018), in line mainly with the drop in purchases of sugar (-22.7%), hard wheat (-19%) and barley (-8.9%). Concurrently with economic activity weakness, purchases of raw materials and semi-finished products dropped by 2%, while the ones of capital goods slowed down considerably (+9.5% against +15.6% in 2018). Purchases of consumer goods progressed at a very weak pace compared to previous years, in line, mainly, with tightening of monetary conditions (+4% vs. +12.5% a year before). This trend concerned, particularly, textiles and clothing products (+3.4% vs. +14.3% in 2018), electrical and mechanical appliances intended to consumption (+6.7% vs. +16.6%) and pharmaceutical products (+11.4% vs. +16.3%). Analysis of trade by regime shows an ongoing deterioration of the trade balance under the general regime, the deficit of which widened by more than 2 billion dinars, posting 31.2 billion dinars, owing to imports’ progress at a more accentuated pace than the one of exports (+5.2% and +0.4%, respectively). At the offshore regime level, exports progressed more rapidly than imports: 9.4% and 5.9% respectively. The trade surplus under this regime firmed up by 1,664 MTD, reaching 11.8 billion dinars.
Table 3-3: Trends in trade over 2019 (In MTD unless otherwise indicated) Mining, Textile, Mecha- Other Sector Agri. and Energy phosphates clothing, nical and miscella- agrofood & Total and by- and electrical neous Trade industries lubricant products leather industries industries Exports at current prices 4,709.1 2,418.3 1,666.7 9,353.9 20,427.7 5,279.7 43,855.4 Trend in % (1) -13.0 3.9 21.3 4.2 12.3 12.2 7.0 Trend in % (2) -16.9 -5.5 0.7 -6.2 -2.4 -0.7 -5.2 Imports at current prices 6,811.3 10,174.8 939.4 7,415.1 26,218.8 11,704.7 63,264.1 Trend in % (1) 5.6 19.6 -9.5 4.4 2.4 3.6 5.4 Trend in % (2) -6.5 2.9 -23.4 -8.2 -12.0 -9.2 -8.5 Trade balance at current -2,102.2 -7,756.5 727.3 1,938.8 -5,791.1 -6,425.0 -19,408.7 prices (1)Variation at current prices. Source: National Statistics Institute (2)Variation at constant prices calculated according to the price indexes of the base year 2015.
Annual Report 2019 64
External payments
Assessed in constant prices, trade decreased for exports as well as for imports (-5.2% and -8.5% respectively). Moreover, the increase in prices at import at a more accentuated pace than the one at export (+15.3% and +12.9% respectively) led to a deterioration of terms of trade by 2.1 % compared to 2018. This trend concerned, particularly, those of agriculture and agrofood industries (-7.2%) and the one of energy (-5.4%). On the other hand, trends in the value of trade suffered, over 2019, from the foreign exchange effect’s negative impact (assessed at -1,907 MTD) resulting from the Tunisian dinar’s depreciation against main settlement foreign currencies (the euro and the US dollar). The price effect has also made a negative impact on trends in foreign trade in 2019 worth 1,557 MTD. Negative foreign exchange and price effects were, however, attenuated by the positive volume effect assessed at 3,079 MTD, following the sharp drop in the volume of imports estimated at 5,213 MTD, while the volume of exports dropped in monetary terms by just 2,135 MTD. 3-1-1-2 Balance of services The balance of services recorded a surplus which improved significantly, reaching 3,470 MTD in 2019 against 1,897 MTD a year before. This progress is mainly attributable to the considerable growth of the surplus balance of travel (+1,548 MTD), taking profit from tourist receipts’ firming up in 2019. Moreover, the balance of transports posted a deficit which shrunk by 22 MTD compared with its level recorded a year before, following mainly higher receipts from travel tickets. Yet, the balance of other services yielded a surplus, over 2019, which went slightly downwards (-2.6%). As for the balance of travel, its surplus progressed significantly, up to 3,869 MTD in 2019 against 2,321 MTD in 2018. Receipts from travel progressed at a sustained pace (+34.7%) while related expenditure rose by just 2.4%. Concerning receipts, the ones drained by the tourist activity, main component of travel, went up significantly (+35.9%), reaching 5,628 MTD in 2019. Excluding the foreign exchange effect1, these flows rose by 27 6%. As for foreign non-resident entries, they grew by 15.4%, posting about 8 million people at the end of 2019. Entries of tourists from the Maghreb and European ones posted respective increases of 15.5% and 15.6% in line mainly with recovery of the tourist activity of the traditional markets2. Non-resident bednights improved by 14.6%, up to 24.3 million units in 2019, relevant mainly to the ones of Europeans which grew, nonetheless, at a less accelerated pace than the one of 2018 (+14.5% vs. 46.3%).
Graphic 3-4 :Trend in main tourist indicators
35,000 6,000
30,000
5,000
units 25,000
4,000 20,000
3,000 In MTD
In In thousand 15,000
2,000 10,000
5,000 1,000
0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Non resident bednights Non resident entries Tourism receipts
1 In terms of annual average, the Tunisian dinar depreciated against the euro and the US dollar by 4.8% and 9.8% respectively. 2 This concerns: France, Germany, Italy and Great Britain.
Annual Report 2019 65
Chapter 3
Flows from medical care carried on with their upward trend, amounting to 350 MTD in 2019 against 283 MTD a year before, supported by firming up of provided medical services, mainly to people from the Maghreb and sub-Saharan Africa. This result testifies to Tunisia’s earned image in this field thanks to internationally recognized skills and developed sanitary and medical services, making of Tunisia a reference regional platform for health tourism. As for the expenditure inherent to travel, it rose by 2.4% in 2019 (against +18.9% a year before), posting 2,341 MTD, in line mainly with expenditure deceleration with respect to tourism (+1.8% against +24.1% a year before), posting 1,398 MTD. As for the balance of transport’s deficit, it shrunk slightly to 850 MTD in 2019 against 871 MTD a year before. This trend is attributable to receipts’ progress at a more accentuated pace that the one of expenses (+9.6% and +6.9%, respectively). As for receipts, they continued to move upwards, from 3,023 MTD to 3,314 MTD, from one year to the next, concurrently with tourist activity’s recovery. In particular, receipts from travel tickets, which account for half of total transport receipts, made an 8.6% progress, up to 1,664 MTD, in line with the increase in non-resident entries, notably from Europe. However, the gas royalty paid to the Tunisian State with respect to crossing of transcontinental pipelines connecting Algeria to Italy went downwards in 2019, coming to 384 MTD in the wake of the drop in the volume of Italy’s natural gas supplies from Algeria (-40.5%).
Table 3-4: Trends in the Gas royalty In cash In kind Total Year In In % In In % In MTD MTD of total MTD of total 2013 87 18.2 391 81.8 478 2014 28 11.9 208 88.1 236 2015 36 19.9 145 80.1 181 2016 150 43.9 192 56.1 342 2017 92 21.1 345 78.9 437 2018 76 14.2 459 85.8 535 2019 41 10.7 343 89.3 384 Sources: BCT and SOTUGAT
Graphic 3-5: Receipts from transport in 2019
Freight 13% Other transports 37%
Passenger tickets 50%
As for transport expenditure, it posted a deceleration (+6.9% against +18.6% a year before), posting 4,163 MTD in 2019. Particularly, expenditure with respect to freight rose by 5.4%, posting +3.132 MTD, in the wake of the sustained progress of imports. Concerning the balance of other services, its surplus shrunk slightly (-17 MTD), down to 614 MTD in 2019. This trend is mainly attributable to the slower growth pace of related expenses (+8.6% against +13.8% a year before). On the other hand, related receipts rose by 5.8% (against +6.7% a year before).
Annual Report 2019 66
External payments
As for receipts, the ones relevant to large-scale works and technical services, main component of flows from other services (about 28%), went slightly upwards (+2.1%), posting 763 MTD in 2019, bearing in mind that the major part of services provided in this respect are mainly intended to African countries. Expenses tied to other services posted a deceleration (+8.6% vs. +13.8% a year before), reaching 2,127 MTD in 2019. In particular, expenses in the framework of large-scale works and technical services rose by 12% to 751 MTD, in line with achievement of public investment projects by foreign companies. 3-1-1-3 Balance of factor income and current transfers The surplus balance of factor income and current transfers consolidated by 733 MTD, up to 2,822 MTD in 2019. This trend is attributable to related receipts’ growth at a more speeded up pace than the one of expenses (+17.3% and +8.1%, respectively, against +8.1% and +17.4% a year before).
Graphic 3-6: Trends in main headings of the balance of factor income and current transfers
6500 6000 5500 5000 4500
4000 3500 3000 In In MTD 2500 2000 1500 1000 500 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Transfers of Tunisians living abroad (receipts) Capital income (expenditure)
As for receipts, flows from worker remittances firmed up by 19.5%, reaching a valuable level of 6,015 MTD in 2019. Contribution in cash progressed significantly (+25.5 %), reaching 5,173 MTD, amplified by the foreign exchange effect resulting mainly from the Tunisian dinar’s depreciation against the euro and the US dollar1. Excluding the foreign exchange effect, worker remittances in cash would increase by just 17.9%. Contribution in kind carried on with its downward trend in 2019 (-8%), down to 842 MTD.
Table 3-5: Worker remittances by transfer mode Total Contribution in cash Contribution in kind Year In Variation In In% In In % MTD in % MTD of total MTD of total 2013 3,721 5.2 2,719 73.1 1,002 26.9 2014 3,984 7.1 2,896 72.7 1,088 27.3 2015 3,867 -2.9 2,863 74.0 1,004 26.0 2016 3,912 1.2 3,017 77.1 895 22.9 2017 4,574 16.9 3,593 78.6 981 21.4 2018 5,035 10.1 4,121 81.8 914 18.2 2019 6,015 19.5 5,173 86.0 842 14.0
As for expenditure, there was notably an increase in transfers with respect to income from foreign capital by 7.5% which reached 4,245 MTD in 2019, mainly, in the wake of higher expenses with respect to medium and long-term external debt interests, while payments with respect to transfers of income from foreign direct investments went slightly downwards in 2019.
1 In terms of annual average, the Tunisian dinar depreciated against the euro and the US dollar by 4.8% and 9.8%, respectively
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In particular, income from foreign direct investments declined by 1.8%, to 2,051 MTD, accounting for about half of total capital income expenditure. The ones carried out by companies operating in the energy field decreased by 7.8%, down to 829 MTD, concurrently with their activity recession in 2019. However, transfers of income from direct investments achieved by other sectors, notably industrial ones, progressed by 2.7%, posting 1,223 MTD in 2019. On the other hand, expenditure to honour medium and long-term external debt interests grew by 21.1%, up to 1,908 MTD in 2019. The ones carried out by both the Government and the monetary authorities amounted to 1,540 MTD, corresponding to 80.7% of total related payments. The remaining part (368 MTD) is relevant to corporate settlements. 3-1-2 Balance of in capital and financial operations The balance of in capital and financial operations continued its strong record over 2019, yielding a surplus of about 13.6 billion dinars against 11.9 billion a year before. This result bore, mainly, the mark of the significant improvement of the surplus balance of loan-borrowings and other commitments, up from 9 billion dinars to 10.7 billion dinars.
Table 3-6: Trends in the main balances of the balance of in capital and financial operations (In MTD) Description 2015 2016 2017 2018 2019 - In capital operations 441 204 445 340 403 - Foreign investment (FDI + portfolio) 2,203 1,215 1,807 2,509 2,415 - Other investments1 5,488 4,910 6,628 9,037 10,745 Balance of in capital and financial operations 8,132 6,329 8,880 11,886 13,563
Graphic 3-7: Trends in external net capital inflows by financing type
16,000
14,000
12,000
10,000
Other investments Foreign investments 8,000
In capital operations (In (In MTD) 6,000
4,000
2,000
0 2015 2016 2017 2018 2019
As for the balance of in capital operations, its surplus firmed up by 18.5%, reaching 403 MTD. The major part of inflows concerned donations granted by the European Commission and Saudi Arabia for the respective packages of 256 MTD and 60 MTD. The surplus balance of foreign investments decreased slightly from 2,509 MTD to 2,415 MTD, from one year to the next, penalised mainly, by regression of FDI inflows.
1This involves financial operations related to medium and long term loan-borrowings capitals, long term deposits at the BCT, short-term assets and liabilities as well as allocations in SDR.
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Table 3-7: Receipts with respect to foreign investments (Commitments) (In MTD) Sector 2015 2016 2017 2018 2019 Energy 970 796 810 910 909 Manufacturing industries 566 802 975 1,129 1,249 Tourism and real estate 86 107 130 134 202 Telecommunications 98 103 76 103 66 Financial sector 156 5 84 386 0 Others 91 82 57 80 53 Foreign direct investments 1,967 1,901 2,132 2,742 2,479 Portfolio investments 401 88 116 124 169 Total 2,368 1,989 2,248 2,866 2,648
In particular, foreign direct investment flows (FDI) going to Tunisia declined by 9.6%, down to 2,479 MTD in 2019: 17.7% of total medium and long term external financing and 2.2% of GDP (against 23.4% and 2.6%, respectively, in 2018). Thus, it is worth mentioning that resumption of FDI flows to their past levels remains dependent on the adoption of a set of reforms which aim at improving the business climate to rebuild international investors’ confidence and support the Tunisian site’s attractiveness. Moreover, foreign direct investment flows, excluding the energy sector, were relevant to 603 investment operations, helping to create 14,353 new job positions in 2019. This involves 126 creation projects and 477 extension projects for the respective values of 209 MTD and 1,361 MTD.
Graphic 3-8: Trends in FDI by activity sector
2019
2018 Energy
Manufacturing industries
2017 Tourism and real estate (In (In MTD) Telecommunications
2016 Financial sector Others
2015
0 500 1,000 1,500 2,000 2,500 3,000
Analysis of the sectorial breakdown of these investments shows a stagnation of the ones in favour of the energy sector, posting 909 MTD in 2019. However, their share in the total FDI flows improved, from one year to the next, up from 33% to 37%. These flows concerned, mainly, investment in the development field (652 MTD or 72%). The remaining part (257 MTD) was carried out in the framework of exploration works. FDI flows going to the manufacturing industries sector went upwards (+10.6%) to 1,249 MTD in 2019: half of total FDI flows. These investments gave way to creation of 84 new projects worth 69 MTD and extension of 442 projects involving a package of 1,180 MTD. The most attractive industrial branches were electrical and electronic industries (518 MTD vs. 491 MTD in 2018) and the ones of the mechanical, metallic and metallurgical sector (214 MTD vs. 183 MTD). However, FDI in favour of the services sector, decreased by more than the half compared with the level recorded a year before, coming to 302 MTD, following the sharp drop recorded by the financial sector compared to 2018, a year marked by the Tunisian State’s transfer of 70% of the Zitouna Bank’s capital to the Qatari group "Majda" for a package of 370 MTD.
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As for the balance of portfolio investment, it recovered substantially, yielding a surplus of 38 MTD (against -108 MTD in 2018) under the combined effect of the 36.3% increase in receipts, up to 169 MTD and the 43.5% shrinking in expenses, down to 131 MTD. Worth of note, in this regard, that the Stock exchange market’s activity closed for 2019 on an adverse note with a TUNINDEX dropping by 2.06%, while it made a 15.76% progress in 2018. As for the balance of other investments, its surplus firmed up strongly in 2019, from 9,037 MTD to 10,745 MTD, from one year to the next.
Table 3-8: Breakdown of drawings and MLT debt amortisation by institutional unit (In MTD) Drawings Amortisation Net flows Description 2017 2018 2019 2017 2018 2019 2017 2018 2019 Total 10,958 8,921 9,302 5,568 5,317 7,357 5,390 3,604 1,945 Administration 7,787 5,025 7,081 3,012 2,000 4,043 4,775 3,025 3,038 Monetary authorities 768 1,959 721 859 1,400 1,143 -91 559 -422 Businesses 2,403 1,937 1,500 1,697 1,917 2,171 706 20 -671
Drawings on medium and long-term borrowing capitals, which constituted the main external financing source over the previous year, rose slightly in 2019 (+4.3%) to 9,302 MTD. By beneficiary, funds raised by the Government made a considerable progress in 2019 (+40.9%), reaching 7,081 MTD, most of which is part of the budgetary support programme. On the international capital market, this involves mainly a debenture loan worth 700 million euros. The ones contracted in the multilateral framework were mainly relevant to disbursement of two tranches of a loan granted by the European Union within the framework of macro-financial assistance programme II for an overall package of 300 million euros, a loan of +120 million euros granted by the African Development Bank (ADB) as part of the financial sector modernization programme and a package worth 100 million euros contracted with the German organization "KFW", related to the programme to support reforms in the banking and financial sector. At the bilateral level, there is particularly the loan worth 500 million dollars granted by Saudi Arabia within the framework of the budgetary support programme. However, drawings in favour of monetary authorities (BCT) dropped sharply in 2019, down to 721 MTD, relevant to the sixth tranche, for an amount of 216 million euros, the loan granted in 2016 within the framework of the Extended Facility Fund agreement with the IMF. Drawings in favour of businesses regressed by about 22.6% in 2019, posting 1,500 MTD: 16.1% of total MLT drawings against 21.7% a year before.
Graphic 3-9: Trends in medium and long-term borrowing capital
12,000
10,000
8,000
6,000
4,000
2,000
0 2014 2015 2016 2017 2018 2019
MLT borrowing capital net inflows Drawings on MLT borrowing capital MLT debt amortisation
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On the other hand, a deposit worth 500 million euros was granted, in 2019, by the Central Bank of Libya to the Central Bank of Tunisia. As for expenditure, reimbursements of the medium and long-term debt principal grew by 38.3% in 2019, up to 7,357 MTD. This trend is mainly attributable by the substantial increase in settlements carried out by the Government, which reached 4,043 MTD against 2,000 MTD a year before. This consists, mainly, in reimbursement of the principal of the Qatari debenture loan, issued on the international capital market in 2017 for a package worth 250 million dollars and of the principal of the debenture loan contracted in 2012 on the international capital market ( USAID guaranteed) for an amount worth 485 million dollars. Thus, reimbursements of medium and long-term debt carried out by businesses rose by 13.2% in 2019, posting 2,171 MTD. Yet, payments carried out by monetary authorities dropped by 18.4% in 2019, down to 1,143 MTD.
Table 3-9: Trends in receipts and expenditure with respect to current payments (In MTD unless otherwise indicated) Variation in % 2016 2017 2018 2019 2018 2019 2017 2018 Current balance* -7,935.4 -9,870.6 -11,760.9 -9,636.9 -1,890.3 2,124.0 Receipts 41,199.1 48,431.6 57,768.3 63,727.0 19.3 10.3 Expenditure 49,134.5 58,302.2 69,529.2 73,363.9 19.3 5.5 Trade balance (FOB)* -10,323.4 -12,841.1 -15,747.1 -15,929.2 -2,906.0 -182.1 Export (FOB) 29,145.6 34,426.6 40,987.4 43,855.4 19.1 7.0 Import (FOB) 39,469.0 47,267.7 56,734.5 59,784.6 20.0 5.4 Services balance* 687.5 738.6 1,897.2 3,469.7 1,158.6 1,572.5 Receipts 7,345.8 8,320.5 10,637.8 12,668.4 27.9 19.1 Expenditure 6,658.3 7,581.9 8,740.6 9,198.7 15.3 5.2 Transport balance* -734.9 -919.4 -871.1 -849.6 48.3 21.5 Receipts 2,036.8 2,363.3 3,023.4 3,313.7 27.9 9.6 Expenditure 2,771.7 3,282.7 3,894.5 4,163.3 18.6 6.9 Travel balance* 1,046.8 1,232.5 2,321.0 3,868.6 1,088.5 1,547.6 Receipts 2,655.2 3,156.8 4,608.6 6,210.0 46.0 34.7 Expenditure 1,608.4 1,924.3 2,287.6 2,341.4 18.9 2.4 Government operations balance* -274.1 -280.3 -182.7 -162.8 97.6 19.9 Receipts 388.0 373.5 416.8 404.3 11.6 -3.0 Expenditure 662.1 653.8 599.5 567.1 -8.3 -5.4 Other services balance* 649.7 705.8 630.0 613.5 -75.8 -16.5 Receipts 2,265.8 2,426.9 2,589.0 2,740.4 6.7 5.8 Expenditure 1,616.1 1,721.1 1,959.0 2,126.9 13.8 8.6 The balance of factor income and 1,700.5 2,231.9 2,089.0 2,822.6 -142.9 733.6 current transfers* Receipts 4,707.7 5,684.5 6,143.1 7,203.2 8.1 17.3 Expenditure 3,007.2 3,452.6 4,054.1 4,380.6 17.4 8.1 * Variation in MTD.
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Table 3-10: Trends in receipts and expenditure with respect to in-capital and financial operations (In MTD unless otherwise indicated) Variation in % 2016 2017 2018 2019 2018 2019 2017 2018 Balance of in capital and financial operations* 6,328.8 8,880.6 11,885.8 13,562.9 3,005.2 1,677.1 Receipts 10,544.5 16,450.7 18,209.6 22,163.7 10.7 21.7 Expenditure 4,215.7 7,570.1 6,323.8 8,600.8 -16.5 36.0 In capital operations balance* 203.5 444.7 339.8 402.4 -104.9 62.6 Receipts 229.4 485.9 383.3 445.6 -21.1 16.3 Expenditure 25.9 41.2 43.5 43.2 5.6 -0.7 Financial operations balance* 6,125.3 8,435.9 11,546.0 13,160.5 3,110.1 1,614.5 Receipts 10,315.1 15,964.8 17,826.3 21,718.1 11.7 21.8 Expenditure 4,189.8 7,528.9 6,280.3 8,557.6 -16.6 36.3 - Foreign investment balance* 1,215.2 1,807.5 2,509.5 2,415.3 702.0 -94.2 Receipts 2,032.8 2,273.4 2,913.7 2,698.4 28.2 -7.4 Expenditure 817.6 465.9 404.2 283.1 -13.2 -30.0 - Other investment balance* 4,910.1 6,628.4 9,036.5 10,745.2 2,408.1 1,708.7 Receipts 8,282.3 13,691.4 14,912.6 19,019.7 8.9 27.5 Expenditure 3,372.2 7,063.0 5,876.1 8,274.5 -16.8 40.8 Adjustment operations (net flows)* 464.7 987.8 1,528.1 1,301.5 540.3 -226.6 General balance* -1,141.9 -2.2 1,653.0 5,227.5 1,655.2 3,574.5 *Variation in MTD.
3.2. Overall external position At the end of 2019, net liabilities abroad went upwards by 4.6% reaching 178,522 MTD against 170,603 MTD at the end of 2018. This trend is attributable to the increase in gross liabilities (+7.2%) while assets rose at a more speeded up pace (+28%).
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Table 3-11: Tunisia’s overall external position (In MTD)
Description 2016 2017 2018 2019
Direct investment (net) -66,608.1 -71,223.0 -78,835.2 -85,864.6 -Assets 1,079.4 1,235.2 1,357.9 1,451.8 -Liabilities -67,687.5 -72,458.2 -80,193.1 -87,316.4 Portfolio investment (net) -4,598.9 -4,969.0 -5,937.0 -5,725.4 -Assets 120.0 124.7 133.6 141.5 -Liabilities -4,718.9 -5,093.7 -6,070.6 -5,866.9 Other investments (net) -65,360.9 -79,923.5 -101,377.8 -107,706.8 -Liabilities -68,345.1 -83,062.7 -105,075.6 -111,879.0 -Medium and long-term liabilities -52,374.4 -64,725.5 -80,746.9 -79,891.8 Loans1 -49,801.7 -63,159.6 -78,863.7 -76,562.3 Government -33,181.8 -43,133.4 -55,112.4 -54,243.3 Monetary authorities -3,662.4 -4,047.1 -4,794.8 -5,274.5 Financial sector -2,085.5 -2,650.3 -3,425.9 -3,171.6 Other sectors -10,872.0 -13,328.8 -15,530.6 -13,872.9 Currency and deposits -1,727.7 -613.6 -749.2 -2,271.3 Monetary authorities -1,727.7 -613.6 -749.2 -2,271.3 Other medium and long-term liabilities -845.0 -952.3 -1,134.0 -1,058.2 -Short-term liabilities -15,970.7 -18,337.2 -24,328.7 -31,987.2 Currency and deposits -9,836.8 -11,342.1 -13,782.1 -13,338.7 Monetary authorities -212.5 -169.2 -636.9 -220.2 Government 0.0 0.0 0.0 0.0 Financial sector -9,624.3 -11,172.9 -13,145.2 -13,118.5 Other sectors 0.0 0.0 0.0 0.0 Trade credits -5,948.8 -6,995.1 -10,546.6 -18,648.5 Other sectors -5,948.8 -6,995.1 -10,546.6 -18,648.5 Other short-term liabilities -185.1 0.0 0.0 0.0 -Assets 2,984.2 3,139.2 3,697.8 4,172.2 -Medium and long-term assets 0.0 0.0 0.0 0.0 -Short-term assets 2,984.2 3,139.2 3,697.8 4,172.2 Currency and deposits 1,945.5 1,806.9 2,175.6 2,550.1 Financial sector 1,945.5 1,806.9 2,175.6 2,550.1 Trade credits 1,038.7 1,332.3 1,522.2 1,622.1 Other sectors 1,038.7 1,332.3 1,522.2 1,622.1 Other short-term assets 0.0 0.0 0.0 0.0 Reserve assets 13,896.4 13,894.2 15,547.2 20,774.7 -Monetary gold2 356.5 424.4 512.9 569.5 -Special drawing rights 76.1 77.3 85.1 33.4 -Reserve position at IMF 345.9 400.6 423.9 506.1 -Foreign currency 13,117.9 12,991.9 14,525.3 19,665.7 Total -122,671.5 -142,221.3 -170,602.8 -178,522.1 1In considering accrued but not yet falling due interests. 2Gold holdings were reassessed according to the gold price at end of period of London fixing market.
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Graphic 3-10: Structure of Tunisia’s stock of gross liabilities
250,000
200,000
150,000 (In (In MTD) 100,000
50,000
0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Direct investment Portfolio investment Outstanding MLT Debt Short term liabilities
3-2-1 Liabilities 3-2-1-1 Foreign investments At the end of 2019, the stock of gross liabilities with respect to foreign investments (direct and portfolio ones) grew by 8%, up to 93,183 MTD against 11.2% and 86,264 MTD, respectively, at the end of 2018. This increase is mainly attributed to the higher stock of liabilities with respect to direct investments while the one of portfolio investments grew downwards. The stock of liabilities in the form of FDI made an 8.9% progress compared to the end of 2018, reaching 87.316 MTD, at the end of 2019. This trend is mainly due to the price and foreign exchange effects, while the volume effect shrunk by 9.6%, posting 2,479 MTD in 2019. However, liabilities in the form of portfolio investments shrunk by 3.4%, coming to 5.867 MTD at the end of 2019. This drop is due to combined effect of the decrease in assets’ values, as reflected by the 2.06% drop in the TUNINDEX Stock exchange index and the lower share of foreigners in Stock capitalisation by 0.17 percentage point, posting 24.73% at the end of 2019. 3-2-1-2 Other investments At the end of 2019, the stock of gross liabilities with respect to other investments went upwards by 6.5% to 111,879 MTD. This increase concerned short-term liabilities, against a slight shrinking of medium and long term ones, particularly liabilities in the form of debt. Accounting for 68.4% of gross liabilities with respect to other investments, the outstanding balance of MLT external debt in the form of loans went downwards by 2.9% compared to the one recorded at the end of 2018, posting 76,562 MTD. The rate of these liabilities compared with the Gross National Disposable Income (GNDI) shrunk, thus, by 7.3 percentage points, coming to 66.1% at the end of 2019. This drop is due exclusively to the negative foreign exchange effect on the outstanding balance of MLT debt following the dinar’s appreciation against main indebtedness foreign currencies1. Yet, MLT borrowing capital’s net inflows offset the negative foreign exchange effect up to just the third. This is because the 46% drop in these net inflows (+1,945 MTD) is due to the increase in principal reimbursements at a more sustained pace than the one of drawings (+38.3% and +4.3% respectively). Broken down by institutional sector, liabilities stocks in the form of MLT external debt shows a 1.6% shrinking of the Government one, coming to 54,243 MTD at the end of 2019, a sector which takes up, alone, about 71% of the stock of this type of liabilities. Concurrently, the outstanding balance of "the
1 9.1% and 7% for the euro and dollar, respectively (rate of the last working day of the year).
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External payments financial sector and other sectors" debt dropped by 10.1%, amounting to 17,045 MTD at the end of 2019. However, monetary authorities’ stock of MLT debt went upwards by 10% to 5,275 MTD. Concerning the outstanding balance of liabilities in the form of MLT currency and deposits, it reached 2,271 MTD in 2019 against 749 MTD a year before. This increase is attributable to deposits carried out by Libya at the Central Bank of Tunisia, over 2019, for a total package of 500 MEUR.
Table 3-12: Main parameters of medium and long term external debt (In MTD unless otherwise indicated) Description 2015 2016 2017 2018 2019 Outstanding balance of medium & long-term debt1 42,009 49,460 62,857 78,205 75,908 Rate of MLT indebtedness (in % of GNDI) 48.7 54.1 63.9 72.8 65.5 Drawings on medium & long-term borrowing capital 7,020 5,359 10,958 8,921 9,302 Medium & long-term debt service 3,243 4,477 6,872 6,894 9,265 Principal 2,283 3,372 5,568 5,318 7,357 Interest 960 1,105 1,304 1,576 1,908 Debt service ratio2 (In %) 8.3 10.9 14.2 11.9 14.5 1Outstanding balance of debt excluding incurred but not yet falling due interests. 2Calculated with reference to current receipts.
Accounting for 15.6% of total gross liabilities, short-term liabilities went upwards by 31.5% to 31,987 MTD at the end of 2019. This increase is attributable to growth of liabilities with respect to trade credits which reached 18,649 MTD, while financial commitments in the form of currency and deposits dropped by 3.2% following decline of liabilities with bank correspondents outside Tunisia by 16.4%.
Table 3-13: Trends in short-term liabilities and assets (In MTD unless otherwise indicated) Variation Description 2016 2017 2018 2019 in% 2019/2018
Short-term liabilities -15,971 -18,337 -24,329 -31,987 31.5 * Currency and deposits -9,837 -11,342 -13,782 -13,339 -3.2 of which : non-resident deposits -7,494 -8,954 -10,809 -11,166 3.3 Bank correspondents outside Tunisia -2,131 -2,219 -2,336 -1,953 -16.4 *Trade credits -5,949 -6,995 -10,547 -18,649 76.8 Short-term assets 2,984 3,139 3,698 4,172 12.8 * Currency and deposits 1,946 1,807 2,176 2,550 17.2 of which : bank correspondents 1,246 1,094 1,439 1,674 16.3 *Trade credits 1,039 1,332 1,522 1,622 6.6 Net liabilities -12,987 -15,198 -20,631 -27,815 34.8 Reserve assets 13,896 13,894 15,547 20,775 33.6 Net liabilities/reserve assets (in %)1 -93.5 -109.4 -132.7 -133.9 1.2 1 Variations in percentage points.
3-2-2 Assets Amounting to 26,540 MTD at the end of 2019, gross assets went upwards by 28% compared to their level recorded at the end of 2018 following the 33.6% firming up in reserve assets, main component of gross assets which reached 20,775 MTD (78.3% of total assets).
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Assets in foreign currency consolidated by 35.4%, amounting to 19,666 MTD at the end of 2019. Concurrently, the IMF’s reserve position and reserves in monetary gold firmed up, reaching 506 MTD and 570 MTD, respectively at the end of 2019. However, special drawing rights declined by 60.8%, down to 33 MTD. Concurrently, net assets in foreign currency firmed up significantly by 39.3%, reaching 19,465 MTD and 111 days of import at the end of 2019 against 13,974 MTD and 84 days at the end of 2018. As for short-term assets, they firmed up by 12.8%, amounting to 4,172 MTD. This trend is attributable to the combined effect of the increase in the stock of financial assets in the form of currency and deposits and assets with respect to trade credits, by 17.2% and 6.6% respectively.
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Tunisia’s external payments: Trends in current receipts and capital inflows (5thedition) (In MTD) Heading 2016 2017 2018 2019 A – Current receipts 41,199.1 48,431.6 57,768.3 63,727.0 Export of Goods (FOB) 29,145.6 34,426.6 40,987.4 43,855.4 Services 7,345.8 8,320.5 10,637.8 12,668.4 Transport 2,036.8 2,363.3 3,023.4 3,313.7 Freight 283.4 328.6 381.5 436.0 Passengers 1,000.6 1,153.1 1,532.6 1,664.2 Other transports 752.8 881.6 1,109.3 1,213.5 Of which : gas royalty 341.7 437.3 534.8 384.2 Travel 2,655.2 3,156.8 4,608.6 6,210.0 Tourism 2.373.4 2.831.0 4,141.2 5,628.4 Business and official travel 61.6 71.2 106.2 139.0 Studies and training 36.2 49.2 56.3 64.4 Medical care 172.3 191.5 283.0 350.0 Other living expenses 11.7 13.9 21.9 28.2 Government transactions 388.0 373.5 416.8 404.3 Tunisian government 0.0 0.0 0.0 0.0 Foreign governments 388.0 373.5 416.8 404.3 Other services 2,265.8 2,426.9 2,589.0 2,740.4 Insurance premiums and benefits 130.3 151.0 174.8 204.3 Office costs 96.6 99.5 112.2 116.9 Commercial & international trade costs 366.8 399.9 434.4 420.1 Large-scale works & technical services 649.8 680.7 747.7 763.1 Communication services 588.3 574.3 495.6 546.6 Financial services 134.9 159.8 175.6 206.7 Data processing and information services 118.1 165.8 222.5 252.5 Royalties and licence rights 48.9 50.2 62.8 66.1 Staff and cultural services 21.5 23.5 29.5 34.7 Miscellaneous 110.6 122.2 133.9 129.4 Factor income 4,202.0 4,878.0 5,376.7 6,392.7 Capital income 289.9 304.5 341.6 378.1 Interest on loans and investment 202.6 218.1 244.4 246.6 Dividends and profits 17.4 17.9 24.5 27.2 Direct investment income 69.9 68.5 72.7 104.3 Labour income 3,912.1 4,573.5 5,035.1 6,014.6 Worker remittances 3,216.6 3,734.2 3,990.9 4,786.2 Other labour income 695.5 839.3 1,044.2 1,228.4 Current transfers 505.7 806.5 766.4 810.5 Tunisian private sector 318.4 383.0 412.9 404.4 Tunisian public sector 187.3 423.5 353.5 406.1
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(In MTD) Heading 2016 2017 2018 2019 B-In capital and financial operations 10,544.5 16,450.7 18,209.6 22,163.7 In capital operations 229.4 485.9 383.3 445.6 Financial operations 10,315.1 15,964.8 17,826.3 21,717.1 Direct investments 1,945.0 2,157.2 2,789.6 2,529.3 Assets 43.6 25.7 47.6 50.2 Liabilities 1,901.4 2,131.5 2,742.0 2,479.1 Shareholdings 1,893.3 2,122.3 2,732.2 2,470.5 Other 8.1 9.2 9.8 8.6 Portfolio investments 87.8 116.2 124.1 169.1 Public sector 0.0 0.0 0.0 0.0 Assets 0.0 0.0 0.0 0.0 Liabilities 0.0 0.0 0.0 0.0 Private sector 87.8 116.2 124.1 169.1 Assets 0.0 0.0 0.0 0.0 Liabilities 87.8 116.2 124.1 169.1 Other investments 8,282.3 13,691.4 14,912.6 19,910.7 Liabilities 7,990.2 13,552.8 14,912.6 19,910.7 Medium and long-term liabilities 5,358.8 10,957.9 8,921.1 10,917.8 Loans and trade credits 5,358.8 10,957.9 8,921.1 9,302.0 General government 3,319.8 7,786.8 5,025.2 7,081.0 Monetary authorities 652.6 767.7 1,958.5 721.0 Financial sector 174.2 742.4 744.5 492.4 Other sectors 1,212.2 1,661.0 1,192.9 1,007.6 Currency and deposits 0.0 0.0 0.0 0.0 General government 0.0 0.0 0.0 0.0 Monetary authorities 0.0 0.0 0.0 0.0 Other medium and long-term liabilities 0.0 0.0 0.0 1,615.8 Short term liabilities 2,631.4 2,594.9 5,991.5 8,191.0 Currency and deposits 948.1 1,548.6 2,449.9 0.0 General government 0.0 0.0 0.0 0.0 Monetary authorities 41.8 0.0 467.7 9.9 Financial sector 906.3 1,548.6 1,972.3 9.0 Other sectors 0.0 0.0 0.0 0.0 Trade credits 1,498.2 1,046.3 3,551.5 8,101.9 Other sectors 1,498.2 1,046.3 3,551.5 8,101.9 Other short-term liabilities 185.1 0.0 0.0 0.0 Assets 292.1 138.6 0.0 0.0 Medium and long-term assets 0.0 0.0 0.0 0.0 Short-term assets 292.1 138.6 0.0 0.0 Currency and deposits 56.5 138.6 0.0 0.0 Financial sector 56.5 138.6 0.0 0.0 Trade credits 235.6 0.0 0.0 0.0 Other sectors 235.6 0.0 0.0 0.0 C – Adjustment operations (net flows) 464.7 987.8 1,528.1 1,301.5 General total 52,208.3 65,870.1 77,506.0 87,192.2
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Tunisia’s external payments: Trends in current expenditure and capital outflows (5thedition) (In MTD) Heading 2016 2017 2018 2019 A – Current expenditure 49,134.5 58,302.2 69,529.2 73,363.9 Import of goods (FOB) 39,469.0 47,267.7 56,734.5 59,784.6 Services 6,658.3 7,581.9 8,740.6 9,198.7 Transport 2,771.7 3,282.7 3,894.5 4,163.3 Freight 2,067.4 2,475.9 2,971.7 3,131.6 Passengers 158.0 183.5 238.1 267.7 Other transport 546.3 623.3 684.7 764.0 Travel 1,608.4 1,924.3 2,287.6 2,341.4 Tourism 941.8 1,107.1 1,374.3 1,398.4 Professional and official travel 196.5 228.7 262.0 282.0 Studies and training 262.3 359.4 383.9 366.4 Medical care 16.7 19.3 21.8 19.9 Other living expenses 191.1 209.8 245.6 274.7 Government transactions 662.1 653.8 599.5 567.1 Tunisian government 662.1 653.8 599.5 567.1 -technical assistance 2.6 86.1 60.0 58.3 -other 659.5 567.7 539.5 508.8 Foreign governments 0.0 0.0 0.0 0.0 Other services 1,616.1 1,721.1 1,959.0 2,126.9 Insurance premiums and benefits 417.7 443.3 459.4 470.2 Office costs 9.1 9.5 13.0 14.2 Commercial costs & international trade 191.5 203.3 227.0 256.6 Large scale works & technical services 554.0 567.4 670.2 750.6 Communication services 115.3 118.6 161.6 174.7 Financial services 133.7 158.2 193.7 202.4 Computer and information services 83.0 88.8 89.3 95.1 Royalties and licence rights 37.6 40.1 46.9 60.2 Staff and cultural services 29.1 39.5 34.6 37.6 Miscellaneous 45.1 52.4 63.3 65.3 Factor income 2,983.5 3,433.0 4,022.2 4,322.3 Capital income 2,924.6 3,362.2 3,950.8 4,245.2 Interest on medium & long-term loans 1,104.7 1,304.3 1,576.0 1,908.4 Interest on short term loans 103.6 144.3 170.4 206.7 Dividends and profits 64.3 73.1 115.4 78.7 Direct investment income 1,652.0 1,840.5 2,089.0 2,051.4 Labour income 58.9 70.8 71.4 77.1 Worker remittances 32.0 42.7 48.1 51.9 Other labour income 26.9 28.1 23.3 25.2 Current transfers 23.7 19.6 31.9 58.3 Tunisian private sector 23.6 19.6 31.9 58.2 Tunisian public sector 0.1 0.0 0.0 0.1
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(In MTD) Heading 2016 2017 2018 2019 B – In-capital and financial operations 4,215.7 7,570.1 6,323.8 8,600.8 In-capital operations 25.9 41.2 43.5 43.2 Financial operations 4,189.8 7,528.9 6,280.3 8,557.6 Direct investments 607.7 195.2 172.0 151.9 Assets 518.8 138.8 90.0 63.9 Liabilities 88.9 56.4 82.0 88.0 Shareholdings 63.4 37.6 48.4 58.4 Other 25.5 18.8 33.6 29.6 Portfolio investments 209.9 270.7 232.2 131.2 Public sector 0.0 0.0 0.0 0.0 Assets 0.0 0.0 0.0 0.0 Liabilities 0.0 0.0 0.0 0.0 Private sector 209.9 270.7 232.2 131.2 Assets 0.0 0.0 0.0 0.0 Liabilities 209.9 270.7 232.2 131.2 Other investments 3,372.2 7,063.0 5,876.1 8,274.5 Liabilities 3,372.2 6,769.4 5,317.5 7,800.1 Medium and long-term liabilities 3,372.2 6,726.1 5,317.5 7,356.7 Loans and trade credits 3,372.2 5,567.7 5,317.5 7,356.7 General government 1,382.0 3,012.2 2,000.1 4,042.9 Monetary authorities 836.2 858.4 1,400.2 1,142.8 Financial sector 285.0 579.5 656.3 508.7 Other sectors 869.0 1,117.6 1,260.9 1,662.3 Other medium and long-term liabilities 0.0 1,158.4 0.0 0.0 Short term liabilities 0.0 43.3 0.0 443.4 Currency and deposits 0.0 43.3 0.0 443.4 General government 0.0 0.0 0.0 0.0 Monetary authorities 0.0 43.3 0.0 416.7 Financial sector 0.0 0.0 0.0 26.7 Other sectors 0.0 0.0 0.0 0.0 Trade credits 0.0 0.0 0.0 0.0 Other sectors 0.0 0.0 0.0 0.0 Other short-term liabilities 0.0 0.0 0.0 0.0 Assets 0.0 293.6 558.6 474.4 Medium and long-term assets 0.0 0.0 0.0 0.0 Short-term assets 0.0 293.6 558.6 474.4 Currency and deposits 0.0 0.0 368.7 374.5 Financial sector 0.0 0.0 368.7 374.5 Trade credits 0.0 293.6 189.9 99.9 Other sectors 0.0 293.6 189.9 99.9 C – adjustment operations (net flows) 0.0 0.0 0.0 0.0 General total 53,350.2 65,872.3 75,853.0 81,964.7
Balance -1,141.9 -2.2 1,653.0 5,227.5
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3-3. Trends in competitiveness indicators 09/07/2019 3-3-1 Trends in the market share of exports
The market share of Tunisian exports on the European Union (EU)1 carried on with its downward trend, coming to 0.50% in 2019 against 0.51% for the two previous years and 0.63% in 2010. The weak progress of Tunisian exports in euro towards this geographical zone2 (1% in 2019 against 7.5% a year before) did not help to line up with the evolution of European imports, despite their deceleration in 2019 (3.7% vs. 6.8% a year before), in line notably, with uncertainties tied to Sino-American trade conflicts and the Brexit. Worth of note that in line with external demand weakness, Tunisian exporting activities suffered important domestic shocks, particularly the collapse of the olive oil harvest, as well as ongoing difficulties in the energy and phosphates and by-products sectors.
Graphic 3-11: Trends in the market share of Tunisia on the European Union market (In %)
0.70 0.67 0.66 0.66 0.65 0.65 0.63 0.62 0.60 0.60 0.58 0.57 0.56 0.55 0.55 0.55 0.55 0.55 0.53 0.51 0.51 0.50 0.50
0.45
0.40
Source: Eurostat and BCT calculations
Trend in the market shares of Tunisian exports by product group3 shows a drop for most categories of goods over 2019, except for "Mineral fuels, lubricants and related products", the market share of which came to 0.18% against 0.15% a year before, in line with the 8.7% increase in Tunisian exports for this category of composed products, mainly crude oil, against a drop in EU imports by 7.6%. However, the market share of “commodities” deteriorated, down from 0.73% in 2018 to 0.53% in 2019 in the wake of olive oil exports’ shrinking in line with harvest decline for the 2018-2019 season (140 thousand tonnes against 325 thousands in the previous season). Worth of note that Tunisia is the main olive oil exporter to Europe with a market share of 74% over this season. However, this activity, which is important both in terms of foreign currency inflows and in terms of employment, is suffering from multiple deficiencies affecting its competitiveness, notably absence of a national label and the weak packaging level, aside from its vulnerability to adverse climate conditions.
1The market share of a country in the EU is measured by the parity between this country’s exports on this region and extra-EU imports. 2BCT calculations as per Eurostat data. 3As per standard classification for international trade established by the United Nations.
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As for “chemicals and related products”, national exports grew by 3.4% in euros in 2019, against a 7% progress of the European imports of these products, meaning a slight drop in the market share, down from 0.13% to 0.12%, from one year to the next, bearing in mind that this share posted about 0.24% in 2010. In fact, and in despite recovery of the phosphate and by- products branch over 2019, activity is still weak and does not help to catch up with the evolution of external demand. Concerning "other manufactured goods", Tunisia's market share dropped slightly to 0.85% against 0.86% in 2018. The evolution of this heading, which encompasses products of the textile, clothing and leather industries, reflects a growing competitiveness, notably of Asian countries which take up 60% of these items’ imports. Excluding China, certain Asian countries and the United States, most countries experienced a regression, or at least, could not improve their market shares. In addition, exacerbated difficulties of the textile, clothing and leather industries branch in Tunisia, since 2011 went on in 2019 with a 6% drop in its exports in volume compared with the previous year. Likewise, the Tunisian market share for "machinery and transport equipment" dropped slightly, from 0.64% to 0.63%, from one year to the next. This share has been going downwards over the previous years, reflecting timid performances at export of mechanical and electrical industries with particularly a decline in exports in volume by 2.4% in 2019. Moreover, it has to be reminded that exports’ concentration on products constitutes a real vulnerability for the Tunisian economy. In fact, the structure of Tunisian exports1 remains less diversified than the one of its main competitors such as Turkey, Morocco and Egypt. Besides, exports of mechanical and electrical industries and of textile, clothing and leather ones, take up respectively, 46.6% and 21.3% of total sales. Activity evolution of these two sectors shows an important correlation with the Euro Zone’s economic activity. This makes them vulnerable to short-term cyclical fluctuations in this zone, aside from a less rapid evolution of demand than the one of most of other regions. Likewise, losses of market share imply competitiveness problems going beyond the cost aspect, which Tunisia has to face up by being more oriented towards high and medium technology products and by improving its positioning in the international value chain.
Graphic 3-12: Trends in market shares of Tunisian exports by products group (In %) 1.8
1.6 Foodstuff, beverages and tobacco
1.4 Commodities
1.2 Mineral fuels, lubricants and related materials 1.0 Chemicals and related products 0.8
0.6 Machinery and transport equipment
0.4 Other manufactured goods
0.2
0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1 Source: CNUCED’s concentration index (last observation-year 2018).
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As for Tunisia's competitors on the European market, China preserves its rank as a first exporter, with a market share of 20.45%. Likewise, competitiveness with countries which have a specialisation in exports closer to the one of Tunisia is relentlessly growing. In fact, most of these countries succeeded in improving their market shares, such as Turkey, Bangladesh, Morocco and Egypt.
Table 3-14: Trends in Tunisia’s market share of goods and in the one of its main competitors in the EU (In %)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
China 13.60 14.31 16.12 15.71 17.41 18.53 17.04 16.24 16.59 17.91 20.35 20.64 20.24 19.96 20.45
Turkey 3.06 3.06 3.27 2.92 2.95 2.82 2.82 2.72 3.00 3.22 3.57 3.90 3.76 3.84 3.90
India 1.61 1.65 1.84 1.87 2.06 2.19 2.31 2.09 2.18 2.20 2.29 2.30 2.37 2.31 2.35
Bangladesh 0.35 0.39 0.35 0.35 0.47 0.46 0.52 0.55 0.65 0.73 0.89 0.96 0.91 0.90 0.94
Morocco 0.77 0.53 0.56 0.54 0.53 0.51 0.51 0.52 0.60 0.65 0.72 0.81 0.82 0.81 0.83
Tunisia 0.58 0.56 0.62 0.60 0.65 0.63 0.57 0.53 0.55 0.55 0.55 0.55 0.51 0.51 0.50
Egypt 0.44 0.56 0.49 0.52 0.50 0.47 0.56 0.47 0.47 0.51 0.42 0.39 0.44 0.43 0.45 Source: Eurostat and BCT calculations
3-3-2 Trend in the dinar’s foreign exchange rate
The Tunisian dinar’s foreign exchange rate appreciated, at the end of 2019 and compared with the end of 2018, by 9.1% against the euro and by 7% against the US dollar. In fact, the dinar has initiated, since the April-May 2019 period, an adjustment movement of its downward trend which prevailed over the previous years, reflecting a better liquidity in foreign currency on the foreign exchange market, thanks notably to the trade deficit stabilisation, better tourist receipts in foreign currency, as well as attenuation of economic agents’ negative anticipations. In terms of annual averages, the dinar depreciated by 4.8% against the euro and by 9.8% against the US dollar.
Graphic 3-13: Comparative trends in foreign exchange rates 1.5 3.5 En dinar 3.3 1.4 3.1 2.9 2.7 1.3 2.5 EUR/USD 2.3 EUR/TND 1.2 2.1 and USD/TND 1.9 1.7 1.1 1.5 1.3 1.0 1.1
EUR/USD EUR/TND USD/TND
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Compared with these trends, the dinar’s nominal effective foreign exchange rate appreciated by 6.7% in December 2019, compared with the same month of the previous year. The real effective foreign exchange rate appreciated at a higher pace: 11.4% in line with an average inflation differential with partner countries of about 4.5 points, despite inflation slowdown in Tunisia starting from the second half of 2019.
Graphic 3-14: Trends in indexes of the dinar’s foreign exchange rate (Base 100 in 2010) In %
145
135
125
115
105
95
85
75
65
55
Nominal index Relative prices index Real index
Annual Report 2019 84
Chapter 4 – Money and Financing of the economy 23/06/2020 4-1. Money and sources of monetary creation 17/05/2019 The M3 money supply posted an acceleration in its progress pace (8.4% vs. 6.6% a year before), induced by the combined effect of the significant recovery of net claims abroad (+4,123 MTD vs. -1,729 MTD) and the firming up of net claims on the State (6.4% vs. 4.3%), while financing of the economy posted a strong deceleration (3.5% vs. 9.3%), thus recording its weakest growth rate since early 2000’s. 4-1-1 Money aggregates The deceleration, recorded in 2019, of the economic growth expressed by GDP at current prices (7.9% vs. 9.3%) as well as M3 money supply in terms of annual average (8% vs. 10.1% in 2018), led to the narrowing of the gap between these two indicators. In return, money circulation velocity has remained practically unchanged, posting 1.381 in 2019 (vs. 1.379 in 2018). On the other hand, the liquidity rate of the economy remained high in 2019, exceeding 72%, hence reflecting an increased fluidity of fiduciary money, in line with the volume of cash in circulation.
Table 4-1: Trends in certain macro-economic indicators
Description 2015 2016 2017 2018 2019
Average money supply M3 (in MTD) 59,799 63,741 69,358 76,341 82,465
M3 average growth rate (in %) 5.0 6.6 8.8 10.1 8.0
GDP in current prices (in MTD) 84,656 89,789 96,298 105,268 113,844
GDP growth rate in current prices (in %) 4.7 6.0 7.2 9.3 8.1
Average inflation rate (in %) 4.9 3.7 5.3 7.5 6.8
Money circulation velocity 1.416 1.409 1.390 1.379 1.381
The overall volume of refinancing of banks from the BCT rose over the last years, peaking in the beginning of March, at a level coming to 17 billion dinars. After this peak, a lull was initiated until May, to follow after that a downward trend (11,462 MTD at the end of 2019 vs. 15,805 MTD at the end of 2018). Thus, the significant drop in the BCT’s intervention in 2019 is attributable to combination of the effects induced by banking liquidity autonomous factors, particularly, the expansive effect linked to the consolidation of assets in foreign currency and the impact of the Credit/Deposit transformation ratio1. The latter was used as a macro-prudential instrument to control the trend in loans to the economy. Operationally and in accordance to its ultimate objective to maintain prices stability, the BCT initiated corrective actions through its privileged instrument, namely the key interest rate, raising it by 100 basis points in February 2019, to 7.75% in order to curb inflation which has remained, on average, at a high level (6.8% in 2019 vs. 7.5% in 2018).
1 Circular to banks n°2018-10 of 1st November 2018.
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Chapter 4
Graphic 4-1: Trend in the money market rate and the overall volume of average refinancing
In MTD In % 17,000 9
7.90 7.86 7.83 7.83 7.83 7.83 7.82 7.81 7.80 7.81 15,000 8 7.24 7.28
13,000 7 7.25 7.25 7.29 7.27 7.25 7.24
6.72
11,000 6.50 6.39 6
6.04
391 391
,
075 075
073 073
061 061
978 978
,
,
,
,
053 053
16
5.61 ,
16
16 16
9,000 5.53 15 5
239 239
082 082
,
,
690 690
15
,
113 113
,
14
14
333 333
13
,
13
423 423
, 12
7,000 4
11
5,000 3
854 854 198 387 487 091 508 881 362 681 150 055 655
, , , , , , , , , , , ,
15 16 16 16 16 15 14 14 12 12 12 11
3,000 2
July
May June
April
March
August
January
October
February
December
November September 2018 2019 MMR 2018 MMR 2019
MMR: Money Market rate
As for the financial system’s resources, the faster progress pace of M3 money aggregate in its broad sense, over 2019, concerned its main components although at different degrees, notably, fiduciary money (9.1% vs. 5.6%), bank money (4.2% vs. 2.4%) and available quasi-money (11.2% vs. 9.9%).
Graphic4-2:Trend in main M3 components 1600 12 10.4 9.8 9.9 1200 9.6 10
8.6 8.4 800 7.6 7.1 8 6.6 400 6.2 6.1 5.6 6
0 Annual Annual shift (in %)
Monthly Monthly variation in MTD 4 -400
2 -800
-1200 0 Sight deposit at banks Banknotes and coins in circulation Certificates of deposits Banknotes forward deposits Money supply M3
Strongly influenced by seasonal effects, Banknotes and Coins in Circulation grew, from one year to the next, at a sustained pace (8.5% or 1,055 MTD in 2019 vs. 6.1% or 721 MTD in 2018), closing for the considered year at 13,508 MTD. Needed to be reminded that high levels of Banknotes and Coins in Circulation recorded in May (+498 MTD), July (+655 MTD) and August (+614 MTD) are imputable to growing household expenses with respect to Ramadan, religious feasts and summer season, respectively.
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Table 4-2: Trend in the financial system’s resources and counterparts (End of period figures) Variation in % Description In MTD unless otherwise indicated Dec.2018 Dec.2019 Dec. 2018 Dec. 2019 Dec.2017 Dec.2018 Money supply M3 79,409 86,093 6.6 8.4
of which : Banknotes and coins in circulation 12,453 13,508 6.1 8.5
Sight deposits at banks 18,111 19,261 2.8 6.3 Forward deposits and other financial products 12,889 15,318 11.9 18.8 Certificates of deposits 3,408 4,147 -1.6 21.7 Savings accounts1 25,840 27,564 11.3 6.7
Other resources 26,497 28,417 7.2 7.2
Total resources=total counterparts 105,906 114,510 6.8 8.1
Net claims abroad2 -4,114 9 -1,729 4,123
of which : Net assets in foreign currency2 13,974 19,465 1,089 5,491
(Number of days of import) 3 (84) (111) (-9) (27)
Net claims on the State2 20,805 22,134 866 1,329
of which : Treasury bonds and national borrowing2 8,858 9,124 -431 266
Treasury current account2 668 905 202 237
Financing of the economy 89,215 92,367 9.3 3.5
of which : loans to the economy 84,743 87,642 9.1 3.4
1 This heading includes special savings accounts, housing savings accounts, project-savings accounts, investment savings accounts, other savings accounts and the savings account at the Postal savings center. 2 Variations expressed in MTD. 3 Variations expressed in days.
On the other hand, bank money’s progress pace firmed up over 2019 (4.2% or 847 MTD in 2019 vs. 2.4% or 477 MTD in 2018), reflecting, particularly, the one of the outstanding balance of sight deposits held at banks (6.3% or 1,150 MTD vs. 2.8% or 489 MTD in 2018). Worth of note that the outstanding balance of these latter posted, over the year under review, an exceptional increase in March (+1,075 MTD) resulting, mainly, from the ones carried out by institutionals, individual businesses and private individuals in line, notably, with receipts from cereal and olive oil campaigns. Nonetheless, two significant decreases were recorded in January (-897 MTD) and October (-825 MTD) with respect to certain corporate accounts following, mainly, payments made in the beginning of the year for the constitution of their stocks and cash withdrawals carried out by operators in the agricultural sector, respectively. The acceleration of quasi-monetary deposits in 2019 (11.2% or 4,961 MTD vs. 9.9% or 3,962 MTD) is mainly attributable to firmed up forward deposits and other financial products (18.8% or 2,429 MTD vs. 11.9% or 1,366 MTD), the moderated rise in deposits in special savings accounts at banks (8.3% or 1,481 MTD vs. 10.9% or 1,749 MTD) and the significant recovery of certificates of deposits (+21.7% or +739 MTD vs. -1.6% or -56 MTD). It is worth mentioning that the outstanding balance of the latter posted erratic evolutions during the year
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Chapter 4 under review, mainly due to subscribers’ preference for securities with short maturities and the non-renewal of securities falling due by certain economic agents owing to lack of liquidity. As for medium and long term savings mobilised in the form of bonds or private borrowings of more than a year, they pursued their downward trend for the second year in a row (-11.4% or - 218 MTD vs. -8% or -165 MTD at the end of 2018) under the effect of weak volume of bond issues and lack of the capital market dynamism linked to liquidity dry up and the latter’s exiguity. 4-1-2 Sources of monetary creation Unlike the previous years, financing of the economy’s contribution to M3 money supply’s growth declined significantly, down from 10.2% in 2018 to only 4% in 2019, in favour of the one of net claims abroad which posted a firm recovery (+5.2% vs. -2.3%) and to a lesser degree the one of net claims on the State (1.7% vs. 1.2%). The financial system’s support for the economy was strongly affected, in 2019, by the institution of the credit/deposit transformation ratio and fallouts from the tightening of monetary conditions carried out by the BCT since 2017 bringing the total of increase of its key rate to 350 basis points, bearing in mind in this framework that the deadline for transmitting increases in key rates to borrowing rate is within a 2-4 month range. Consequently, financing of the economy decelerated (3.5% or 3,152 MTD vs. 9.3% or 7,567 MTD a year before) and affected financing of the lending institutions in both their ordinary and special resources (2,900 MTD vs. 7,101 MTD) in favour of individuals as well as professionals. In particular, the outstanding balance of loans granted by banks were characterized, in 2019, by a sharp deceleration in financing in portfolio discount (753 MTD vs. 4,354 MTD) and to a lesser degree in debit current accounts (246 MTD vs. 1,058 MTD), along with the deterioration of their claims’ quality as shown by the acceleration of the outstanding balance of fixed and non performing loans (1,656 MTD vs. 1,349 MTD).
Graphic 4-3 :Contribution of counterparts to M3* Graphic 4-4 :Trend in the structure of loans by growth financial institution
16000 14 12.3 8500 14000 11.4 12 12000 9.9 9.9 6500 9.2 10 10000
8.4 8000 7.6 7.1 8 4500 6.6 6000 6
4000 In MTD 2500
2000 4 Annual shift (in %) Annual Annual shift (in MTD)
0 500 2 -2000
-4000 0 -1500
-3500 Financing of the economy (left scale) Net claims on the State (left scale) Nets claims abroad (left scale) Other net items (left scale) Leasing institutions Banks Central Bank of Tunisia M3 (right scale)
*M3= Net claims abroad + Net claims on the State + Financing of the economy - Other net items.
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Moreover, the credit structure by financial institution confirms the drop in banks recourse to the BCT’s resources (-2,971 MTD against +3,362 MTD) as well as in credits granted by leasing institutions (-233 MTD vs. +203 MTD) on the one hand, and the hegemony of financing of the economy by the banking sector (6,104 MTD vs. 3,536 MTD) on the other hand. By beneficiary, the increase in the outstanding balance of loans granted to professionals1, though in net deceleration (+3,080 MTD in 2019 vs. +6,032 MTD a year before) was mainly beneficial for the services sector (+2,433 MTD) accompanied by an important slowdown of loans to the industrial sector (484 MTD vs. 3,000 MTD) and to individuals (93 MTD vs. 1,248 MTD), mainly due to fallouts from monetary conditions’ tightening. As for net claims abroad, they recovered significantly at the end of 2019 (+4,123 MTD vs. -1,729 MTD in 2018), shifting for the first time since April 2016 into a positive territory, closing for the year at the level of 9 MTD. This trend is mainly the result of the rise in external assets of the financial system (5,732 MTD vs. 2,275 MTD) at a more important pace than the one of external liabilities (1,608 MTD vs. 4,004 MTD). To this end, external medium and long term debt service was mainly amplified by reimbursements in April of a package worth 250 million dollars with respect to the principal tranche of the Qatari debenture loan issued in 2017, and in July 2019 for an amount of 485 million dollars related to the debenture loan issued on the international capital market in 2012 granted by the USAID. Concerning mobilized external resources over 2019, the loans granted by the Kingdom of Saudi Arabia (500 M$), the ADB (120 M€), the European Union (300 M€), the sixth tranche of the IMF’s Extended Fund Facility loan (216 M$) and the debenture loan issued on the international capital market in the framework of State’s budget support (695 M€), are the most significant ones. Hence, net assets in foreign currency closed for the year 2019 at 19,465 MTD, corresponding to 111 days of imports against 13,974 MTD and 84 days, respectively, at the end of 2018.
Graph 4-5: Trend in net assets in foreign currency
20000 120 112 110 113 111 19000 111 104 110 18000 100 101 98 100
17000 93
16000
84 84 90
15000 78 19465 74 80 73
In In MTD 14000 72 In In Days of imports
13000 18044 70
12000
60
14464
11000 13974
12989
12935
12894
12885
12634 12626
12507 50
12281 12076
10000 11759
11351 11044 9000 40 M3 M6 M9 M12 M3 M6 M9 M12 M3 M6 M9 M12 M3 M6 M9 M12 2016 2017 2018 2019
Net assets in foreign currency (left scale) Days of imports (right scale)
M: Month
2 Source : Risk unit at the Central Bank of Tunisia
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State’s net indebtedness from the financial system increased, at the end of 2019, by 1,329 MTD against 866 MTD in 2018, thus reflecting the recovery of the outstanding balance of Treasury bonds in banks’ portfolio (+447 MTD vs. -251 MTD) and the moderated increase in the ones purchased by the BCT in the framework of the Open Market operations (296 MTD vs. 678 MTD), besides the mobilization of resources in foreign currency at certain local banks (356 M€). These funds helped replenish the balance of the Treasury's current account which rose by 237 MTD, at the end of 2019, against 202 MTD a year before. This account, being moved during the considered year by operations carried out by the State, has evolved erratically, posting a record level of 1,145 MTD in January 2019 following, notably, encashment of tax revenues and installments with regard to the last quarter of 2018. Worth of note that over 2019, the global volume of Treasury bonds issues reached 1,451 MTD against repayments in this respect of 702 MTD, corresponding to net subscriptions of +749 MTD against 3,186 MTD, 2,844 MTD and +342 MTD, respectively in the previous year. It is worth noting that this volume was lower than the one expected in the framework of State budget for the same year: 2,400 MTD. Money aggregates’ Outlook for 2020 Like most countries, fallouts from the Covid-19 pandemic have started to impact the national economy as of the first quarter of 2020. In fact, the Tunisian economy should experience in 2020, a recession of about 4.3% which will result in a sharp deceleration of the M3 money supply growth pace (4% at the end of 2020 vs. 8.4% in 2019), while financing of the economy is expected to accelerate (5.3% vs. 3.5%) in line with financial measures of economy support. 4-2 Financing of the economy 09/07/2020 4-2-1 Trend in loans to the economy The outstanding balance of loans excluding surety bonds granted by banks and financial institutions to the economy, as recorded by the Risk Unit and the Central Unit for loans to individuals reached more than 92.2 billion dinars at the end of 2019, posting a deceleration in its progress pace, for the second year in a row: 3.6% compared to 8.9% in 2018 and 13.4% in 2017.
Graphic 4-6 : Trend in the overall outstanding balance of loans by category of beneficiaries
16
14
12
10
8
6 In % In 4
2
0 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19
Loans to professionnals Loans to individuals Overall Outstanding balance of loans
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By category of beneficiaries, the deceleration of loans to the economy is attributable both to the 5.4-percentage point drop in the outstanding balance of loans to professionals’ growth pace and the 5.1-percentage point drop in the outstanding balance of loans to individuals’ growth pace, relevant mainly to consumer loans. By term, the slow growth pace was mainly relevant to the outstanding balance of loans in its different terms and originates basically from the significant deceleration of short term loans granted to professionals. In 2020, the Central Bank of Tunisia took exceptional support measures in favour of professionals and individuals, to reduce the expected impact of “Covid-19” pandemic1 on the economy.
Table 4-3: Breakdown by beneficiary, sector and term of the outstanding balance of loans to the economy (In MTD unless otherwise indicated) Variation in % Description 2017 2018 2019 2018 2019 2017 2018 Loans to businesses and to professionals 58,994 65,028 68,122 10.2 4.8 Short term 32,826 37,392 39,496 13.9 5.6 Medium & long term 26,168 27,636 28,626 5.6 3.6 - Agriculture & fishing1 2,651 2,748 2,910 3.7 5.9 Short term 1,517 1,585 1,673 4.5 5.6 Medium & long term 1,134 1,163 1,237 2.6 6.4 - Industry 21,482 24,483 24,969 14.0 2.0 Short term 14,673 17,469 18,030 19.1 3.2 Medium & long term 6,809 7,014 6,939 3.0 -1.1 - Services 34,861 37,797 40,243 8.4 6.5 Short term 16,636 18,338 19,793 10.2 7.9 Medium & long term 18,225 19,459 20,450 6.8 5.1 Loans to individuals 22,713 23,960 24,053 5.5 0.4 - Consumer loans 12,318 12,889 12,774 4.6 -0.9 Short term 2,839 3,142 3,168 10.7 0.8 Medium & long term 9,479 9,747 9,606 2.8 -1.4 - Housing loans 10,395 11,071 11,279 6.5 1.9 Medium & long term 10,395 11,071 11,279 6.5 1.9 Total 81,707 88,988 92,175 8.9 3.6 Short term 35,665 40,534 42,664 13.7 5.3 Medium & long term 46,042 48,454 49,511 5.2 2.2 1 This involves loans granted directly to farmers and fishermen.
1 See circular to banks n°2020-06 of 19 March 2020 related to exceptional support measures in favour of professionals and individuals and the circular to banks n°2020-07 of 25 March 2020 related to exceptional support measures in favour of individuals as completed by circular to banks n°2020-08 of 1st April 2020.
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Businesses and professionals continued to consolidate their share in the outstanding balance of loans to the economy to the detriment of the one of loans to individuals, the growth pace of which posted a rather more pronounced slowdown. This brought about an ongoing decrease in individuals’ share: down from 27.8% to 26.9% then to 26.1% over the last three years. 4-2-2 Trend in the outstanding balance of loans to professionals 4-2-2-1 Breakdown of the outstanding balance of loans to professionals Deceleration of the outstanding balance of loans to professionals is due to the slower progress pace of the outstanding balance of loans to private businesses, down by 7.8 percentage points, and the faster growth pace of the outstanding balance of loans to public companies and administration: up by 15.1 percentage points.
Table 4-4: Breakdown of the outstanding balance of loans between public companies and Administration and private companies by sector (In MTD unless otherwise indicated) Variation in % Description 2017 2018 2019 2018 2019 2017 2018 Agriculture & fishing 2,651 2,748 2,910 3.7 5.9 Public companies and Administration 108 116 112 7.4 -3.4 Private companies 2,543 2,632 2,798 3.5 6.3 Industry 21,482 24,483 24,969 14.0 2.0 Public companies and Administration 1,429 1,679 1,591 17.5 -5.2 Private companies 20,053 22,804 23,378 13.7 2.5 Services 34,861 37,797 40,243 8.4 6.5 Public companies and Administration 4,082 4,551 6,422 11.5 41.1 Private companies 30,779 33,246 33,821 8.3 1.7 Loans to businesses and to professionals 58,994 65,028 68,122 10.2 4.8 Public companies and Administration 5,619 6,346 8,125 12.9 28.0 Private companies 53,375 58,682 59,997 10.0 2.2
The fast growth pace of the outstanding balance of loans granted to public companies and Administration is attributable to disbursement of the syndicated loan in foreign currency worth 841 MTD for the Ministry of Finances by 12 local banks to finance the State budget. The same Ministry profited from two other syndicated loans in foreign currency: the first worth 1,435 MTD and the second worth 1,180 MTD, disbursed in March and May 2020. Public banks contributed to financing of the economy, with an outstanding balance of 26.6 billion dinars against 24.4 billion dinars a year before, recording a growth rate of 9 % against 13.5% in 2018. They could, thus, increase their market share which went from 37.5% in 2018 to 39.1% in 2019.
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4-2-2-2 Breakdown of the outstanding balance of loans to professionals by sector of activity
Sectoral breakdown of the outstanding balance of loans to professionals shows a drop in the share of loans granted to the services and agriculture and fishing sectors in favour of the industry one.
Graphic4-7: Trend in the share of the outstanding balance of professional loans by sector of activity
100% 90% 80% 59.7% 59.1% 58.2% 70% 60% 50% 40% 30% 35.8% 36.4% 37.6% 20%
10% 4.5% 4.5% 4.2% 0% 2017 2018 2019
Agriculture and fishing Industry Services
4-2-2-2-1 Financing agriculture and fishing sector
Bank financing granted to this sector encompasses, aside from loans granted directly to farmers and fishermen, indirect loans granted to agricultural products and material marketing structures and retroceded with the same conditions to farmers and fishermen. The outstanding balance of loans granted whether directly or indirectly to the agriculture and fishing sector grew by 28.8% at the end of 2019 against 8.3% in 2018. This significant acceleration is attributable, mainly, to the increase in the progress pace of the outstanding balance of indirect loans, as well as the acceleration in that of direct loans. The speeded up outstanding balance of indirect loans is mainly attributable to the important increase in commitments granted to the Cereals Board due to the sound cereal campaign and to the new financing method adopted in 2019, with respect to the financing of cereal harvest which consists in loans to the Cereals Board rather than to private collectors.
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Table 4-5: Outstanding balance of loans granted to the agriculture and fishing sector (In MTD) Medium & long Short term loans Total Description term loans 2017 2018 2019 2017 2018 2019 2017 2018 2019 Direct loans 1,517 1,585 1,673 1,134 1,163 1,237 2,651 2,748 2,910 Indirect loans 1,071 1,315 2,390 283 273 284 1,354 1,588 2,674 Agricultural products marketing 1,071 1,315 2,390 113 106 91 1,184 1,421 2,481 structures of which :National Oil Board 107 112 144 46 31 26 153 143 170 Cereals Board 714 969 2,013 0 0 0 714 969 2,013 SMCSAB (ex. Central Wheat 29 10 0 5 4 4 34 14 4 Cooperative)1 SMCSAGC (ex. Central Cooperative for Large Scale 78 83 88 12 9 9 90 92 97 Cropping)2 Agricultural material marketing 0 0 0 170 167 193 170 167 193 companies Total 2,588 2,900 4,063 1,417 1,436 1,521 4,005 4,336 5,584 1 Central mutual company for agricultural services of wheat (SMCSAB). 2 Central mutual company for agricultural services of large-scale farming (SMCSAGC).
It should be pointed out that some measures were taken in favour of the agriculture and fishing sector, namely: granting supplementary loans to cover expenditure related to adjuvant weeding and fertilisation with respect to the large-scale farming 2019-2020 campaign1 due to favourable weather conditions; reviewing maturities of seasonal loans granted to the olive oil sector2; reviewing scales and aquaculture loans’ maturities3
4-4-2-2-2 Financing of industry Totalling 24,969 MTD at the end of 2019 against 24,483 MTD in the previous year, the outstanding balance of loans granted to the industrial sector made a 2% progress against 14% a year before. This net deceleration results from the slower growth pace of short-term loans and the drop in medium and long-term loans. The sharp decrease in short-term outstanding balance of loans’ growth pace by 15.9 percentage points, is mainly due to the drop in the outstanding balance of loans to metallurgy and metal work branch (-2.4% vs. +39.2% in 2018), as well as a deceleration in the one of agro-food industries’ branch 4 (+3.1% vs. +14.4% in 2018).
1 Note to banks n°2020-04 of 18 February 2020 relative to fixing the amount of supplementary loans to cover expenditure related to adjuvant weeding and fertilisation with respect to the large-scale farming 2019-2020 campaign. 2 Circular to banks n°2019-10 of 14 October 2019 relative to the review of maturities of seasonal loans granted to the olive oil sector. 3 Circular to banks n° 2019-11 of 18 October 2019 relative to the review of scales and maturities of aquaculture loans. 4 Despite measures taken for rescheduling debts of oleifactors recommended by note to banks n°2019-12 of 18 December 2019, relative to treatment of indebtedness of oleifactors and olive oil exporters.
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As a direct consequence of the deterioration of business climate, the growth pace of the outstanding balance of medium and long-term loans, regressed by 4.1 percentage points, which is mainly relevant to branches of chemical industries (+7.9% vs. +24.8% in 2018) and construction (-15.6% vs. -2.1% in 2018).
Table 4-6: Breakdown of the outstanding balance of loans granted to the industrial sector by branch of activity (In MTD) Medium and long Description Short-term loans Total term loans 2017 2018 2019 2017 2018 2019 2017 2018 2019 - Agrofood industries 4,541 5,197 5,359 1,454 1,619 1,808 5,995 6,816 7,167 - Construction 1,573 1,769 2,179 998 977 825 2,571 2,746 3,004 - Metallurgy and metal work 1,624 2,261 2,206 521 517 558 2,145 2,778 2,764 - Other non- metal mineral 1,177 1,285 1,408 1,479 1,405 1,270 2,656 2,690 2,678 product manufacturing - Chemical industries 983 1,216 1,355 487 608 656 1,470 1,824 2,011 Paper/cardboard and 681 866 865 341 360 351 1,022 1,226 1,216 publishing/printing Rubber and plastics industries 743 873 789 288 268 240 1,031 1,141 1,029 - Other industrial branches 3,351 4,002 3,869 1,241 1,260 1,231 4,592 5,262 5,100 Total 14,673 17,469 18,030 6,809 7,014 6,939 21,482 24,483 24,969
4-2-2-2-3 Financing of the services sector
Financing granted to the services sector, which accounts for more than 58% of loans to the economy, posted a slower growth pace, down from 8.4% in 2018 to 6.5% in 2019. This deceleration concerned mainly the outstanding balance of medium and long term loans which went down by 2.3 percentage points involving, transport and communication, and financial activities. As for the growth pace of the outstanding balance of medium and long term loans, it grew at a slower pace by 1.7 percentage points involving financial activities, trade and tourism branches.
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Table 4-7: Breakdown of the outstanding balance of loans granted to the services sector by branch of activity (In MTD) Short term Medium and long term Total loans loans Description 2017 2018 2019 2017 2018 2019 2017 2018 2019 - Trade, automobile repair 9,236 10,355 11,526 3,467 3,773 3,833 12,703 14,128 15,359 and household items - Real estate, renting & service to 2,258 2,223 2,339 4,327 4,835 5,124 6,585 7,058 7,463 businesses - Hotels and restaurants 2,056 1,970 2,040 2,588 2,576 2,403 4,644 4,546 4,443 - Transport & communications 1,007 1,322 1,574 2,983 2,759 2,693 3,990 4,081 4,267 - Financial activities 1,112 1,265 1,286 2,300 2,709 2,593 3,412 3,974 3,879 - Public administration 198 389 160 873 842 1,671 1,071 1,231 1,831 - Health & social services 150 161 196 888 1,019 1,081 1,038 1,180 1,277 - Collective, social and personal 450 493 506 532 615 685 982 1,108 1,191 services - Education 53 41 42 137 201 229 190 242 271 - Other services 116 119 124 130 130 138 246 249 262
Total 16,636 18,338 19,793 18,225 19,459 20,450 34,861 37,797 40,243
4-2-2-3 Unpaid and disputed claims
The outstanding balance of unpaid or disputed claims grew at a faster pace, going up from 8,880 MTD in 2018 to 9,850 MTD in 2019, corresponding to a 10.9% progress. Thus, the rate of unpaid or disputed claims grew from 13.7% in 2018 to 14.5% in 2019, compared to an increase in loans to professionals that came to 10.2% and 4.8% from one year to the next, indicating a deterioration in commitments’ quality.
Graphic4-8: Trend in unpaid or disputed claims
20 100 18 16
80 14 in in % 12 60
85.0 84.3 84.6 86.6 86.3 85.5 10 %
8 In
40 6 Evolution Evolution rate 4 20 2
15.0 15.7 15.4 13.4 13.7 14.5 0 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 0 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Unpaid loans or disputed claims Outstanding without unpaid loans and disputed claims Outstanding without unpaid loans and disputed claims Unpaid loans or disputed claims Overall outstanding balance of loans
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Money and Financing of the economy
Table 4-8: Breakdown of the outstanding balance of unpaid or disputed claims by sector (In MTD unless otherwise indicated) Share in total 2018 2019 (in %) Sector Unpaid Unpaid Total Share Total Share & & 2018 2019 loans (in %) loans (in %) disputed disputed Agriculture and fishing sector 666 2,748 24,2 701 2,910 24.1 7.5 7.1 Industrial sector 2,848 24,483 11,6 3,306 24,969 13.2 32.1 33.6 Services sector 5,366 37,797 14,2 5,843 40,243 14.5 60.4 59.3 Total 8,880 65,028 13,7 9,850 68,122 14.5 100.0 100.0
Breakdown of the outstanding balance of unpaid or disputed professional claims by sector of activity shows a slight decrease in the share of the agriculture and fishing sector, down from 7.5% in 2018 to 7.1% in 2019, and the services sector which dropped slightly from 60.4% in 2018 to 59.3% in 2019. However, the share of the industry sector went up from 32.1% to 33.6% between 2018 and 2019, respectively. Worth of note also that five activity branches took up 6,023 MTD or about 61.2% of the overall outstanding balance of unpaid or disputed professional claims which are broken down as follows: Trade, automobile repair and household items: 1,810 MTD or 18.4%, Hotels and restaurants: 1,583 MTD or 16.1% Real estate, renting and services to businesses: 1,172 MTD or 11.9%, Transport and communication: 730 MTD or 7.4%, and Agrofood industries: 728 MTD or 7.4%. 4-2-3 Financing of individuals
Individuals’ overall indebtedness from the banking sector totalled 24,053 MTD in 2019 against 23,960 MTD in the previous year: progressing slightly by 0.4% against 5.5% in 2018. This deceleration is attributable to the one of housing loans (+1.9% vs. +6.5% in 2018), as well as the decrease in consumer loans (-0.9% vs. +4.6% in 2018) involving, mainly, housing fitting out loans.
Table 4-9: Breakdown of the outstanding balance of loans granted to individuals by financing category (In MTD unless otherwise indicated) Variations in % Description 2017 2018 2019 2018 2019 2017 2018 Housing loans 10,395 11,071 11,279 6.5 1.9 Consumer loans 12,318 12,889 12,774 4.6 -0.9 Housing fitting out 9,085 9,367 9,139 3.1 -1.9 Vehicles 322 314 311 -2.7 -0.9 Solar water heating 59 56 93 -4.6 65.9 Family computer 8 7 7 -5.6 -9.9 University loans 5 4 3 -30.6 -26.3 Other 2,839 3,141 3,221 10.6 2.5 Total 22,713 23,960 24,053 5.5 0.4
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The growth pace of the outstanding balance of unpaid and disputed claims regressed by 6.4 percentage points. This deceleration is attributable to the slower growth pace of the outstanding balance of disputed loans and that of the outstanding balance of unpaid claims, despite the fast growth pace of unpaid claims related to consumer loans which grew by 6.3 percentage points.
Table 4-10: Breakdown of the outstanding balance of unpaid and disputed claims concerning loans to individuals by financing category (In MTD unless otherwise indicated)
Variations December December December 2018 2019 Description 2017 2018 2019 2017 2018 In In In In MTD % MTD % Disputed claims 457 523 537 66.0 14.4 14.0 2.7 Total Overdue 428 458 487 30.0 7.0 29.0 6.3 - Unpaid housing 255 276 284 21.0 8.2 8.0 2.9 - Unpaid consumption 173 182 203 9.0 5.2 21.0 11.5 of which : Unpaid housing fitting out 106 110 130 4.0 3.8 20.0 18.2 Total (unpaid + disputed claims) 885 981 1024 96.0 10.8 43.0 4.4
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Part II: Bank missions
Chapter 1 –Monetary Policy
1-1. Monetary policy 03/08/2020 In 2019, the national economy evolved in an international environment marked by an escalation of Sino-American trade tensions and the exacerbation of geopolitical conflicts weighing on the world economic outlook. At the level of the Euro Zone, Tunisia's main trading partner, activity remained anemic and accompanied by an inflation which came below its target of 2%. This situation led to maintaining of an excessively accommodating stance of monetary policy, with the aim of converging inflation towards its target. In Tunisia, economic activity was strongly affected by an unfavourable international environment and a national context strongly marked by extension of the political transition phase and the persistence of a tense political and social climate. Consequently, the rate of economic growth, expressed in prices of the previous year, was limited to 1% for the whole year of 2019, against 2.7% a year earlier, bearing the mark of a downturn in the sector of industry and a deceleration of the added value of the agricultural sector, after an exceptional year 2018. Despite this underperformance, the economic balance sheet was overall positive, thanks in particular to a proactive and very watchful monetary policy which endeavoured to put an end to the drift in inflation and which set out to restore economic balances. Thanks to an ongoing tightening of monetary policy, by raising the Central Bank's key rate by 100 basis points (bps below), in February 2019, bringing it to 7.75% (i.e. the fifth increase within two years, for a total of 350 bps), monetary policy managed to significantly reduce the volume of the Central Bank refinancing on the money market and to put inflation on an almost continuing downward path, reducing it from a maximum of 7.7% in June 2018 to 6.1% at the end of 2019 and a low level of 5.8% in February 2020. This policy contributed also reducing external vulnerability thanks to a current deficit in regression (8.5% of GDP vs. 11.2% a year earlier), and to accumulating foreign currency reserves, favouring thus an appreciation of the dinar exchange rate against the main foreign currencies. In 2020, the world economy was hard hit by the spread of the COVID-19 pandemic. This unprecedented health crisis is likely to generate an unprecedented economic recession, the extent of which could exceed that of 2008 and undoubtedly that of the great depression of 1929, with world growth estimated at -3%, according to latest forecasts from the International Monetary Fund1. This exceptional context continues to push governments and central banks around the world to the limits of their action, in order to curb the impact of the crisis on their economies. In Tunisia, fallout from conjunctural inflections notably generated by the containment of the population, the sudden cessation of productive activity and the disruption of supply chains are already perceptible on many economic and monetary indicators. These shocks, both of supply and demand, are likely to plunge the national economy into a strong recession in 2020, which could be more pronounced than that of 2011. In this context of high uncertainty surrounding the duration and severity of the health crisis, and considering the challenges involved in this situation and its immediate and future repercussions, and with the objective of contributing to mitigation of its negative effects, the Central Bank decided to act proactively. To this end, the Executive Board of the Central Bank of Tunisia, in its meeting on 17 March 2020, decided to lower the key rate by 100 basis points, bringing it
1 World Economic Outlook - April 2020.
Annual Report 2019 101
Chapter 1 down to 6.75%. This action was accompanied by others aimed at providing banks with sufficient liquidity to meet the needs of the economy, and came to consolidate the series of macro-prudential measures decided simultaneously, with a view to preserving financial stability and supporting the productive sector and employment. 1-1-1 Liquidity managements The ongoing gloomy economic activity combined with a deficit of the current account remaining, in spite of its reduction, at important levels, maintained the average needs of banks in liquidity1 on a high level throughout the year 2019, close to that recorded in 2018. In fact, the banks' average liquidity need came to 14,632 MTD in 2019, up by 108 MTD compared to the previous year (cf. graphic 1-1).
Graphic 1-1: Trend in banks’ need for liquidity (daily averages in MTD)
16000 174 14000 170 12000
10000 153 8000 14354 14458 142
In In MTD 6000 169 9070 421 475 4000 316 6357 4481 4932 2000 4217 3864
0 2012 2013 2014 2015 2016 2017 2018 2019
Total effect of factors Reserve requirements Banks' needs for liquidity
Last data: year 2019 Source: Central Bank of Tunisia
It should be noted that the progress pace of banks' liquidity needs has decelerated significantly compared to previous years, especially the years 2016, 2017 and 2018, and has been affected by the evolution of the autonomous factors of liquidity, and mainly the favourable impact of the appreciation of the dinar exchange rate in 2019 on the external sector, leading to a significant expansive effect of net assets in foreign currencies on bank liquidity. Also, banknotes and coins in circulation contributed to improvement of the bank treasury, but to a lesser extent. However, the Treasury current account balance which was characterized in 2019, in particular by strengthening of the State's indebtedness to banks, had a restrictive effect on bank liquidity. Worth of note that net subscriptions to Treasury bonds reached 749 MTD, during the year under review, against 343 MTD a year earlier, bringing the outstanding financing of public deficit by the domestic market in dinar to 14,182 MTD, at the end of 2019, the double of its level in 2011 (cf. graphic 1-2).
1 Banks’ need in liquidity = Autonomous Factors effects + required reserve.
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Graphic 1-2: Trend in the outstanding balance of Treasury issues (In MTD)
16000 14182 13452 13614 14000 12494
12000 10238 9441 10000 8280 7674 8000 6953
6000
4000
2000 2011 2012 2013 2014 2015 2016 2017 2018 2019
Long-term Treasury bonds Short-term Treasury bonds National debenture loan Total government domestic debt
Last data: year 2019 Source: Central Bank of Tunisia
The infra-annual analysis shows that the evolution of banks' liquidity needs went through two distinct phases (cf. graphic 1-3):
Graphic 1-3: Daily trend in banks’ needs for liquidity
MTD
17000
15000
13000
11000
9000
7000
5000
Autonomous Liquidity Factors Reserve requirements Monthly average
Last data: March 2020 Source : Central Bank of Tunisia
During the first period from January to April, the banks' need for liquidity constantly increased, going from 15,837 MTD on average in January 2019 to 16,454 MTD in April. This evolution bears the mark, essentially, of the restrictive impact of some 1,207 MTD exerted by buying and selling currencies between banks and the Central Bank, reflecting the importance of the current account deficit. Indeed, the cumulative monthly deficit of the current account balance reached 4.505 MTD, over the first four months of the year, up 20% compared to the same period of the previous year (cf. graphic 1-4).
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Chapter 1
Between May and December 2019, the banks needs gradually regressed, from a highest level of 16,454 MTD in April 2019 to 11,847 MTD in December, a decrease of 4,607 MTD or 28%. This is mainly due to:
the impact of monetary policy tightening on global demand through its effects, on the one hand, on the cost of access to credit and on the other hand, on the expectations of economic agents allowing, consequently, an improvement of the bank liquidity situation. It should be noted in this regard that the institution of a prudential “Loan / Deposit” ratio has also contributed to curbing the evolution of bank uses, in particular in terms of granting credits. the appreciation of the dinar's exchange rate against the main currencies, helped on the one hand by the tightening of monetary policy, which widened the gap of yields between investments in dinar and those in foreign currency. Worth of note that investments in dinars could yield returns of more than 10% at a time when the rates of return on the euro were close to zero. This situation has led economic agents to review their expectations and sell overly the currencies in their possession for fear of suffering exchange losses due, precisely, to the appreciation of the dinar. On the other hand, the abundant supply of foreign currency on the foreign exchange market, thanks to an exceptional tourist season and the notable increase in transfers from work remittance income, combined with declining demand, did in fact boost foreign exchange reserves, thus easing pressures on the dinar exchange rate. It should be noted that in 2019, tourist receipts and work remittance totalled 5,619 MTD and 4,949 MTD respectively, compared to 4,141 MTD and 4,121 MTD a year earlier, helping to consolidate the surpluses of the balance of services and that of factor income, which was a moderating factor of the current account deficit, despite a very large trade deficit. (cf. graphic 1-4 and graphic 1-5).
Graphic 1-4:Trend in the current account balance Graphic 1-5: Estimated effect of manual exchange and net sales of foreign currency by banks to the on bank liquidity (In MTD) BCT (In MTD)
1000 818 1200 635 643
500 1000 957 155 11 0 800 -66 -17 -5 -139 -203 -500 600 -439 511 -561
-1000 400 295
-1500 162 160 182 200 122 119 80 64 43 53 -2000 0
Current account deficit Net sales
Last data: December 2019 Source : Central Bank of Tunisia Last data: December 2019 Source : Central Bank of Tunisia
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Monetary policy
To meet banks’ needs, the Central Bank intervened on the money market to provide a liquidity package of 11,999 MTD, on average over the year, against 11,334 MTD in 2018. (cf. graphic 1-6). These interventions1 took the form of:
- main refinancing operations up to 7,000 MTD. It should be mentioned that these operations have been capped at this level since July 2017, with the aim of forcing banks to seek other alternative sources of financing and not to rely exclusively on the resources of the Central Bank. - longer-term refinancing operations, specifically at 6 months, which increased from 141 MTD in 2018 to 1,831 MTD in 2019. These operations, launched at the end of 2018, and intended to provide structural liquidity, benefited from banks’ attractiveness. It should be noted that these operations also benefited the three local Islamic banks which were allocated a package of 30 MTD on average, in the form of "Wakala Investissement" conventions signed between the BCT and these three banks, taking into account the specificities of these institutions prohibited by their charaic committees from the use of interest rate in their transactions. - outright purchases of public securities on the secondary market, bringing the outstanding amount of these operations to 1,910 MTD on average, in 2019, up by 676 MTD compared to 2018. - foreign exchange swaps for monetary policy purposes , the outstanding amount of which came to 1,258 MTD on average in 2019, down by 1,316 MTD compared to their level in 2018.
Graphic 1-6:Annual trend in BCT interventions on Graphic 1-7: Liquidity surplus and deficit on the the money market (In MTD) money market (In MTD) 4000 13000 11999 11334 3000 11000 2000 8558 9000 3209 2690 1000 6474 7000 102 700 0 -665 5000 -25 -1000 -3190 -2633 3000 -2000
1000 -3000
-1000 2016 2017 2018 2019 -4000 2016 2017 2018 2019 FX Swap for monetary policy purposes Longer-term refinancing operations (6 months) Surplus or deficit on M.M Marginal lending facilities Longer-term refinancing operations (3 months) Deposit facilities Excess reserve Outright operations Main refinancing operations Total central bank interventions Last data: year 2019 Source: Central Bank of Tunisia Last data: year 2019 Source: Central Bank of Tunisia
1 BCT Interventions = monetary policy operations initiated by the BCT, which are currently the main refinancing operations, longer-term refinancing operations (3 months and 6 months), outright operations and foreign exchange swaps for monetary policy purposes.
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It should be noted that in 2019, the interventions of the BCT (11,999 MTD) could not cover all of the banks' needs (14,632 MTD), which created a liquidity deficit on the money market1 worth 2,633 MTD, on average, against 3,190 MTD in the previous year (cf. graphic 1-7). This deficit was covered by the banks' recourse to marginal 24-hour lending facilities, for an average amount of 2,690 MTD, down by 519 MTD compared to 2018. On the other hand, the 24-hour deposit facilities totalled just 26 MTD in 2019 against only 1 MTD the previous year. It should be noted that the liquidity deficit on the money market has experienced a continuous downward trend from May 2019 until the end of the year.
Table 1-1: Trend in the main indicators on the money market (Average data in MTD) 2018 2019 Q1-2020 Main refinancing operations 7,049 7,000 6,013 outright operations 1,234 1,910 2,384 Foreign exchange swaps for monetary policy purposes 2,574 1,258 463 Longer term refinancing operations (3 months) 336 - - Longer term refinancing operations (6 months) 141 1,831 1612 BCT interventions 11,334 11,999 10,472 Autonomous liquidity factors 14,354 14,458 10,551 Required reserves 170 174 183 Banks’ needs 14,524 14,632 10,734 Surplus(+) or deficit(-) on money market -3,190 -2,633 -262 24h-Deposit facility 1 26 89 24h-Marginal lending facility 3,209 2,690 379 Excess reserves 18 31 28
1-1-2 Interbank market activity The activity of the interbank market was characterized, in 2019, by strengthening of the average interbank outstanding balance, and specifically that of blank transactions2, which increased by 12% compared to the previous year, going from 853 MTD to 953 MTD. This increase hides, however, a contrasting development of sight and forward transactions. Indeed, the share of sight transactions fell by 3 percentage points, while that of forward transactions consolidated by the same rate, thus representing 61% of total transactions, in 2019 (cf. graphic 1-8).
1 Surplus / deficit of liquidity on the money market = interventions of the BCT –Banks’ need for liquidity. 2 According to Circular of the Central Bank to banks n ° 2018-12 of 28 November 2018, relating to the interbank market in dinar, these are interbank transactions without guarantee.
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Graphic 1-8: Trend in the average interbank outstanding balance in MTD 1000 900 800 700 600 500 400 300 200 100 0
Sight average interbank outstanding banlance Forward average interbank outstanding banlance
Last observations : 31 March 2020 Source: Central Bank of Tunisia
The intra-annual dynamics on the interbank market, during the year 2019, bore the mark on the one hand, of the better visibility for actors on the said market, outcome of the last reform introduced at the end of the year 2018 by provisions of Circular of the Central Bank to banks n ° 2018-12 of 28 November 2018, relative to interbank market in dinar, and meant to set more transparency for this market, and on the other hand, of eased-up pressure on liquidity in dinar with the drop in the overall volume of refinancing which followed a more pronounced downward trajectory during the last quarter of 2019, down from 13.6 billion dinars at the beginning of September 2019 to 11.5 billion dinars at the end of December. This downward trend continued in the first quarter of 2020 and the overall volume of refinancing reached the level of 10.5 billion dinars on 31 March 2020. Compared to the overall refinancing volume, the average interbank outstanding balance, for blank transactions, stood, on average, around 7%, which testifies not only to the weakness of interbank liquidity exchanges but above all a strong dependence on the resources of the Central Bank, in relation with persisting tight liquidity situation for banks, despite the easing observed mainly during the last quarter of 2019 and the first quarter of 2020 (cf. graphic 1-9).
Graphic 1-9: Trend in the ratio “average interbank outstanding balance/overall volume of refinancing”
1400 14% 1300
1200 12% 1100
10%
1000 In % In
900 8%
In MTD In
800 6% 700
600 4%
Jul-18 Jul-19
Jan-18 Jan-19 Jan-20
Jun-18 Jun-19
Oct-18 Oct-19
Feb-18 Sep-18 Feb-19 Sep-19 Feb-20
Apr-18 Apr-19
Dec-19 Dec-18
Mar-18 Mar-19 Mar-20
Aug-18 Nov-18 Aug-19 Nov-19
May-18 May-19
Interbank average outstanding balance (left scale)
Ratio (Interbank average outstanding balance/Overall average volume of refinancing)(right scale)
Last observations : 31 March 2020 Source: Central Bank of Tunisia
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Structure by term of interbank outstanding balance shows that most of the transactions on the market relate to maturities of day-to-day and week maturity, a breakdown that shows a strong concentration on short maturities with a share of around 47% at the end of 2019 compared to 64% in 2018. For the rest of the maturity spectrum, there is a revival of activity for 1 and 2 months which could reflect easing of pressures on liquidity, in 2019, compared to previous years. Nevertheless, there is a virtual absence of interbank transactions and, consequently, of references based on real transactions beyond the 3-month horizon. (cf. graphic 1-10).
Graphic 1-10: Structure by term of the interbank outstanding balance (figures of end of period)
90% 84%
80% 71% 70% 57% 60%
50% 39% 36% 36% 40% 33% 31% 31% 30% 21% 21% 19% 20% 16% 16% 16% 12% 13% 5% 6% 10% 4% 3% 0% 0% 0% 0% day-to-day One week One month Two months Three months Six months
2017 2018 2019 2020
Last observations : 31 March 2020 Source: Central Bank of Tunisia
As for the repurchase operations, second category of interbank transactions, the market experienced a certain dynamic in 2019. Indeed, the transaction volume increased from 185 MTD in 2018 to 829 MTD in 2019. Unlike the blank transactions, repo transactions focussed on maturities over 90 days, which represented 98% of the outstanding balance in 2019 against 73.5% in 2018. Worth of note that repos are operations which are prepared for forward exchanges since they are made in return of guarantees1, which allows risk taking on longer maturities.2 The easing of tensions on liquidity in dinar was noticeable at the level of money market rates, and more particularly the money market average rate (TMM) and the weighted average rate of the call for bid which were very close and even identical, at times, to the key rate (cf. graphic 1-11). Thus, the latter fully played its role of reference rate for market actors.
1 The counterparts are as defined by Circular of the Central Bank to banks No. 2013-05 of 30 April 2013 relate to the standard agreement governing repo operations.
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Graphic 1-11: Trend in market rates (In %)
8.75 8.25 7.75 7.25 6.75 6.25 5.75 5.25 4.75 4.25 3.75
Corridor Money Market Average Rate Key Rate Call to Bids Average Rate
Last observations : 31 March 2020 Source: Central Bank of Tunisia
The average spread between the key rate and the money market average rate fell from 0.54% in 2018 to 0.15% in 2019 and that between the key rate and the weighted average rate of the call for bid went from 0.35% to 0.05% respectively, which once again shows this easing of pressures on liquidity, particularly in the last quarter of 2019 (cf. graphic 1-12).
Graphic 1-12-: Spread of rates (In %)
1.00
0.50
0.00
-0.50
Spread of Money Market Average Rate Spread of call for bids rate
Last observations : 31 March 2020 Source: Central Bank of Tunisia
For the first quarter of 2020, the spreads between the key rate and the money market rate, on the one hand, and the weighted average rate of the call for bids, on the other hand, fell further to reach 0.07% and 0% respectively.
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1-1-3 Activity of the market for negotiable debt securities
At the end of 2019, the outstanding amount of negotiable debt securities came to 5,224 MTD, all maturities combined, in the form of certificates of deposit (4,148 MTD) and commercial paper (1,076 MTD). In December, issues totalled some 2,887 MTD of certificates of deposit including 2,399 MTD for maturities of less than 1 month. For commercial paper, with a total of 551 MTD issued in December, maturities of less than one month totalled 299 MTD. Indeed, most of the exchanges are carried, both for certificates of deposit and for commercial paper, on maturities of less than 1 month, which shows a general reluctance of issuers, who are risk averse and who tend to shorten their positions in a buoyant market which lacks maturity. 1-1-4 Collateral policy
In order to protect its balance sheet against any financial risk, in particular credit risk, the Central Bank pursues a prudent policy of collateral since it requires and accepts in return for refinancing operations only guarantees, of high quality, materialized by negotiable public and private securities and sound credit claims (classified zero as per Circular of Central Bank to banks n° 91-24 of 17 December 1991 relative to division, hedging of risks and monitoring of commitments) and this, in application of article 15 of Circular of the Central Bank to banks n° 2017-02 of 10 March 2017 relative to implementation of monetary policy. To do this, the guarantees presented by banks and declared to the Central Unit for assets eligible to refinancing are closely examined and only those which meet the eligibility criteria set by the Central Bank are retained. These criteria include the nature of the assets (whether they are negotiable or non-negotiable securities) and the sector of activity1. These guarantees are then subject to risk control measures relating to the maturity, the minimum residual maturity, the haircut to be applied to non-negotiable assets and the rule for the breakdown of collaterals. Indeed, the Central Bank requires, on the one hand, that the amount of the guarantee covers the loan granted in principal and in interest and imposes, on the other hand, a breakdown between the negotiable and non-negotiable assets2. In addition, it monitors the fair value of collateral daily and makes margin calls when this value posts a drop compared to the value of the loan granted. In application of article 64 of the Central Bank Circular n° 2017-02 of 10 March 2017 mentioned above, and relating to "Control of non-negotiable assets", and to further ensure the quality of non-negotiable assets admitted as guarantee for the refinancing granted, the central bank required, as from July 2019, that claims pledged as collateral must be certified, quarterly, by the top managers of banks, and annually by a chartered accountant registered in the order of accountants in Tunisia.
1 Thus, claims on the real estate sector are not taken as collateral for refinancing operations considering the mismatch between the term of the financing of this sector (long term) and the nature of money market funding (short-term cash market). 2 The Executive Board of the Central Bank, met on 17 March 2020, decided that the collateral taken by the Central Bank in return for the refinancing that it grants to banks, must take the form of Treasury bonds (50% strictly), and of non-negotiable securities classified zero (50% exactly), against quotas of exactly 40% and 60% respectively, since October 2018.
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The collateral portfolios eligible for refinancing (cf. graphic 1-13) evolved in 2019 as follows:
Graphic 1-13: Structure of collaterals eligible for refinancing (monthly average in MTD)
20,000
18,000
16,000
8,194
8,391
762
,
8,525
8,637 8
14,000 8,381
8,478
104
,
8,566
9
9,181
12,000 8,984
8,626
10,000 8,718
8,619 8,640 8,000
6,000
479 986
4,000 ,
,
8,546
8
8,473
8,440
8,402
8,388
8,349
8,326
8,233
8,212 8,212
8,167
8,098
8,008 7 2,000 0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20
Current claims (with haircut) Treasury bonds Average refinancing (excluding foreign exchange swap and outright operations) Global refinancing
Last data: 31 March 2020 Source: Central Bank of Tunisia
Compared to 2018, the volume of guarantees provided to the Central Bank for monetary policy operations regressed by 2.36%, a decrease resulting from the drop in the overall volume of refinancing as from the second half of 2019. In addition, the share of government securities delivered by banks to the Central Bank as collateral decreased in 2019 by 24% in favour of private claims (+10%) due to the modification of article 56 of the above-mentioned Circular n ° 2017-02 of 10 March 2017, relating to the “breakdown of guarantees of refinancing operations between negotiable assets and non- negotiable assets” by Circular n° 2018-08 of 05 October 2018 which fixed the quotas at exactly 40% in negotiable assets and 60% in non-negotiable assets, before these quotas are again modified in March 2020. It should be pointed out, to this end, that any modification made to the quotas of assets is displayed to banks through the Central Unit of Assets Eligible to Refinancing. 1-1-5 Trend in interest rates and transmission of monetary policy actions
Faced with persisting tensions on consumer prices and maintaining of inflation at a relatively high level, the Central Bank reinforced, in 2019, the restrictive stance of its monetary policy. To do this, the BCT Executive Board decided, in February 2019, to raise the key rate by 100 basis points, bringing it to 7.75%. Also, the Central Bank has endeavoured to maintain the ceiling on main refinancing operations, while ensuring more consistency in its monetary policy instruments and more rigorous collateral policy, considering the unprecedented rise in the overall volume of refinancing. As a result, the money market rate (TMM) went from 7.24% at the end of 2018 to 7.90% in March 2019, before stabilizing near an average of 7.82% during the remaining period of 2019. The impact of these measures was noticeable in terms of the credit and debit conditions of banks during the year 2019.
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In terms of forward deposits, the drying up of bank liquidity, the restrictive monetary policy measures and the regulatory requirements in terms of macro-prudential ratios (LCR1 and LTD2) weighed on the dynamics of remuneration rate for this category of deposits. These reached record levels, in a context marked by a strong competition between banks for collection of adequate resources for their activity. In fact, interest rates on new deposit contracts, concluded with both households and private companies, maintained an upward trend, although at a less accelerated pace than in 2018. On the side of households, the increase in the money market rate by 104 bps, on average in 2019, resulted in an average annual increase in the rates served on new forward deposit contracts for less and more than a year, by 154 bps and 131 bps respectively (cf. graphic 1-14). Also, and for the same maturities, the credit rates applied on new deposit contracts concluded with private companies increased, in 2019, by 153 bps and by 145 bps respectively (cf. graphic 1-15).
Graphic 1-14-: Trend in the money market rate Graphic 1-15-: Trend in the money market rate and and in the rates applied on the new deposit in the rates applied on the new deposit contracts of contracts of individuals (quarterly averages) private enterprises (quarterly averages)
10.0 10.5 9.5 10.0 9.0 9.5
8.5 9.0
8.0 8.5 7.5 8.0 7.5 7.0 7.0
6.5 6.5 In In percentage 6.0 In percentage 6.0 5.5 5.5 5.0 5.0 4.5 4.5 4.0 4.0 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 2016 2017 2018 2019 2016 2017 2018 2019
Money market average rate Less than 1 year Money market average rate Less than 1 year More than 1 year More than 1 year Last observations: Q4-2019 Last observations: Q4-2019
In terms of loans, the increase in the key rate by 100 bps in February 2019 had repercussions on the interest rates applied on new credit contracts granted to both households and private enterprises. This transmission was quick and more-than-unitary for almost all of the loans. Nevertheless, despite the virtual stability of the money market rate since March 2019, lending rates continued to rise. For households, bank lending rates (cf. graphic 1-16) increased in 2019 at a faster rate than that of the money market rate (104 bps), recording average annual increases of 151 bps for maturities of less than 3 years, 124 bps for maturities between 3 and 7 years and 83 bps for maturities over 7 years (housing loans). It should be noted that the share of fixed-rate housing loans constitutes the major part of total housing loans (56% in 2019). For private companies, the debit rates for new contracts (cf. graphic 1-17) also increased by 150 bps for loans of less than one year, by 148 bps for loans from 1 to 3 years, by 124 bps for loans between 3 to 7 years and by 137 bps for loans over 7 years.
1 Cf. Circular to banks n ° 2014-14 of 10 November 2014 concerning the liquidity ratio which requires banks to permanently comply with a liquidity ratio higher than 100% as of 1stJanuary 2019. 2 Cf. Circular to banks n ° 2018-10 of 1stNovember 2018 relative to establishment of a "Loans / Deposits" ratio, respecting the limit of 120%, in order to ensure a better matching between resources and uses and to control the risk of transformation of maturity.
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Graphic 1-16-: Trend in the money market rate Graphic 1-17-: Trend in the money market rate and and in the rates applied on the new credit contracts in the rates applied on the new credit contracts to to individuals (quarterly averages) private enterprises (quarterly averages)
11.5 10.5 11.0 10.0 10.5 9.5 10.0
9.5 9.0
9.0 8.5 8.5 8.0 8.0 7.5 7.5 7.0
7.0 6.5 In In percentage 6.5 In percentage 6.0 6.0 5.5 5.5 5.0 5.0 4.5 4.5 4.0 4.0 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 2016 2017 2018 2019 2016 2017 2018 2019 Money market average rate Money market average rate Less than 3 years Less than 1 year 1 year to 3 years 3 years to 7 years 3 years to 7 years More than 7 years More than 7 years Last observations: Q4-2019 Last observations: Q4-2019
Debit interest rate spreads (with reference to the money market rate) continued to increase in 2019 both for households and private enterprises. All categories combined, the spreads (cf. graphics 1-18 and 1-19) followed upward trends during 2019, despite the slowdown in credit distribution activity observed since the end of 2018.
Graphic 1-18-: Trend in spreads on rates applied to Graphic 1-19-: Trend in spreads on rates applied to individuals’ new credit contracts (Quarterly averages) private enterprises’ new credit contracts (Quarterly averages)
360 300 340 280 320 260 300 240 220
280
260 200
In In bps In In bps 240 180 220 160 200 140 180 120 160 100 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 2016 2017 2018 2019 2016 2017 2018 2019
Less than 3 years 3 years to 7 years Less than 1 year 1 year to 3 years 3 years to 7 years More than 7 years More than 7 years
Last observations: Q4-2019 Last observations: Q4-2019
Excluding housing loans, spreads on debit interest rates increased to return to their pre-2018 levels at the end of 2019. This development contributed to ongoing slowdown in the outstanding balance of loans to the economy, which only increased by 3.4% yoy over December 2019 compared to 9.1% a year earlier.
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1-2. Monetary policy and inflation 1-2-1 Trend in inflation The upward trend in inflation, which began in 2016, was interrupted in 2019. On a monthly average, the consumer price index increased by 0.5% in 2019, against 0.6% in 2018. Expressed in annual shift, the inflation rate fell from 7.1% in January 2019 to 6.1% towards the end of the year compared to 7.5% in December 2018. Over the year as a whole, average inflation came to 6.7% in 2019 compared to 7.3% a year earlier (cf. graphic 1-20).
This easing was notably supported by the tightening of monetary policy and by the appreciation of the dinar against the main currencies, the effect of which was noticeable particularly at the level of core inflation (cf. graphic 1-21). In addition, the cumulative base effect was favourable over the whole of 2019, especially with fading of the effect generated by the increase in tax rates over 2018. It should be mentioned that the virtual stability of inflation of fresh foodstuff and that of regulated price products, during the period under review, largely contributed to the deceleration of headline inflation.
Graphic 1-20: Monthly trend in headline inflation Graphic 1-21: Trend in the main components of in monthly variation and in annual shift inflation (in annual shift)
8 3.2 14
7 7.3 12 6.7 2.4 6 5.3 6.1 10 5 4.6 4.4 1.6 8.3
8 3.6 7.2
4
En % En 6 In
In In % 0.6 0.8
3 % 0.5 0.5 4.7 0.4 0.3 0.3 4 2 0.0 2 1
0 -0.8 0
Inflation Monthly Growth (Right scale) regulated inflation Annual sliding (Left scale) Fresh food inflation Annual average Inflation excluding freshfood and regulated products Last observation: December 2019 Last observation: December 2019
. Sources: National Statistics Institute and BCT calculations
The reduction in core inflation (+7.2% compared to +8.2% in 2018) was global, affecting the main product groups, albeit to different degrees (cf. table 1-2). The most significant deceleration concerned the prices of non-regulated manufactured products prices, having increased by +8.8% in 2019 after +10.5% in 2018, in particular in connection with the slowdown in the rate of progress for the price of cars (+5.4% vs. +15.3%) and housing construction and maintenance materials (+10% vs. +14.6%). Regarding non-regulated processed food products, prices experienced a certain easing in 2019, increasing by +7.2% after + 8.6% in 2018, mainly due to the combined effect of the fall in the prices of olive oil (-2.4% after +10.0%) and the deceleration in cereal prices (+7.2% after + 9.7%). Also, but to a lesser degree, the progress pace of the prices of non-regulated services slowed down to 5.3% in 2019 after 5.6% a year earlier, thanks to price easing for health services (+7.4% after +8.3%) and the decrease in public tariffs (-0.1% after +1.6%), notably, for phone and fixed internet fees,
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Table 1-2: Trend in the inflation of some groups of products (In %)
weight 2019 Description 2017 2018 in% Q1* Q2* Q3* Q4* Year General index 100.0 5.3 7.3 7.2 6.9 6.6 6.3 6.7 Uregulated products’ 73.5 6.3 8.2 8.1 7.6 7.3 6.7 7.4 consumer price index -Fresh foodstuff 12.7 6.3 8.2 9.7 7.4 8.4 7.7 8.3 -Processed food products 8.3 7.7 8.6 7.4 7.7 7.7 6.2 7.2 -Manufactured products 27.3 6.8 10.5 10.0 9.5 8.5 7.5 8.8 -Services 25.2 5.2 5.6 5.4 5.4 5.3 5.4 5.3 Regulated consumer price 26.5 2.6 4.6 4.4 4.8 4.5 5.0 4.7 index - Processed foodstuff 5.2 0.6 2.2 2.3 2.3 2.4 2.3 2.3 - Manufactured products 9.2 2.8 7.1 4.6 4.8 6.5 8.9 6.2 of which : energy 7.2 2.7 6.6 7.4 8.1 4.1 2.2 5.4 - Services 12.1 3.3 3.8 5.0 5.7 4.0 3.2 4.5 Core inflation - Excluding regulated and fresh 60.8 6.2 8.2 7.7 7.6 7.1 6.5 7.2 food - Excluding food and energy 66.3 5.4 7.4 6.9 6.8 6.7 6.7 6.8 * Variation in annual shift. Sources: National Statistics Institute and BCT calculations Q: Quarter.
As for fresh food products, prices in 2019 maintained a rate of increase comparable to that of 2018 (+8.3% against +8.2%), despite a mixed development at level of components. We note a strengthening of prices for red meat (+14.9% after +11.9%) and eggs (+22.0% after +18.3%) and a recovery in prices of vegetables (+8.1% after -4.3%) on the one hand, and easing of poultry (+1.0% after +15.1%) and fruits prices (+3, 6% after +14.6%) on the other hand.
Regarding inflation of regulated price products (+4.7% in 2019 after +4.6% in 2018), it bears the mark of disparate developments in terms of its components. We mainly note an acceleration in the growth pace of regulated services prices (+4.5% after +3.8%), induced by the upward adjustment of electricity and gas prices (+3.8 % after +2.5%) and the strengthening of prices for health services (+6.0% after +3.2%) but the impact of which was somewhat mitigated by easing of inflation in regulated manufactured products (+6.2% vs. +7.1%) in connection with the slowdown in fuel prices (+8.0% after +11.5%) and pharmaceutical products (+3.6% after +4.0%), despite the acceleration in tobacco prices (+8.7% in 2019 after +6.3% in 2018) induced by the integration of the price increase recorded on the market in calculating these prices, over August and September. In terms of contribution to headline inflation (cf. table 1-3), core inflation captured the largest share in 2019 (+67.1% compared to +69.8% a year earlier). As for the contribution of regulated products, it increased from +15.8% in 2018 to +17.1% the following year, mainly due to the adjustments in the prices of regulated services (+7.6% compared to +6.0%), to the detriment of the contribution of manufactured products (+7.9% against +8.4%), in particular,
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Table 1-3: Contributions of some groups of products to inflation (In %)
2019 weight Description 2017 2018 in% Q1* Q2* Q3* Q4* Year
General index 100.0 5.3 7.3 7.2 6.9 6.6 6.3 6.7 Unregulated products’ 73.5 4.6 6.1 6.1 5.7 5.5 5.0 5.6 consumer price index -Fresh foodstuff 12.7 0.8 1.1 1.3 1.0 1.1 1.0 1.1
-Processed food products 8.3 0.6 0.7 0.6 0.7 0.7 0.5 0.6
-Manufactured products 27.3 1.9 2.9 2.8 2.7 2.4 2.2 2.5
-Services 25.2 1.3 1.4 1.4 1.4 1.3 1.3 1.3
Regulated consumer price index 26.5 0.7 1.2 1.1 1.2 1.1 1.2 1.1
- Processed foodstuff 5.2 0.0 0.1 0.1 0.1 0.1 0.1 0.1
- Manufactured products 9.2 0.2 0.6 0.4 0.4 0.6 0.8 0.5
of which : energy 7.2 0.2 0.4 0.5 0.5 0.3 0.1 0.4
- Services 12.1 0.4 0.4 0.6 0.6 0.5 0.4 0.5
Core inflation - Excluding regulated and fresh 60.8 3.8 5.1 4.8 4.7 4.4 4.1 4.5 food - Excluding food and energy 66.3 3.6 4.9 4.6 4.6 4.5 4.5 4.5
* Variation in annual shift. Sources: National Statistics Institute and BCT calculations Q: Quarter.
1-2-2 Determinants of Inflation The slowdown in inflation also marked the growth pace of the various components of the price chain. Indeed, after having recorded an increase of +7.8% in 2018, the industrial selling price index experienced a relative easing, increasing by just 6% in 2019 (cf. table 1-4). This deceleration is mainly due to the slowdown in the industrial selling price index of manufacturing industries (+5.5% against +8.9%) and more particularly, the indexes of chemical industries (+7.3% against +15%), mechanical and electrical industries (+5.4% vs. +9.1%), agrofood industries (+4.0% vs. +7.1%), textile industries (+3.1% vs. +5.2%) and those of building materials, ceramics & glass (+6.9% against +7.1%), which contrasted with the rebound in prices of mining products (+20.9% against -0.3% ). It should be noted that the industrial selling price excluding mining and chemical industries experienced a slowdown (+5.5% in 2019 against +6.8%), the component that most affects consumer prices.
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Table 1-4: Trend in the industrial sale price index (Variation in %) Weight Description in % 2017 2018 2019 Overall index 100 4.7 7.8 6.0 Manufacturing industries 84.8 4.2 8.9 5.5 - Agrofood industries 18.6 6.7 7.1 4.0 - Building materials, ceramics and glass industries 5.1 2.6 7.1 6.9 - Mechanical and electrical industries 25.9 6.9 9.1 5.4 - Chemical industries 14.2 -0.9 15.0 7.3 - Textile, clothing and leather 14.8 2.8 5.2 3.1 - Miscellaneous industries 6.2 3.6 9.5 10.8 Mining 1.5 -0.7 -0.3 20.9 Energy 13.7 8.3 2.8 7.1 - Fuel extracting 7.8 9.9 8.1 10.3 - Oil refining 1.4 1.3 10.4 24.4 - Electricity production and distribution 4.0 3.1 9.1 13.6 -Water catchment, treatment and supply 0.4 7.9 0.0 0.0 Excluding mining and chemical industries 84.3 5.9 6.8 5.5 Sources: National Statistics Institute and BCT calculations
Regarding import prices, they eased up in 2019, increasing by 15.3% in annual shift compared to 18.8% a year earlier. This development was the result of the almost general reduction in prices, albeit to different degrees. The deceleration concerned the prices of energy and lubricants and those of mining, phosphates and by-products (+15.8% and +19.2% respectively against +39.2% and +30.4%), and in to a lesser extent, the progress pace in the prices of mechanical and electrical industries (+16.4% vs. +17.5%), miscellaneous manufacturing industries (+14% vs. +16.3%) and those of textiles, clothing and leather (+13.9% against +14.5%). In addition, prices in the agricultural and agrofood sector recorded a slight increase (+12.6% against +11.3%). The easing of import prices had a downward effect on domestic prices, during 2019 (cf. graphics 1-22 and 1-23).
Graphic 1-22:Monthly trend in import prices Graphic 1-23:Monthly trend in the Barrel of Brent’s (annual shift) price
80 30 140 250
60 20 120 200 40 10 100 20 150 0 80 0
In In % 100 -10 -20 60 50 -40 -20 40
-60 -30 20 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Agriculture and agrofood sector (Left scale) Energy sector (Left scale) Brent in US dollar (Left scale) Textiles, Clothing and Leather (Right scale) Mechanical and Electrical Industries (Right scale) Brent in dinar (Right scale) All sectors (Right scale)
Last observation: December 2019 Last observation : December 2019
Sources: National Statistics Institute and BCT calculations Sources: World Bank and BCT calculations
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As for the exchange rate, the depreciation of the dinar, which began in 2011 and which increased between 2016 and 2018, was suspended in April 2019, giving way to a sustained appreciation of the dinar against the main foreign currencies, that benefited from the tightening of monetary policy. The impact of this appreciation was quickly transmitted to the various components of the price chain and it was very noticeable at the level of consumer prices, notably manufactured products such as cars (+5.4% against +15 , 3% on average in 2018) as well as unregulated processed foodstuff prices (+7.2% after +8.6%).
2019 was marked by weak economic growth, the lowest level recorded since 2011 (+1% after +2.7% in 2018)1. This slowdown is explained, on the one hand, by the contraction of activity in the manufacturing industries (-1% against +1.2% in 2018), especially export-oriented ones, bearing the mark of the deterioration of the industrial sector at the main trading partners’ level in the Euro Zone and, on the other hand, by the decline in the value added of non-manufacturing sector (-1% against -1.5% a year earlier), penalized by the underperformance of the hydrocarbon sector, in connection with recurring technical problems at the production sites and the absence of new prospecting, despite a recovery in the mining production (+21.1% against +17.1% in 2018) which was a hallmark for the year 2019. The market services sector experienced a deceleration (+2.2% against +3.2% in 2018) attributable, essentially, to the decline in activity of the transport sector (-2.4% against +3.2% in 2018) despite the continued recovery in the tourism sector. This is the same for agricultural activity, which slowed down, increasing by just 0.8%, after 11.3% in 2018, in line, in particular, with notably a decrease of more than 50% in the production of olives for oil, in 2019 (700 thousand tonnes against 1,625 thousand tonnes in 2018).
In view of the above-mentioned difficulties, the potential of growth has steadily slowed down in recent years, in line with the multitude of shocks of supply (reduction in the production capacity of the extractive sectors, deterioration in productivity, etc.) and demand (persistence of unemployment, deterioration in foreign demand as well as the business and investment climate). Despite this, the estimated output gap remained in negative territory, for the whole of 2019, eliminating any generalized pressure on production capacities stemming from demand, and therefore on the general price level (cf. graphics 1-24 & 1-25) .
1 At constant 2010 prices.
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Graphic 1-24 : Trend in GDP in volume compared Graphic 1-25: Trend in the output gap (annual data, to its tendency (annualized quarterly data) * in %)
75000 3
2 70000
1
65000 0 In In %
In In MTD -1 60000
-2
55000 -3
-4 50000 2006 2008 2010 2012 2014 2016 2018
Output gap Potential GDP* GDP
Last observation: December 2019 Last observation: December 2019
Sources: National Statistics Institute and BCT calculations Sources: National Statistics Institute and BCT calculations * Output potential used to calculate the output gap was estimated through two methods: the first method uses a Hodrick–Prescott filter with a correction of side effects. The second rather resorts to a Kalman filter integrated within the BCT’s medium term forecasting model.
For 2020, economic growth is expected to decrease sharply, as a result of the fallout from the health crisis linked to COVID-19 pandemic. Drastic measures of the general containment which were taken by several countries in the world, including Tunisia, to curb the spread of the pandemic, have shut down several sectors of the national and international economies. The entry into a progressive and targeted phase of de-containment should encourage a slow recovery in economic activity, without quickly regaining the pre-pandemic GDP level. The dynamics of economic growth in 2020 would result from the following sectorial perspectives: A sharp drop in the production of most manufacturing industries , due to the virtual cessation of activity and the disruption of supply chains, during the period of general containment. The recovery in activity would be slow because of weak outlook for demand from the main trading partners, in particular the Euro Zone. A strong decline in the production of non-manufacturing industries, mainly from the building and civil engineering sector, heavily affected by the health crisis. In addition, the past decline in the production of the energy sector should ease up relatively thanks to the entry into operation of the NAWARA gas field. A notable drop in market services. Indeed, the fallout from the health crisis on tourism and related activities should persist in the coming quarters, which could have a negative impact on employment and the balance of payments. A good performance of the added value of the agricultural sector, mainly supported by the exceptional production of olives for oil (1,750 million tonnes after 700,000 tonnes in 2019). Weak prospects for public administration in the short and medium terms, impacted by the financial constraints that weigh on the balance of the State budget. Potential growth would tend to slow down to 0.8% in 2020, in connection with the poor prospects for real investment and the fallout from the COVID-19 health crisis. The output gap should sink further into negative territory (-0.2% in 2019 and -5.8% in 2020).
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With regard to inflation, the downward trend started in 2019 would continue in 2020. The recent forecasts point to a slowing of the growth pace in consumer prices to 5.6% in 2020, after having recorded 6.7% in 2019 and 7.3% in 2018.
By main price components, we expect the following trends:
The upward trend in inflation of regulated products (26.5% of the basket) observed during the last two years would tend to slow down in the second half of 2020, thanks to a significant downward base effect (coming from tobacco prices). The inflation rate for regulated products would be around 4.8% on average, for the whole of 2020, after 4.7% in 2019, and would bear the mark of moderate price developments of the main regulated products and services.
The surge in inflation of fresh products (12.7% of the basket), in recent years, should gradually diminish, and it is expected to drop from 8.3% in 2019 to 6% in 2020. This easing would be favoured by firming up of production and absence of significant tensions in terms of demand (sharp drop in tourist flows).
Core inflation (60.8% of the basket), measured by the consumer price index excluding fresh food and regulated prices, should gradually decrease to an average of 5.8% in 2020 after 7.2% in 2019. This deceleration would bear the mark of the past appreciation of the dinar exchange rate against the main foreign currencies, the fall in international prices of commodities and raw materials, and declining demand.
The relative easing of core inflation would still be insufficient to bring overall inflation back to its usual pace in the medium term. Maintaining of this fundamental component of price evolution at relatively high levels over a fairly extended period is an obstacle to the recovery of the main drivers of economic growth and, consequently, to the reestablishment of global macroeconomic balances in the medium and long term.
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Chapter 2 – Management of international reserves 11/06/2020 2-1. Trends in reserves As of end December 2019, gross assets in foreign currency reached 19,666 MD against 14,526 MD at the end of 2018, up by 5,140 MD compared with an increase by 1,533 MD over 2018. Expressed in dollars, gross assets in foreign currency posted 7,015 MUSD at the end of 2019, marking an increase by 2,168 MUSD compared to their level recorded at the end of 2018.
Table 2-1: Trends in foreign exchange reserves’ items (In millions) 31/12/2018 31/12/2019 International reserves items TND USD TND USD Gross assets in foreign currency 14,525.3 4,847.2 19,665.7 7,015.3 Assets and investment in SDR 85.1 28.4 33.3 11.9 IMF Reserve position 512.9 171.2 506.1 180.5 Gold holdings 423.9 141.5 569.5 203.2 Total international reserves 15,547.2 5,188.2 20,774.7 7,410.9
Expressed in days of import, net assets in foreign currency reached 111 days at the end of 2019 against 84 days as of 31 December 2018, corresponding to an increase by 27 days, bearing in mind that the import ratio went up from an average of 166.8 MTD per day in 2018 to 175.7 MTD per day in 2019: a 5% increase which added 6 days of import to net assets in foreign currency. Foreign currency reserves’ reinforcement is mainly attributable to an important mobilisation of external resources (about 8,000 MTD), notably the Saudi loan worth 500 MUSD, the debenture loan worth 700 MEUR, the loan granted by the Central Bank of Libya worth 500 MEUR, the drawing of 216 MEUR with respect to the IMF’s EFF, the EU’s two loans worth 150 MEUR each and the BAD’s and KFW’s budgetary supports of 120 MEUR and 100 MEUR respectively. Foreign currency reserves were also supported by better tourist receipts and worker remittances. 2-2. Performance of reserves At the end of December 2019, the overall yield rate of assets in foreign currency posted 111 bp against 67 bp for the Benchmark composite. By tranche, the Investment Tranche’s yield was the main return generator, posting, at the end of the year, a performance of 138 bp against 122 bp for the Liquidity Tranche and 56 bp for the Working Capital. By currency, investments in US dollar and Sterling pound posted a performance of 222 bp and 93.2 bp respectively against 17.7 bp for the euro. 2-3. Risk analysis 2-3-1 Duration Over the whole year, the overall duration of reserves reached its highest level over April up to 9 months against 8.7 months in the beginning of the year, following reimbursement of the Qatari loan’s tranche of (USD 250 millions) falling due in April 2019, which reduced the
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Chapter 2 volume of short-term liquidities in reserves. Over the second half, disbursement of the loan granted by the Central Bank of Libya and Eurobond issue proceeds, added to foreign currency inflows generated by economic agents’ operations, led to a drop in the overall duration of reserves, down to 6.2 months at the end of December 2019.
Graphic 2-1: Trend in the overall duration of reserves
Months
14.0
12.0
10.0 9.0 8.9 8.7 8.5 8.2 8.0 7.7 6.8 6.8 6.5 6.6 6.3 6.2 6.0
4.0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
2-3-2 Key Rate Duration (KRD) of portfolio-securities Key Rate Duration (KRD) measures the sensitivity of a portfolio following a variation of 1% in the different points over of the yield curve (expressed in percentage of the portfolio’s value). At the end of December 2019, the USD portfolio is virtually exposed on all sectors of the 1-10-year curve, while the EUR portfolio is mainly exposed on the 6-9 years segment due to negative interest rates on the short part of the European yields curve.
Graphic 2-2 Trend in the key-rates’ reserves of portfolio-securities
10 years
9 years 0.33% 0.1% 8 years 0.46% 0.2% 0.29% 7 years 0.3% 6 years 0.19% 0.1% 5 years 0.18% 0.1% 4 years 0.14% 0.1% 3 years 0.18%
2 years 0.30% 0.4% 1 year 0.14% 6…
3…
0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8%
GBP USD EUR
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Chapter 3 – Payment systems and means 02/07/2020 3-1. Trend in payments activity The payments activity is ensured by payment systems encompassing Electronic Clearing, Manual Clearing, Monetics and Large Amounts Transfers. 3-1-1 Electronic clearing Electronic clearing activity in 2019 progressed at a less pronounced pace than in 2018, both in terms of number of transactions and amounts: 4.1% and 9.7% respectively in 2019 compared with 6.9% and 15.9% a year before, taking into account the trend in economic activity.
Table 3-1: Trend in clearing activity Variation in % 2018 2019 (2019/2018) Values Number in Amount in Number in Amount in Number Amount millions MTD millions MTD Transfers 28.0 31.902 30.1 36.156 7.6% 13.3% Direct debits 4.20 14.390 4.65 16.236 10.6% 12.8% Cheques 26.0 91.554 26.0 99.250 0.2% 8.4% Bills of exchange 2.2 24.425 2.1 26.379 -5.3% 8.0% Total 60.4 162.271 62.9 178.021 4.1% 9.7%
The structure of cleared values evolved in number in favour of transfers in line with civil servants’ salary increases, bearing in mind that the BCT authorized 5 new direct-debit issuing institutions, bringing their number to 106 at the end of 2019.
Graphic 3-1 : Breakdown in volume of cleared Graphic 3-2 : Breakdown in amount of cleared values values (In MTD)
Electronic Electronic Electronic cheques letters of 41% letters of Transfers exchange exchange 20% 3% 15% Transfers 48%
Electronic cheques 56% Direct Direct debits debits 9% 8%
As for the rejection of cleared values, the highest rejection rates over 2019 are for the direct- debit and the bill of exchange: 51% and 17% respectively, as shown in the table below: The most frequent rejection reasons are defaults on provisions for direct debits, cheques and bills of exchange and closed accounts for transfers.
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Table 3-2: Trend in rejection rates by cleared value 2018 2019 Values Number Amount Number Amount Transfers 0.1% 0.1% 0.1% 0.1% Direct debits 52.0% 7.1% 51.3% 8.3% Cheques 1.8% 3.0% 1.9% 3.4% Billing of exchange 17.3% 10.3% 17.0% 10.8%
3-1-2 Manual clearing Non-standardized cheques and bills of exchange’s manual clearing activity is getting weaker, accounting respectively for a share of 0.4% and 0.3% of the overall number of these values at the end of 2019. The dematerialization project of cautioned bonds has been finalized since 11 March 2019, consisting in paper-free payment means both for Customs revenue when clearing goods, and at the level of banks when carrying payments on the due date. In addition, the collection deadline is optimised and the generated costs are saved.
3-1-3 Monetic system Electronic banking activity’s main indicators in 2019 pursued their evolution at a rate similar to that in 2018, both in terms of payment equipment and transactions, as shown in the following table:
Table 3-3: Trend in Monetics’ indicators Variation in % Variation in % Description 2018 2019 (2018/2017) (2019/2018) Local cards in millions 4.64 5.50 27% 19% ATM’s 2,694 2,854 4.0% 6% POS 21,622 22,180 14% 2.6% Electronic Transactions Number in millions 82.3 92.6 15% 13% Amount in MTD 11,908 14,361 21% 21%
Behavioural analysis of monetic operations carried out in Tunisia over 2019 further confirms that cardholders would rather make cash withdrawals from ATMs than make digital payments. In fact, 3/4 of monetic operations and 84% of their amount are cash withdrawals.
Graphic 3-3: Breakdown in monetic transactions’ Graphic 3-4: Breakdown in monetic transactions’ value number (in %) (in %) Payments Payments 25% 16%
Cash withdrawal Cash 75% withdrawal 84%
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In 2019, e-commerce in Tunisia continued to grow at a sustained pace as presented in the following table:
Table 3-4: E-commerce statistics in Tunisia Variation in % E-commerce 2018 2019 (2019/2018) Number of commercial websites 1,657 1,864 12.5% Number of transactions 3,961,951 3,862,300 -2.5% Amount in million dinars 215.4 271.1 25.9%
This structure is expected to evolve in the future in favour of digital payments with the entry into production of the electronic payment project (mobile POS and internet) of fines and traffic tickets for the Treasury and the imminent publication of a new regulatory framework on mobile payments. 3-1-4 Tunisia’s large amounts transfer system (SGMT) Over the last ten years, the payment orders executed via SGMT posted a steady growth: up from 170 thousand payment orders for 464 billion dinars in 2010 to 203 thousand orders accounting for 2.965 billion dinars carried out in 2019, in line with the trend in the economic activity, the banking landscape and liquidity situation on the market.
Graphic 3-5: Annual trend in the SGMT activity
3,500 210
3,000 200
2,500
190
2,000
dinars
180 1,500 170 1,000
Amount Amount billion in 160
500 Number in Thousands
0 150
VALUE VOLUME
Over 2019, large amounts transfers increased by 2.3% in volume, mainly attributable to an increase in the number of payment orders initiated by participants, and decreased by 10.4% in value, mainly due to a decline in the amounts of transactions initiated by the BCT in line with the adopted monetary policy. An examination of the breakdown of SGMT activity in 2019 shows that the value of BCT transactions (86.7%), and in particular monetary policy operations, will predominate. The volume of transactions is shared between the BCT and the participants with respective proportions of 48% and 52%.
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3-2. Trend in payments environment In the framework of its strategy aiming at developing the payment ecosystem to boost the security and efficiency of payment systems, the BCT set out to modernize the regulatory framework and payment market infrastructures in line with international standards and technological developments in this area, while working to establish effective oversight of these systems in order to apprehend, timely, the possible risks inherent in these systems and to design and initiate measures likely to eliminate them. 3-2-1 Trend in the regulatory system Considering the importance of strengthening the legal and regulatory payments framework and the need to adopt best practices in this field, the BCT has initiated the following actions: • Draft circular on the oversight of the payment system The BCT continued to work on the preparation of a draft application text relating to the oversight of Financial Market Infrastructures and to payment means issuers. The aim of this draft is to establish, in a transparent manner, the rules and standards to be applied by the payment systems managers in order to ensure a proper and secure operating of these systems, while further strengthening and clarifying the oversight procedures for tax payers. • Framework of the policy of the oversight of payment and system means This policy, which constitutes a frame of reference for the conduct of the payment systems’ oversight mission for both the BCT and the supervised entities, will help: define and publish the objectives for the oversight of payment systems ; define the scope to be covered by the oversight, the activities as well as the methodology to be adopted ; devote the principles of transparency and re-edition in the implementation of its oversight mission; acquit the BCT's oversight mandate in a responsible and consistent manner. • Circular fixing rules governing mobile payments in Tunisia Aware of the crucial role of mobile payment in the expansion of digital payments, cash reduction and financial inclusion, the BCT has provided for the publication of regulations specific to mobile payment aiming to standardize the conditions and rules for providing mobile payment services, in particular the legal, technical, security, reporting and interoperability rules to be complied with by the providers of the said services, namely banks, the National Post Office and payment institutions, as well as mobile switch manager. 3-2-2 Trend in the payment ecosystem The year 2019 was marked by an ongoing implementation of the portfolio of strategic projects of modernization and reform of Financial Markets Infrastructures initiated in 2016. • Project to reform Tunisia’s Large Amounts Transfers System (SGMT) The SGMT is undergoing a profound transformation. The current version will be replaced by a new SGMT2 system that uses more modern technologies with improved resilience and risk control features. The BCT team, in coordination with the solution editor, exercises a decisive role in implementation work. The operating testing phase was initiated with the awareness of the need to maintain the interbank payment system stability and the requirement for alignment with the principles for Financial Market Infrastructures issued by the BIS. As part of the high availability of the SGMT platform, a SWIFT station failure simulation was organised to test the SGMT back-up solution, which consists of using the Platform for
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Partnership (PFP) in WEB mode to initiate payment orders instead of the SWIFT network. This simulation was conducted over the last quarter of 2019 with all adherents. • The inter-Arab payment regional system (BUNA) In order to develop and secure inter-Arab payment circuits that are likely to boost financial and trade exchanges and stimulate investment, the BCT actively participated in the work of the group in charge of setting up the inter-Arab payment regional system of clearing and settlement “ARPS” or "Buna", which means "infrastructure" in Arabic. In fact, over their meeting in November 2018, Arab Central Banks’ Governors voted in favour of the BCT’s Governor as a member of the selection committee composed of five Arab Governors, the mission of which is to steer and oversee the implementation of the Buna system. Within this framework, the Innovation and Development of Payment Systems and Means unit was involved in the study and evaluation of aspects relating to the project’s roadmap as well as the various system processes affecting the technical, legal, business, governance, overseeing, compliance, continuity and invoicing aspects. • Payment Gateway Within the framework of the development of international payments for goods and services offered by Tunisian commercial websites, a study was conducted in 2019 with the support of a commissioned firm and the BCT collaboration, the Ministries of Trade, Finance and Communication Technologies in order to identify and negotiate with potential partners likely to provide an International Payment Gateway for Tunisian exporters. This involves developing a model through which a gateway could be selected as an entity facilitating the interfacing of commercial websites with wallet suppliers worldwide. This gateway, which constitutes the Tunisian e-traders interlocutor with the said suppliers, will help to optimize transaction costs, ensure the repatriation of receipts from online cross-border sales as well as detailed reporting to the BCT on these transactions. 3-2-3 Trend in the operational oversight system The year 2019 was extremely busy, ambitious and productive in terms of operational oversight of payment systems and means. In this respect, the undertaken work and projects concerned: • SGMT Self-assessment The BCT, with the technical assistance of the World Bank, initiated a self-assessment mission of the Large Amounts Transfer System (SGMT) in order to assess its compliance with the fundamental principles of the BIS financial market infrastructure, particularly in terms of security and governance of the various risks inherent to it. This mission covers the system evaluation in line with the following aspects: The legal basis and the system ‘s governance structure; The understanding and management of financial risks; Operational safety and reliability. The evaluation is carried out on the basis of questionnaires elaborated according to the identified key aspects of the principles, in line with international practices. • Deployment of a reporting and information analysis process: In order to carry out its mission of payment systems oversight, the BCT has asked the Financial Market Infrastructures’ managers to provide a set of reports covering various aspects, from governance to technical, operational, financial and legal ones, in line with the systemic nature of these infrastructures with respect to 2019. This involves initiating the first phase of the oversight process, which consists in deploying a feedback system that sets out the list of documents and
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Chapter 3 their communication frequency by payment system managers, as well as defining the analytical framework for the collected information. The regular transmission of information by the managers helps the BCT to continuously monitor the activity of the payment systems, on the one hand and to pay particular attention to the evolution of risk areas likely to affect the operation of the systems and thus to be detrimental to the interests of the participants and to financial stability, on the other hand. • Planning an on-site oversight mission Considering the provisions of Article 17 of Law n° 2016-35 related to the BCT’s statute, which mandated it to carry out documentary and on-site and offsite control of Financial Market Infrastructures, an inspection mission of a mass payment system has been scheduled for the first time. The purpose of this mission is to inquire about the quality of governance and the adequacy of the internal control system for the company's activity and its risks in terms of organisation, formalisation, operation and notably the management of operational risks and risks related to computerised transactions processing. • Oversight of payment means As part of its statutory mission of payment means oversight, the BCT ensures compliance with the legal and regulatory requirements concerning the issue and management of payment means. Over 2019, the BCT examined the regulatory and functional aspects relating to several payment solutions issued by certain institutions. In view of the spreads observed, it issued recommendations to the institutions concerned in order for them to take the necessary measures helping them comply with the requested security and efficiency requirements.
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Chapter 4 – Fiduciary circulation
13/07/2020 By law 2016-35 of 25 April 2016 fixing the Central Bank of Tunisia’s statute, the Tunisian legislator entrusted the Central Bank with the mission of issuing and maintaining fiduciary money and facilitating its circulation in Tunisia. These three processes of the fiduciary cycle constitute the cornerstones that help to consolidate the economic operators’ trust in the national currency.
4-1 Issue of banknotes and coins
Banknotes and coins’ issues are carried out by the BCT in order to meet the economy’s need for liquidity and replace the banknotes and coins in an advanced stage of wear.
4-1-1 Issue of banknotes
In 2019, banknotes issue came to 2,810.5 MTD, corresponding to 142 million banknotes, up by 49% in value and by 45% in volume compared to 2018.
Table 4-1 : Trend in the issue of banknotes Value 2011 2012 2013 2014 2015 2016 2017 2018 2019
In million 123 107 189 217 54 65 156 98 142 banknotes
In MTD 1,770 2,574 4,178 2,701 729 803 1,535 1,892 2,811
The most important issues concerned, over this period, the 20-dinar type 2017 (99% in value and 99% in volume), then the 10-dinar type 2013 (1% in value and 1% in volume).
4-1-2 Issue of coins
Over 2019, the issue of coins totalled 51 million coins for an amount of 10 MTD, increasing thus by 19% in volume and decreasing by 9% in value compared to 2018.
Table 4-2 : Trend in the issue of coins Value 2011 2012 2013 2014 2015 2016 2017 2018 2019
In million coins 61 76 145 75 38 9 12 43 51
In MTD 14 18 22 50 25 2 5 11 10
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In terms of value, the most important issues concerned ½-dinar and 2-dinar coins with respective proportions of 46% and 27%.
4-2 Maintenance of fiduciary money
The maintenance of fiduciary money sums up in the withdrawal from circulation of worn-out banknotes (used, counterfeited, mutilated, taped, etc.) in order to put back into circulation only genuine and good quality banknotes. The sorting out operation involved 446 million banknotes in 2019, in counter-value of 6,621.5 MTD, posting a decrease of 16% in volume and 16.7% in value compared to 2018. It covered 74.4% of the volume of banknotes deposits recorded in 2019 (599.1 million banknotes: 8,424.6 MTD) and helped to retreive 377.1 million banknotes valid for circulation, corresponding to 84.6% of the total of sorted banknotes. Banknotes worn-out for circulation are afterwards destroyed via BCT machines and incidentally by incineration, corresponding to 33.3 million banknotes, 4% with no more legal tender, were destroyed at the end of 2019. Box : 4- 1 : Upgrading the management of cash
The cash cycle in Tunisia involves several parties :
BANKS
CIT ONP BCT
TRT
BCT : Central Bank of Tunisia - TRT : National Treasury - ONP : National Post Office - CIT : Cash in Transit
As part of its first three-year strategic plan 2019-2021, the BCT has set as its objective to modernize the fiduciary circulation’s management tools, while learning from the best practices adopted by central banks of neighbouring countries and the Euro-system, notably with respect to recycling banknotes and coins and forecasts regarding future fiduciary demands. Along with its partners in the cash industry, and in order to ensure the availability of good- quality authentic banknotes and coins, the bank will have to develop the necessary control tools, both offsite and on-site, as well as a portal for the exchange of relevant data. Thus, banks and cash in transit companies willing to carry out the processing and recycling of banknotes and coins will comply with the standards regarding this activity.
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4-3 Cash supply
Through its network of 12 branches, the BCT ensures the supply to customers (Banks, Treasury, National post office (ONP) of clean banknotes and coins for circulation (valid and new). In 2019, withdrawals of banknotes at branches reached 9,453.1 MTD, the counter-value of 650.4 million banknotes, increasing thus by 4.5% in value and by 7.8% in volume compared to 2018. On the other hand, withdrawals of coins dropped by 50.5% in value and 0.4% in volume in 2019 compared to 2018, totalling 38.1 MTD and 70 million coins. As usual, the 10-dinar and 20-dinar banknotes were dominant in funds provided to BCT's customers, representing thus 52% and 47% respectively of the volume of banknotes withdrawn. Box : 4- 2 : Management of foreign banknotes encashment
In addition to its mission of managing the national currency, the Issuing Institute also manages foreign currency stocks resulting from its operations with its customers. In this respect, the purchases of foreign banknotes at BCT cash desks posted a sound growth of 35.8% in 2019 by reference to 2018, reaching 4,815.6 MTD, mainly from purchases drained by tourism and labour income which accounted for 80.9% of total purchases. Purchases from holders of non-resident accounts totalled 920.3 MTD. On the other hand, foreign currency sales totalled 897.2 MTD at the end of 2019, 757.9 MTD (84.5%) of which were in favour of holders of non-resident accounts, declining thus by 4.6% compared to 2018. These sales accounted for 18.6% of total foreign currencies purchased over 2019. Banknotes dispatching to BCT foreign correspondents, carried out within the framework of Euros remittance to their countries of origin and sales of other foreign currencies on international foreign exchange markets, improved by 9.2% in 2019 compared to 2018, rising from 2,713.8 MTD to 2,962.5 MTD. They accounted for 61.5% of total foreign currencies purchased with respect to the same year.
4-4 Total fiduciary circulation
Banknotes in circulation reached 742.3 million banknotes at the end of 2019 mainly made up of 20-dinar (53%) and 10-dinar (39%) banknotes: corresponding to 13,112.2 MTD, up by 7.4% in volume and 8.5% in value compared to the end of 2018. The volume of 50-dinar banknotes in circulation stood at 46.4 million banknotes at the end of 2019, a counter-value of 2,320.9 MTD and represented only 6% and 18%, respectively of the volume and value of banknotes in circulation. The 50-dinar banknote, strongly criticised for the easy cash exchange it provides to the informal sector and tax fraud, has not been put back into circulation by the BCT as of January 2017. This measure falls within the national programme for limiting cash transactions, commonly known as DECACHING. Coins in circulation reached 2,005.4 million coins, corresponding to 396.1 MTD at the end of the same year, mainly made up of 1-dinar (36%), 5-dinar (25%) and ½-dinar (14%) coins. They posted a 3.1% growth in volume and 7.1% in value compared to the end of 2018.
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Graphic 4-1: Breakdown of the volume of Graphic 4-2: Breakdown of the value of coins in banknotes in circulation circulation
5 TND 2 TND 1 TND 50 TND 20 TND 1/2 TND 10 TND 200 M 5 TND 100 M 50 M OTHERS
Hence, the total fiduciary circulation reached 13.509 MTD at the end of 2019: an 8.5% progress compared to 2018 (more than 1000 MTD), reflecting the importance of cash use as a favourite payment means. In fact, it recorded over the last decade, an average growth rate of 8%.
Graphic 4-3: Trend in total fiduciary circulation (2010-2019)
16,000 13,508 14,000 12,454 11,731 12,000 10,199 10,000 8,515 8,856 7,616 8,000 7,090 7,164 5,790
6,000 Million Million dinars 4,000
2,000
0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Total fiduciary circulation
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Chapter 5 – Banking Supervision 06/07/2020
At the end of 2019, the number of authorized banks and financial institutions in Tunisia stood at 42 units. They are broken down between 23 resident banks, 8 leasing institutions, 2 factoring companies, 2 merchant banks and 7 non-resident banks. The bank branches’ network increased by 32 branches over 2019, up to 1,945 branches, corresponding to one branch per 6,027 inhabitants against a branch per 6,038 inhabitants at the end of 2018. Over 2019, the activity of these institutions slowed down remarkably compared to 2018, as shown by the sharp regression in the growth pace of the outstanding balance of assets (5.1% in 2019 compared to 10.7% in 2018) in the wake of restrictive monetary policy measures taken by the BCT and the introduction of a Credit/Deposit ratio starting the end of 2018. Consequently, the share of banks’ and financial institutions’ assets in GDP decreased by more than 300 basis points, down to 124%.
Table 5-1: Main indicators related to banks and financial institutions 2017 2018 2019* Structure and size Number 42 42 42 - Resident banks 23 23 23 - Non-resident banks 7 7 7 - Leasing institutions 8 8 8 - factoring companies 2 2 2 - Merchant banks 2 2 2 Total assets (in MTD) 121,029 133,471 140,859 Resident banks’ share (in %) 91.7 91.8 92.3 Total assets/GDP in current prices (in %) 125.2 127.3 124.0 Loans to customers (in MTD)) 78,898 86,201 88,929 Customers deposits (in MTD) 64,772 70,674 77,180 Banking services indicators - Bank branch network 1,860 1,913 1,945 - Number of inhabitants per bank branch 6,154 6,038 6,027 * Provisional Data.
5-1. Resident Banks 5-1-1 Activity 5-1-1-1 Trend in resources In 2019, banking resources progressed by 9.5% corresponding to the same pace as in 2018. This trend results from the acceleration of the outstanding balance of deposits (9.4% vs. 9% in 2018) which concerned deposits in dinars (11.7 % vs. 6.2% in 2018) against a decrease in deposits in foreign currency (0.7% vs. 21.2% in 2018).
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Medium and long-term borrowing resources almost stagnated.
Table 5-2: Raised operating resources (In MTD unless otherwise indicated) Variations 2018 2019 2017 2018 2019* 2017 2018 In In In In MTD % MTD % Customers deposits 56,518 68,375 74,797 5,636 9.0 6,422 9.4 Sight deposits and other sums due 22,804 28,544 30,107 2,005 7.6 1,563 5.5 Savings deposits 16,687 20,402 22,003 1,962 10.6 1,601 7.8 Forward accounts 13,386 16,194 18,630 1 750 12.1 2,436 15.0 Certificates of deposits 3,641 3,235 4,057 -81 -2.4 822 25.4 Medium and long term 4,426 5,689 6,333 725 14.6 644 11.3 borrowings’ resources Special resources 3,286 4,184 5,359 581 16.1 1,175 28.1 Ordinary debenture loans 990 875 744 -138 -13.6 -131 -15.0 Other borrowings 150 630 230 282 81.0 -400 -63.5 Total operating resources 60,944 74,064 81,130 6,361 9.4 7,066 9.5 * Provisional Data.
The increase in deposits in dinars over 2019, was observed at the level of forward deposits and certificates of deposits (20.3% vs.8.9% in 2018) against a slowdown in sight deposits and savings deposits, which reflects a migration from a share of sight deposits of institutionals and companies and savings invested on the stock market towards the forward compartment pressured by the auction movement practiced by banks. By category of depositor, the better growth of the outstanding balance of deposits concerned private companies and institutionals. The outstanding balance of individuals’ deposits progressed at the same pace as that in 2018, while non-resident deposits posted a sharp deceleration (4% vs. 21.1% in 2018).
Table 5-3: Trend in deposits by category of depositor (In %) Category 2018 2019 Private companies 2.7 8.4 Private individuals 11.1 10.8 Institutionals -3.1 13.5 Non-residents 21.1 4.0
These trends had an impact on the deposits structure with a consolidation of the share of forward deposits (+1.2 percentage point) and certificates of deposit (+0.6 percentage point) against a decrease in the share of sight deposits and savings deposits by 1.4 percentage point and 0.4 percentage point, respectively.
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Graphic 5-1: Trend in deposit structure (In %) Graphic 5-2: Deposits collected by category of depositor (In %)
120 120
100 100 14.3 15.8 15.0 8.9 8.2 80 42.3 41.7 40.3 80 7.9
60 60 52.4 53.3 54.0 29.4 40 40 29.4 29.8
20 20 23.0 23.7 24.9 24.4 23.0 22.8 0 5.3 4.8 5.4 0 2017 2018 2019 2017 2018 2019
Sight deposits Savings deposits Non-residents Institutionals
Forward deposits Certificates of deposit Private individuals Private companies
By category of depositor, the deposits structure posted a decrease in the share of non- residents deposits (-0.8 percentage point) and of private companies (-0.2 percentage point) against an increase in the shares of private individuals (+0.7 percentage point) and institutionnals (+0.3 percentage point). 5-1-1-2 Trend in uses Resident banks’ uses grew at a decelerated pace (4,698 MTD or 4.9% vs. 7,245 MTD or 8.3% in 2018). This trend concerned notably loans to customers (3,103 MTD or 3.9% vs. 7,057 MTD or 9.6% in 2018) in the wake of: • The increase in the Money Market Rate • The introduction of the Credit/Deposit ratio which stood at an average level of 120% at the end of 2019 against 130.7% at the end of 2018. The securities portfolio posted a strong increase in 2019 (1,595 MTD or 10.8% vs. 188 MTD or 1.3% in 2018) influenced by the trend in the outstanding balance of Treasury bonds and of national borrowings (1,251 MTD or 13.4% vs. -332 MTD or -3.4% in 2018) and of shareholding securities (493 MTD or 12.7% vs. 454 MTD or 13.2% in 2018).
Table 5-4: Uses (In MTD unless indicated otherwise) Variations 2018 2019 2017 2018 2019* 2017 2018 In In In In MTD % MTD % Loans to customers 73,214 80,271 83,374 7,057 9.6 3,103 3.9 Securities portfolio 14,583 14,771 16,366 188 1.3 1,595 10.8 of which : Shareholding and similar securities 3,429 3,883 4,376 454 13.2 493 12.7 Trade and placements securities 739 949 891 210 28.4 -58 -6.1 Bonds 328 298 296 -30 -9.1 -2 -0.7 Treasury bonds and national borrowings 9,642 9,310 10,561 -332 -3.4 1,251 13.4 Total uses 87,797 95,042 99,740 7,245 8.3 4,698 4.9 * Provisional Data.
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Compared to 2018, the average effective bank rates increased overall, involving all categories of loans in line with the increase in the Money Market Rate.
Table 5-5: Trends in average effective rates (AER) by category of loan* Variations 2018 2019 Description 2017 2018 2019 2017 2018 In % In %
Average money market rate 4.86 6.70 7.74 1.84 1.04 AER/Housing loans 8.20 9.53 10.68 1.33 1.15 AER/Overdrafts 8.97 10.16 11.51 1.19 1.35 AER/Long term loans 7.66 9.10 10.24 1.44 1.14 AER/Medium term loans 7.56 9.17 10.32 1.61 1.15 AER/Consumer loans 9.06 10.57 11.88 1.51 1.31 AER/Short term loans 7.20 8.76 10.06 1.56 1.30 * Rates of the second half of the year.
5-1-2 Operating results Analysis of FY2019 statement of results compared to FY 2018 shows: • An important progress in the interest margin (524 MTD or 20.8%) in 2019 against (476 MTD or 23.3% in 2018) in spite of the drop at the level of activity, in line with the considerable improvement of the average income of the outstanding balance of loan by 2.4%, exceeding the rise in deposit costs (1.3%) in line with the increase in the Money Market Rate; • An increase in net commissions by 99 MTD or 9.4%,: a trend similar to that in 2018 (113 MTD or 12% in 2018). •A rise in the income from investment-securities portfolio of 65 MTD or 10% in 2019 against 264 MTD or 67.9% in 2018; • A drop in the foreign exchange gains for the second year in a row. Consequently, the Net Banking Proceed (NBP) of resident banks progressed by 647 MTD or 13.3% in 2019 against 736 MTD or 17.9% in 2018: up to 5,500 MTD.
Table 5-6: Operating results (In MTD unless otherwise indicated) Variations 2018 2019 Description 2017 2018 2019* 2017 2018 In In In % In % MTD MTD Interest margin 2,045 2,521 3,045 476 23.3 524 20.8 Net commissions 941 1,054 1,153 113 12.0 99 9.4 Gains on commercial securities-portfolio 742 625 585 -117 -15.8 -40 -6.4 Income from investment securities portfolio 389 653 718 264 67.9 65 10.0 Net banking proceed 4,117 4,853 5,500 736 17.9 647 13.3 Operating costs 1,958 2,285 2,482 327 16.7 197 8.6 of which : wage bill 1,484 1,587 1,701 103 6.9 114 7.2 * Provisional Data.
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Following these trends, the NBP structure was marked by the drop in the contribution of income from gains on commercial securities-portfolio, commissions and of investment securities portfolio (2.3 percentage points, 0.7 percentage point and 0.5 percentage point, respectively) against a consolidation in the interest margin (3.5 percentage points).
Graphic 5-3: Trend in net banking proceeds structure (In %)
Interest margin
49.7 51.9 55.4 Net commissions
Gains on commercial securities portfolio
22.9 21.7 Investment portfolio income 21.0
18.0 12.9 10.6
9.4 13.5 13.0
2017 2018 2019
Influenced by the money market rate increase, the average yield of loans and the average cost of deposits went up respectively by 2.4 and 1.3 percentage points. As a result, the net intermediation margin improved by 1.1 percentage point, coming to 4.3% at the end of 2019.
Graphic 5-4: Trend in the banking intermediation margin
8.9 7.9
6.5
4.6
4.0 In% 3.3 4.3 3.9 3.2
2017 2018 2019
Loans average yield Deposit average cost Net intermediation margin
The operating ratio dropped by 2 percentage points, posting 45.1% in 2019 following a decrease in operating costs (8.6% vs. 16.7% in 2018).
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5-2. Leasing institutions 5-2-1 Activity In 2019, the activity of leasing sector slowed down remarkably, in line with the fall in investment and the tightening of bank liquidity. In fact, the outstanding balance of leasing dropped by 5.4% against a 5% increase in 2018, coming to 4,275 MTD at the end of 2019, funded up to 73.9% by borrowing resources, of which 51.4% are bank borrowings and 26.6% are bond borrowings. Worth of note, that this sector raised 75 million dinars of bond resources in 2019 compared to 117.7 million dinars in 2018: down by 36.3%.
Table 5-7: Trend in the outstanding balance of leasing and borrowing resources (In MTD unless otherwise indicated) Description 2017 2018 2019*
Outstanding balance of leasing 4,302 4,518 4,275
Borrowing resources 3,121 3,354 3,158
of which : Bank resources (in %) 49.1 52.8 51.4
Bond resources (in %) 34.4 30.9 26.6 * Provisional Data.
5-2-2 Operating results Leasing institutions’ net proceed continued with its downward pace as in 2018, down by -4.5% or -8 MTD in 2019 compared to -3.2% or -6 MTD in 2018. This trend translates the activity slowdown and the increase of resources costs affecting the interest margin which dropped by 5.2% or 8 MTD.
Table 5-8: Operating indicators (In MTD unless otherwise indicated) Description 2017 2018 2019*
Interest margin 167 155 147
Net proceed 185 179 171
Operating costs 75 78 79 * Provisional Data.
The operating ratio deteriorated in 2019 by 2.6 percentage points: going from 43.6% in 2018 to 46.2% in 2019. 5-3. Non-resident banks 5-3-1 Activity 5-3-1-1 Operating resources In 2019, non-resident banks’ resources posted an increase in their outstanding balance by 7.8% or 142.5 M$US, against a decrease by 5.1% or 99 M$US, a year before.
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The structure of resources is made up, mainly, of customers’ deposits (40% vs. 37.7% in 2018), bank borrowings (24.7% vs. 23%) and equity (17.8% vs. 18.5%)
Graphic 5-5 : Non-resident banks’ resources at the Graphic 5-6 : Non-resident banks’ resources at the end of 2018 end of 2019
Customer Banking Customer Banking deposits borrowing deposits borrowing 37.7% 23.0% 40.0% 24.7%
Other Other Equity Equity Resources 18.5% Resources 8.9% 4.2% 17.8% Provisions Provisions 11.9% 13.3%
Table 5-9: Trend in non-resident banks’ resources (In M$ U.S unless otherwise indicated) Variations In million $ US 2018 2019 Description 2017 2018 2017 2018 2019* In M$ US In % In M$ US In % Banks borrowings 503.0 420.5 487.0 -82.5 -16.4 66.5 15.8 Based in Tunisia 181.8 172.2 173.3 -9.6 -5.3 1.1 0.6 Based abroad 321.2 248.3 313.7 -72.9 -22.7 65.4 26.3 Customers’ deposits 734.2 688.5 787.1 -45.7 -6.2 98.6 14.3 Resident 54.6 25.1 45.3 -29.5 -54.0 20.2 80.5 Non-resident 679.6 663.4 741.8 -16.2 -2.4 78.4 11.8 Other resources 162.4 162.0 81.7 -0.4 -0.2 -80.3 -49.6 Equity 267.8 337.8 350.2 70.0 26.1 12.4 3.7 Provisions 257.9 217.5 262.8 -40.4 -15.7 45.3 20.8 Total resources 1,925.3 1,826.3 1,968.8 -99.0 -5.1 142.5 7.8 * Provisional Data.
5-3-1-2 Trend in uses Non-resident banks’ uses increased by 6.5% or 116.3 M$US compared to a decline by 9.1% or 179.3 M$US in 2018. This trend concerned, notably, placements at banks based abroad (139.8 M$US or 47.1% vs. -142.3 M$US or -32.4% in 2018).
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However, loans granted to residents decreased (-28.8 M$US or -15.9%) and the share of loans to customers in the overall uses fell by 2.3 percentage points to be limited to 20.5%.
Table 5-10: Trend in non-resident banks’ uses (In M$ U.S unless otherwise indicated)
Description Variations In million $ US 2018 2019
2017 2018 In M$ In M$ 2017 2018 2019* In % In % US US Treasury operations 1,233.9 1,018.7 1,223.0 -215.2 -17.4 204.3 20.1 of which : placements at banks 852.3 672.0 718.4 -180.3 -21.2 46.4 6.9 Based in Tunisia 413.1 375.1 281.7 -38.0 -9.2 -93.4 -24.9 Based abroad 439.2 296.9 436.7 -142.3 -32.4 139.8 47.1 Loans 477.4 406.3 389.3 -71.1 -14.9 -17.0 -4.2 to residents 329.9 181.0 152.2 -148.9 -45.1 -28.8 -15.9 to non-residents 147.5 225.3 237.1 77.8 52.7 11.8 5.2 Securities portfolio 169.0 159.6 176.5 -9.4 -5.6 16.9 10.6 Other uses 83.1 199.5 111.6 116.4 140.1 -87.9 -44.1 Total operating uses 1,963.4 1,784.1 1,900.4 -179.3 -9.1 116.3 6.5 * Provisional Data.
Graphic 5-7 : Non-resident banks’ uses at the end of Graphic 5-8 : Non-resident banks’ uses at the end 2018 of 2019
Treasury Treasury operations operations 64.3% 57.1%
Other uses Other uses 5.9% 11.2% Customer Securities loans Securities Customer portfolio 22.8% portfolio loans 8.9% 9.3% 20.5%
Surety bonds went down by 33.5% or 149.3 M$US due mainly to a decrease in documentary credits confirmation by 72.8% or 107.9 M$US.
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Table 5-11: Trend in non-resident bank’s surety bonds (In M$ U.S unless otherwise indicated) Variations In million $ US 2018 2019 Description 2017 2018 In M$ In M$ 2017 2018 2019* In % In % US US Total surety bonds 611.4 446.3 297.0 -165.1 -27.0 -149.3 -33.5 Of which : Documentary credit confirmation 248.9 148.2 40.3 -100.7 -40.5 -107.9 -72.8 Opening of documentary credit 15.7 10.6 17.0 -5.1 -32.5 6.4 60.4 Approval and guarantee 174.6 143.1 159.4 -31.5 -18.0 16.3 11.4 * Provisional Data.
5-3-2 Operating results The interest margin resulting from non-resident banks’ activity grew by 8.6% compared to 3.3% in 2018, posting 23.9 M$US at the end of 2019. The operating ratio improved by 4.6 percentage points, coming to 33% in 2019.
Table 5-12: Operating indicators (In M$US unless otherwise indicated) Variations Variations In million $ US 2018 2019 Description 2017 2018 In million In In million In 2017 2018 2019* $ US % $ US % Interest margin 21.3 22.0 23.9 0.7 3.3 1.9 8.6 Net banking proceed 66.5 66.7 74.4 0.2 0.3 7.7 11.5 Operating costs 27.6 25.1 24.6 -2.5 -9.1 -0.5 -2.0 * Provisional Data.
5-4. Factoring companies 5-4-1 Activity The outstanding balance of financing of the factoring sector dropped in 2019 by 1.9% or 3.7 MTD, coming to 190.6 MTD against 194.3 MTD at the end of 2018.
Table 5-13: Factoring activity indicators (In MTD unless otherwise indicated) Variation 2019 Description 2017 2018 2019* 2018 In In % MTD Outstanding balance of financing 195.5 194.3 190.6 -3.7 -1.9 * Provisional Data.
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Borrowing resources dropped by 34.1 MTD or 38.2% in 2019.
Table 5-14: Trend in resources (In MTD unless otherwise indicated) Variation 2019 Description 2017 2018 2019* 2018 In In % MTD Equity 56.0 62.2 67.1 4.9 7.3 Borrowing resources 95.0 89.2 55.1 -34.1 -38.2 Bank borrowings (in %) ** 36.8 37.7 41.4 - 3.7 Treasury bills (in %) ** 31.6 26.3 0.0 - -26.3 Debenture loans (in %) ** 18.9 19.2 22.3 - 3.2 Other borrowings (in %) 12.7 16.8 36.3 - 19.5 * Provisional Data ** Variation in percentage points. 5-4-2 Operating result The factoring net proceed increased by 9.4% against 28% in 2018. This rise which was accompanied by a more pronounced trend in operating costs (17.3% vs. 8.3% in 2018) yielded a deterioration in the operating ratio by 2.3 percentage points, posting 34.8% at the end of 2019.
Table 5-15: Operating indicators (In MTD unless otherwise indicated) Variation 2019 Description 2017 2018 2019* 2018 In In % MTD Interest margin 6.5 9.4 10.3 0.9 9.6 Net factoring proceed 12.5 16.0 17.5 1.5 9.4 Operating costs 4.8 5.2 6.1 0.9 17.3 * Provisional Data.
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Chapter 6 – Financial stability 02/07/2020
The year 2019 was marked by a consolidation of the financial sector’s resilience and a better monitoring of macro-financial risks, amidst a delicate national and international context, foreshadowing an exacerbation of financial and non-financial institutions’ vulnerabilities. Easing of tensions on bank liquidity came after adoption of restrictive monetary and macroprudential measures which aim basically at curbing demand for liquidity from the Central Bank. In this framework, banks adopted rigorous financial risk-monitoring policies. Their economic agents-financing activity slowed down significantly for professional loans as well as for those granted to individuals. On the other hand, the capital market’s activity was marked, over 2019, by an ongoing pressure on liquidity in a political uncertainty climate tied to electoral deadlines. This has strongly affected savings raised at mutual investment companies. As for the first quarter of 2020, it was marked by outbreak of the COVID-19 health crisis, which made the financial sector’s regulatory authorities adopt a set of measures which aim at limiting the pandemic’s social, economic and financial repercussions in order to preserve the financial sector’s stability.
Box 6-1: Macro prudential oversight by the BCT
Contribution to financial stability constitutes an explicit mandate of the BCT as per article 7 of its statute. In this framework, article 8 of law n° 2016-35 entrusted the BCT with "contributing to macroprudential policy implementation in such a way as to prevent against, and attenuate systemic risk". Chapter 4 related to financial stability preservation made this BCT mission explicit: «Detection and follow up of the different factors and trends likely to affect the financial system’s stability notably the ones threatening its soundness or an accumulation of systemic risks». Thus, the above-mentioned law provided for the creation of a Macroprudential Oversight and Financial Crisis Management Committee at the BCT to ensure a mission of "determing, by means of recommendations, the measures that the financial system’s regulatory authorities should adopt and implement so as to contribute to the whole financial system’s stability, notably by boosting its soundness, by preventing against systemic risks and curbing effects of possible disturbances on the economy …”. Since its creation, the committee has held five meetings in the presence of all its members to examine financial risks’ evolution, development of the regulatory and institutional framework, macroprudential oversight’s operational framework as well as main concerns and challenges facing financial stability. Finally, the Macroprudential Oversight Committee held an extraordinary meeting in the beginning of April 2020 to examine coordination modalities of efforts to fight against the COVID-19 pandemic’s effects.
6-1. Macro-financial risks Macro-financial risks were assessed as per a methodology based mainly on six factors related to macroeconomic conditions, excessive credit growth, the banking sector’s resilience, its liquidity, as well as the credit-portfolio quality. In 2019, four risk factors improved while the
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Chapitre 6 ones related to macroeconomic conditions and to the credit-portfolio’s quality deteriorated slightly as illustrated by the figure below:
Graphic 6-1: Macro-financial risks
Macroeconomic conditions 1.00 Dec.-10 0.75 Dec.-18 Liquidity 0.50 solvency
0.25 Dec.-19
-
Excessive credit growth Asset quality
The risk level decreases as it gets nearer centre of the convas Profitability
Source: BCT calculations
6-1-1 Macroeconomic conditions Amidst an international economic context characterized by a decelerating economic growth, important pressure affected national economic and financial balances over 2019. In fact, the national economy grew at a strongly slower pace following mainly agricultural production deceleration, despite an exceptional cereal campaign, and manufacturing production regression, reflecting, notably, a decrease in external demand. The budget deficit reduction was accompanied by a higher tax burden and a delayed payment of the Administration and public enterprises’ debt to their suppliers. Moreover, and despite easing of the external deficit, savings weakness along with a lack of foreign investment dynamism, put further pressure on liquidity for both banks and the capital market. 6-1-2 Credit risk Credit growth was particularly marked by a sharp deceleration of its progress, bearing the mark of the combined effect of the drop in demand for investment loan, monetary tightening and institution of a threshold for the transformation "Loans / Deposits" ratio. In fact, loans to the economy rose by 3.6% over 2019 against 8.9% in 2018. Likewise, compared to GDP growth, the spread of credit growth came to -4.1 points with respect to 2019 against +1.2 points in 2018. These trends may hide potential risks that would be brought about by credit dry-off, although they reflect a rationalisation of credit dynamics in line with the economic situation. On the other hand, the sectorial concentration of loans, measured by the (IHH1) index, reveals a slightly slower concentration at the end of 2019 with a regression in the share of individuals, industry and tourism. Concurrently, banks have further diversified their commitments with large-scale loan consumers.
1 Herfindahl-Hirschman index.
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However, banks' direct exposure to public enterprises went up from 5,151 MTD in 2018 to 6,351 MTD in 2019. This is mainly attributable to the financing of an exceptional cereal campaign. In addition, commitments to the public administration amounted to 1,774 MTD, following mainly mobilisation at banks of a syndicated loan in foreign currency worth 356 million euros in favour of the Treasury.
Graphic 6-2 : Trends in loans to the public Graphic 6-3 : Trends in public enterprises’ administration commitments 8% 7.6% 7,000 12% 11.0% 11.0% 6,351 7% 11% 5.8% 6,000 6% 10.2% 11% 5.1% 5,151 10% 5% 5,000 9.5% 4,583 9.3% 10% In % 4% 3,998 3,915 In MTD In 3,890 3,680 3,770 9% 2.5% 2.7% 4,000 3% 2.4% 2.4% 3,553 3,526 2.5% 2.1% 9% 1.9% 1.8% 2% 1.5% 1.6% 7.8% 8% 3,000 8.0% 7.9% 0.9% 0.9% 0.8% 0.5% 0.7% 0.9% 7.8% 8% 1% 0.5% 7.3% 2,000 7%
0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010
Loans to public administration / Professional loans Public enterprises' bank commitments (L)
Loans to public administration / State domestic indebtedness Share of public enterprises / Professional commitments (R)
1 6-1-3 The banking sector’s resilience The quality of banking assets deteriorated slightly in 2019. Thus, the share of non-performing loans in total commitments went up, to 13.3% of all loans in 2019 against 13.2% in 2018. However, the coverage rate of non-performing loans by provisions improved with respect to 2019, up from 56% to 58% from one year to the next.
Graphic 6-4 : Breakdown of non-performing Graphic 6-5 : Sectorial breakdown of loans loans Internal loop 2010 / Central loop- 2018/ External Internal loop 2010 / Central loop- 2018/ External loop 2019 loop 2019 5.2% 11.4% Agriculture 3.2%
Industries 26.1% 5.9% 10.7% 5.4% 3.1% 27.1% Trade 26.9% 6.1% 6.6%3.3 % 30.7% 27.5% Tourism 3.4% 5.1% 28.9% 24.8% 9.6% 8.6% 27.2% 9.9% 38.4% Collective transport 2.4% 9.2% 6.1% 5.9% 19.6% Real estate 16.0% 10.8% 5.2% 5.4% 16.1% 11.4% 8.1% Other services 6.1% 15.9% 18.0% 15.3% 4.6%5.1 % Loans to individuals 16.7% 6.1% 4.6% 4.8% 15.1% 16.3%
1 Provisional figures.
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The evolution of asset quality by bank type shows a better rate of public banks’ non-performing loans, down from 18.2% in 2018 to 17.3% in 2019, resulting mainly from intensified collection efforts and the effect of operations to write off claims carried out by these banks. However, the rate of private banks’ non-performing loans deteriorated slightly, down from 10.4% to 10.6%. Concerning profitability, it improved over 2019 following the increase in the net banking proceed driven by the higher interest margin (accounting for 55% of the net banking proceed in 2019 against 52% in 2018) and to a lesser degree by commissions. As for the banking sector’s solvency, there was a consolidation of this sector’s financial fundamentals over 2019. In fact, banks' net equity grew by 11.5% with respect to 2019 against 10.4% a year before. Deceleration of risk-weighted assets further reinforced the solvency ratio which improved from one year to the next, posting 12.7% in 2019. Worth of note, however, that compliance with solvency regulatory ratios hides disparities between banks. 6-1-4 Liquidity Over 2019, the banking sector’s liquidity risk eased up. This easing is reflected by the drastic drop in the overall financing volume, down from a peak of 16,913 MTD in March to 11,462 MTD at the end of 2019: decreasing by 32.2 %. Thus, the refinancing share at the issuing institute in banks’ total resources in dinars decreased from 13.9% in 2018 to 8.7% in 2019. This trend is also attributable to the increase in the deposits’ share by about 2% after a downward trend over the 2011-2018 period. As for the transformation "Credits / Deposits" prudential ratio, loan-granting slowdown and intensified deposit-collection efforts led to an improvement of the above-said ratio which was down from 131% at the end of December 2018 to 120% at the end of 2019. However, this situation hides disparities between banks.
Graphic 6-6: Trends in the Credits/Deposits ratio (In %)
134
52 128 42
32
122
130.7
129.1
22
127.4 127.0
120.0 116
9 122.8 12 6 6 5 4 2 110 Dec 2017 Dec 2018 March 2019 June 2019 Sept 2019 Dec 2019
The Banking sectors LTD ratio (R) (in%) Number of banks in infringement comparred to LTD ratio requirements (L)
6-2. Risks tied to capital markets and collective savings activity The capital market evolved, over 2019, amidst a context marked by pressure on liquidity along with a climate of political uncertainty tied to electoral deadlines. Thus, the Tunindex reference index closed 2019 at a 2.1% regression compared to the previous year, with a declining volume of transactions. This trend was exacerbated, over the first quarter of 2020 by spread of the COVID-19 pandemic.
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Financial Stability
Table 6-1: Main Stock exchange indicators (In MTD unless otherwise indicated) Q1 2016 2017 2018 2019 Description 2020 State issues1 3,373 2,079 2,732 1,132 1,622 - Bonds equivalent to Treasury bonds (BTA) and Zero-coupon Treasury bonds (BTZ)* 3,297 1,985 1,216 696 56 - Short-term Treasury bonds (BTCT) 76 94 1,516 436 1,566 Outstanding balance of Treasury bonds (End of 12,493 13,452 13,614 14,182 15,162 period) - BTA and BTZc 11,471 12,585 12,975 13,341 13,055 - BTCT 76 101 54 436 1,702 - National borrowing 946 766 585 405 405 Outstanding balance of Treasury bonds/GDP (In 13.9 14.0 12.9 12.5 13.33 %) Corporate issues through public call for savings Approved amounts 514 568 365 883 80 - Capital increase 42 153 20 718 0 - Debenture loans 472 415 345 165 80 Raised Funds2 507 691 441 683 240 - Capital increase 31 167 0 462 206 - Debenture loans 476 524 441 221 34 Amount of transactions on the stock quotation 1,741 2,408 2,521 1,590 356 - capital securities (a) 1,651 2,243 1,899 1,329 320 - Claim securities 90 165 622 261 36 Number of listed companies (In units) 79 81 82 81 81 Stock market capitalisation (b) 19,300 21,852 24,380 23,724 21,830 Stock market capitalisation/GDP (In %) 21.5 22.7 23.2 20.8 19.2 (3) TUNINDEX in points (Base 1,000 on 31 December 5,488.77 6,281.83 7,271.65 7,122.09 6,483.38 1997) Annual rotation rate (a/b) (In %) 8.6 10.3 7.8 5.6 1.5 Liquidity rate (In %)4 46 41 44 39 48 Amount of transactions on the off-list 79 64 166 203 1 Amount of registries and declarations 945 1,008 1,151 1,574 129 OPCVM (Exclusive of FCPR)5 - Operating units 125 123 124 119 120 - Net assets 4,544 4,361 3,956 3,675 3,749 Sources: Tunis Stock Exchange Market and Capital Market Council 1 Calculated on the basis of auction dates. 2 Calculated on the basis of subscription closing dates. 3 Calculated on the basis of 2019 GDP. 4 The liquidity rate is defined as being the volume of processed securities compared with the one of securities ready for sale on the Stock exchange quotation. 5 Venture mutual investment fund. (*) Excluding trade auction of Treasury bonds.
The primary market was characterized, over 2019, by a sharp drop in State issues by 1,600 MTD or 58.6%, totalling 1,132 MTD. This decline is notably attributable to resumption of external resources mobilised by the State over 2019. Worth of note, also, that the increase in the key interest rate by 100 base points which took place over 2019, as well as liquidity shortage on the market brought about a rise of public debt cost as reflected by higher average weighted rates upon Treasury bonds issue.
Annual Report 2019 147
Chapitre 6
Graphic 6-7: Trends in Treasury bond issues 4000
3500 National borrowing 3000
2500 BTA trade auctions
2000 In MTD In
1500 BTCT auctions
1000
500 BTA auctions
0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Mar-20
However, businesses intensified their recourse to the primary market to mobilise funds through public call for savings. In fact, fresh cash raised on this market went upwards by more than a half, reaching 683 MTD with respect to 2019, in spite of difficulties encountered to raise funds notably on the bond market. This trend means a liquidity shortage on the market and the overbid on banking deposits meaning a partial subscription of issues in some cases. On the other hand, after three years of increase in a row, the Tunindex reference index closed 2019 on a 2.1% drop in line with the lack of visibility and investors’ wait-and-see attitude. This downward trend observed in 2019 was more pronounced over the first quarter of 2020 in line with spread of the Covid-19 pandemic. Stock capitalisation dropped by 656 MTD or 2.7%, closing for 2019 at 23,724 MTD: 20.8% of GDP. On the other hand, activity of mutual funds investing in securities (OPCVMs) was strongly affected by the ongoing pressure on liquidity, in line with migration of savings towards banking placements, particularly forward accounts and certificates of deposit, the remuneration rates of which are relatively high. Thus, OPCVMs’ net assets dropped by 281 MTD or 7.1% in 2019 compared to 2018, posting 3,675 MTD: 8.1% of bank savings. This decrease affected all OPCVMs, of which notably bond units (-255 MTD), bearing in mind that their share in the whole collective savings market approaches 84%. Thus, the yield of all OPCVMs went downwards compared to the previous year, posting 4.5% (against 5.2% in 2018): a yield below the savings remuneration rate.
Graphic 6-8: Variation of OPCVMs’ net assets and trends of their share in bank savings.
22 700 21 20 500 19 18 300 17
16
100 15 In In %
In In MTD 14 13 -100 12 11 -300 10 9 -500 8 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Mar-20
Bond OPCVMs Mixed OPCVMs In % of savings at banks
Annual Report 2019 148
Chapter 7 – Financial inclusion and protection of banking services’ users 23/06/2020
The Central Bank of Tunisia is entrusted, as per law n ° 2016-35 of 25April 2016, with a legal mandate for working on banking services’ users protection. It is with the aim of fulfilling this mission that it created, in April 2019, within its organisational chart, a Financial Inclusion and Banking Services’ Consumers’ Protection Unit.
7-1. Protection of banking services’ users 7-1-1 Strategic vision
Within the framework of its 2019-2021 strategic plan, the BCT has launched a project around “Protection of banking services’ users” to promote professionals subject to loyal commercial behaviour and practices while fostering economic actors’ confidence in its action. This project, which will help the BCT to fully play its role and boost banking supervision actions, is based on a diagnosis of the existing regulatory corpus as regards consumers’ protection and a benchmark of successful experiences in order to end up with the elaboration of a comprehensive regulatory framework which converges towards good international practices. In this respect, the BCT is concerned with covering all aspects of the bank-consumer relationship and upholding transparency and equity principles. Likewise, aware of the reach of digital finance, it puts protection of digital financial services’ users at the core of its future structuring projects. On the other hand, and aside from the regulatory framework, the BCT is striving to develop technical and operational means empowering it to ensure close follow-up of banks’ and financial institutions’ commercial practices, by drawing notably on its normative, control and sanctioning power, so as to guarantee a market conduct favourable to preserving clients' interests.
7-1-2 Operational activity
Over the last nine months of 2019, the BCT received 433 queries from bank customers, reporting difficulties encountered in their relationship with banks and financial institutions or asking for information. These queries emanate from individual customers as well as from businesses and are broken down as follows: • 399 queries from individuals, involving basically the following transactions: Seeking accounts open in the banking sector on behalf of dead people. Financing and guarantees; Accounts’ operating.
Annual Report 2019 941
Chapitre 7
Graphic 7-1: Queries-Individuals
Account operation Other 12% 4%
Means of payment
4%
Financing and guarantees Succession 54% 26%
• 34 queries from businesses mainly for reasons related to financing (32%) or to their current accounts’ operation (18%).
Graphic 7-2: Queries - Businesses
Other 15%
Means of payment
18% Financing and guarantees
50%
Account operation
17%
The role of the BCT within the framework of queries processing consists mainly in guiding customers towards avenues of redress , namely: banks and financial institutions in a first step and banking mediation in a second step. Worth of note that these queries help the BCT to detect possible dysfunctions in the market conduct and to work for their recovery.
7-2. BCT initiatives for financial inclusion promotion At the time when classical banking services are showing their limits in offsetting banking exclusion, new financial inclusion facilities appear as an inescapable lever to meet the urgent needs of a significant segment of the population, often marginalised and economically vulnerable. Moreover, paradoxically, in Tunisia, where the financial system is fairly deep-seated, important inequalities in terms of access may be observed. In fact, results of the national survey on financial inclusion achieved in 2018, reveal that the access rate to financial institutions at the national level amounts to 61%. However, this proportion is estimated at 54% for rural people
Rapport Annuel 2019 951
Financial inclusion and protection of banking service’s users against 65% for city dwellers, at 51% for women against 71% for men and at 44% for low- income people against 87% for high-income people. It is within this framework that the BCT, as a key actor of the National Financial Inclusion Strategy, and despite this field’s transversality, focused on widening the banking offer notably by means of promoting digital financial services which constitute a genuine catalyst of inclusive and long-lasting economic development. In this regard, the legal framing in November 2019 of Islamic banking operations came to develop and elucidate supply of products and should contribute to including clients who are underserved so far. On the other hand, and aware of the enormous opportunities and challenges tied to banking services’ digitalisation, the BCT has made the choice of supporting fintechs and stimulating their integration within the financial ecosystem by adopting a structured and concerted approach aimed at ensuring the right balance between two roles: the one of regulator mandated by the legislation and the one of facilitator which it assigned to itself. Likewise, it goes without saying that the latest reform of the banking law was the occasion to introduce a new actor on the market, namely the payment institution, which is called upon to evolve as a genuine neobank in order to support innovation in payment services, favour financial inclusion and act as cash aspirator. By circular, the BCT allowed these institutions to get rid of certain requirements which could constitute major obstacles to the payment offer’s development without, however, compromising these service providers’ capacity to make their process secure, protect their clients well and comply with anti-money laundering norms. In fact, the BCT eased up rules as regards governance and prudential rules by giving the possibility to these specialised institutions to resort to extended networks of payment agents while digitalising clients’ identification process by means of E-KYC. Still, bearing in mind the need to diversify financial offer and gain proximity to banking services’ access, the BCT encourages entry of new actors on the market such as banking operations intermediaries provided for by the financial inclusion draft law. Moreover, at the international level, the BCT has always joined its voice to the one of organisations advocating financial inclusion, by recording this issue among strategic orientations. As a token of its strong commitment to promoting financial inclusion, the BCT, as a member of the Alliance for Financial Inclusion, prepared a membership file to adhere to Maya Declaration. Likewise, and drawing a connection between two of the most urgent concerns which emerging countries are faced up with, namely financial inclusion and climate change, the BCT reiterated its unflinching commitment to promoting inclusive green finance through the banking system’s progressive adherence within a social and environmental responsibility logic, all the more so as it adhered to the Network of Central Banks and Supervisors for the Greening of the Financial System (NGFS).
Rapport Annuel 2019 959
Financial situation of the Central Bank
Analysis of the financial situation and results 29/07/2020 The BCT’s financial statements, set as of 31 December 2019, bore the mark of missions exerted by the Issuing Institute as per the law n°2016-35 of 25 April 2016 fixing its statute, as well as the prevailing economic and financial situation in the country over 2019, characterized notably by: The current deficit shrinking and the significant consolidation of net inflows of external capital, The improvement in stocks of foreign currency reserves, The drop in the overall refinancing volume due to the decrease in banks’ needs for liquidity, The dinar’s appreciation against the US dollar and the Euro, In the context of the above-mentioned trends, the Central Bank of Tunisia’s total balance sheet posted 34,558.2 MTD at the end of FY 2019 against 31,353.6 MTD, corresponding to an annual increase of 10.2%. At the level of Asset, the rise is mainly due to the significant increase in foreign currency assets, which rose by 5,197.1 MTD, over one year, thanks notably to drawings on external loans, on the one hand, and the increase in tourist receipts and the income of Tunisians living abroad, on the other hand. At the level of Liability, the increase results, from the higher level of «commitments in foreign currency " section by 1,495.7 MTD on the one hand, and banknotes and coins in circulation, which grew by 1,054.8 MTD from one end of the year to the next, on the other hand. Furthermore, the increase recorded at the level of equity (prior to FY result), going from 146.8 MTD in 2018 to 352.1 MTD in 2019, is mainly due to reserves constituted when allocating FY 2018 result to finance the Bank's investment projects within the start-up year of its first strategic plan (2019-2021) , in particular.
Table 1: Aggregated balance sheet (In MTD) Asset 2019 2018 Liabilities and equity 2019 2018 Foreign currency assets 19,722.4 14,525. 3 Fiduciary circulation 13,508.4 12,453.6 Bank refinancing 10,950.9 13,505.9 Government Accounts 2,752.3 2,781.6 Commitment in foreign Other assets 3,884.9 3,322.4 currency 9,744.1 8,248.4 Other liabilities 7,152.1 6,841.8 Total liabilities 33,156.9 30,325.4 Equity prior for financial year
results 352.1 146.8 Financial year result 1,049.2 881.3 Total assets 34,558.2 31,353.6 Total liabilities and equity 34,558.2 31,353.6
As for the financial year’s result, it closed for 2019 at a record level, amounting to 1,049.2 MTD against 881.3 MTD a year before: a 167.9 MTD increase.
Annual Report 2019 155
1-1. Main trends in the asset situation Assets in foreign currency Assets in foreign currency increased significantly compared to 2018, reaching 19,722.4 MTD at the end of 2019 against 14,525.3 MTD over 2018: a variation of 5,197.1 MTD or 35.8%. Accounting for 57.1% of the total balance sheet against 46.3% a year before, these assets are mainly invested in monetary deposits, the portfolio structure of which is presented as follows:
Table 2: Structure of assets in foreign currency (In MTD) 2019 2018 Amount Share Amount Share Deposit assets 9,714.5 49% 6,789.3 47% Sight assets 2,686.9 14% 2,222.6 15% Securities-portfolio 5,178.2 26% 4,261.1 29% Other1 2,142.8 11% 1,252.3 9% Total 19,722.4 100% 14,525.3 100%
This increase is mainly due to external resources mobilized over 2019, as well as foreign currency flows in tourist receipts and income of workers living abroad. It is worth mentioning that during 2019, reimbursement was made for the debenture loan of USD 485 million in July 2019 and the first tranche of the Qatari private placement of USD 1 billion for an amount of USD 250 million in April 2019. Bank refinancing Reflecting the drop in banks' needs for liquidity, bank refinancing posted a 2,555 MTD or 18.9% drop compared to its level in 2018. In fact, its main component, the asset of the balance sheet heading entitled "Financing to banks tied to monetary policy transactions", declined by 2.851 MTD or 24.1%, observed for the first time since 2013, down from 11.846 MTD at the end of 2018 to 8.995 MTD one year later, reflecting the gradual deceleration of the Central Bank's interventions on the money market since July 2019. It is worth mentioning the significant reduction in swap foreign exchange operations for monetary policy purposes, the average envelope of which posted 1,258 MTD at the end of FY 2019 against 2,574.4 MTD a year before: a significant drop of 1,316.4 MTD. On the other hand, firm purchases of Treasury bonds within the framework of the Open-Market, increased by 296.1 MTD compared to 2018, posting 1,955.9 MTD against 1,659.8 MTD a year before: a 17.8% increase.
1 Including assets in foreign banknotes, funds entrusted to external management mandate, assets in foreign currency cheques and debit foreign accounts in foreign currency.
Annual Report 2019 156
Analysis of the financial situation and results
Graphic 1: Overall trend of refinancing (In million dinars)
18,000
16,000
14,000
2018 12,000
averages 2019 10,000
Monthly 8,000
6,000
MAY
JUNE JULY
APRIL
MARCH
AUGUST
JANUARY OCTOBER
FEBRUARY
DECEMBER NOVEMBER SEPTEMBER
Fiduciary circulation Remaining the main component of liabilities and weighing 40.7%, the fiduciary circulation posted, at the end of FY 2019, an increase of 8.5% compared to its level at the end of 2018, reaching 13,508.4 MTD against 12,453.6 MTD. Over the financial year under review, its level fluctuated between a minimum of 12,288.6 MTD and a maximum of 14,246 MTD, recorded on 20 February and 14 August respectively, with peaks in May, August and December, coinciding with Ramadan, the summer season, religious holidays and those of New Year.
Graphic 2: Monthly Trends in fiduciary circulation
(In thousand dinars) Aid Al-Adha 15,000
The new year's feast 14,000 Ramadan
13,000 +8.5 %
month month data -
of +6.2 %
- 12,000 End 11,000
10,000
9,000
Government’s accounts The Government's accounts decreased slightly by 29.3 MTD, down from 2,781.6 MTD to 2,752.3 MTD from one year end to the next.
Annual Report 2019 157
Being one of the major components of this heading, the Treasury’s current account, the balance of which stood at 905.1 MTD on 31 December 2019, experienced strong fluctuations in 2019. In fact, its balance varied within a range from 95.7 MTD to 1,829.2 MTD. Commitments in foreign currency The heading " commitments in foreign currency " increased by 1,495.7 MTD or 18.3% compared with the previous financial year, up from 8,248.4 MTD to 9,744.1 MTD, from one year end to the next, mainly due to the encashment of the deposit made by the Central Bank of Libya at the BCT, in July 2019, for an amount of 500 million Euros. 1-2. Main trends in the statement of results The Central Bank of Tunisia closed for FY2019 with a record result, amounting to 1,049.2 MTD against 881.3 MTD a year before, corresponding to a 19.1% increase.
Graphic 3: Trends in proceeds, costs and result
In MTD 1,600 1,049.2 1,400 881.3 1,200 1,000 800 385.8 1,459.4 225.2 600 252.1 295.6 214.9 186.8 174.7 221.7 400 200 372.1 470.8 418.9 439.4 442.5 505.2 475.9 689.9 1,246.8 0 -120.0 -175.2 -204.0 -252.6 -267.8 -254.2 -200 -280.0 -304.1 -365.5 -410.2 -400 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
COSTS PROCEEDS RESULT
Proceeds from intervention on the dinar money market
Remaining the most important heading in the statement of results, proceeds from refinancing operations, whose weight in the Bank's total income was up to 82.4%, reached 1,201.8 MTD at the end of 2019 against 1,021.6 MTD a year earlier: increasing by 180.2 MTD or 17.6%. The total proceeds from intervention operations on the money market are detailed as follows:
Table 3: Proceeds from intervention operations on the money market (In MTD) 2019 2018 Δ% Interests on interventions on the money market in the form of 542.5 464.1 16.9 purchase on calls for bids Interests on 24-hour lending facility 232.9 239 -2.6 Proceeds on securities purchased firm 145 79.6 82.2 Carry-over on foreign exchange swap operations 104 194 -46.4 Interest on interventions on the Money Market at longer terms 142.3 10.6 >100 Interest on money market intervention in the form of Treasury - 22.7 -100 bond repo for 3-month duration Penalty interest with respect to the money market 15.6 6.6 >100 Recovery of provisions on securities purchased firm 19.5 5 >100 TOTAL 1 201.8 1 021.6 17.6
Annual Report 2019 158
Analysis of the financial situation and results
Interests on forward investments in foreign currency
Interests on forward investments in foreign currencies totaled 150 MTD at the end of FY 2019 against 165.4 MTD a year before: a slight fall of 15.4 MTD or 9.3%, attributable exclusively to the regression of interests collected on securities in foreign currency. Interests paid on transactions in foreign currency
Interests paid on transactions in foreign currency more than doubled over a year, rising to 72.6 MTD at the end of FY 2019 against 29.8 MTD in the same period of the previous financial year, corresponding to an increase of 42.8 MTD or 143.6%. In fact, this increase is largely attributable to the rise in interests paid within the framework of intervention on the money market in foreign currency which rebounded by 28.7 MTD culminating at 48 MTD at the end of 2019 against 19.3 MTD a year before. This rise is due to the increase in interests paid on term investment of foreign currency at the Central Bank of Tunisia (+5.4 MTD), as well as the rise in interests charged by our correspondents on our sight accounts opened on their books (+6.8 MTD). Operating costs Operating costs posted an annual increase of 12.1 MTD or 11%, up from 109.8 MTD to 121.9 MTD. These costs are made up of: - 78.8% in staff costs, which went up to 96 MTD at the end of 2019 against 89 MTD in 2018, rising by 7 MTD or 7.9% mainly due to salary increase as well as the integration of 97 new recruits. - 21.2% in general operating costs, which increased by 5 MTD or 24% compared to the previous year, posting 25.8 MTD against 20.8 MTD.
Annual Report 2019 159
Financial statements and statutory auditors’ report
Financial statements of the Central Bank of Tunisia
Balance Sheet as at 31 December 2019
(In Tunisian dinars)
Assets Notes 31/12/2019 31/12/2018
Gold holding 1 569 491 253 512 906 454
Subscriptions to international organisations 2 2 371 793 2 371 793
IMF reserve position 3 506 101 907 423 938 124
Assets and investments in special drawing rights 4 33 376 336 85 055 604
Foreign currency assets 5 19 722 387 797 14 525 339 281
Refinancing to banks related to monetary policy 6 8 995 000 000 11 846 000 000 transactions
Securities purchased in the framework of the open 7 1 955 947 547 1 659 861 562 market transactions
Advance to the State pertaining to Monetary Funds 8 2 384 702 113 2 034 352 894 subscriptions
Shareholding portfolio 9 57 467 327 56 313 107
Fixed assets 10 126 009 497 39 610 832
Miscellaneous debtors 11 40 011 215 37 172 773
Memorandum accounts and accounts calling for 12 165 323 916 130 634 704 adjustment
Total assets 34 558 190 701 31 353 557 128
The attached notes are an integral part of the financial statements
Annual Report 2019 163
Balance Sheet as at 31 December 2019
(In Tunisian dinars)
Liabilities and equity Notes 31/12/2019 31/12/2018
Liabilities Banknotes & coins in circulation 13 13 508 362 952 12 453 554 639
Bank and financial institutions current accounts 281 734 236 295 118 211
Government’s central account 14 1 306 050 686 1 562 993 875
Government’s special accounts 15 1 446 215 071 1 218 611 380
Allocations of special drawing rights 16 1 058 185 096 1 134 005 307
Current accounts in dinar of foreign institutions 17 1 763 691 849 1 484 789 511 Commitments towards banks tied to monetary policy 18 120 000 000 operations
Commitments in foreign currency towards Tunisian 19 7 271 650 393 6 932 889 693 authorised intermediaries
Foreign accounts in foreign currency 20 201 120 443 208 796 208
Other commitments in foreign currency 21 2 271 287 500 1 106 743 708 Current collection of values 22 7 543 600 6 774 337
Differences on conversion and revaluation 23 3 013 947 082 3 259 640 800
Miscellaneous creditors 24 142 174 801 102 384 004 Memorandum accounts and accounts calling for 25 764 940 246 559 128 112 adjustment Total liabilities 33 156 903 955 30 325 429 785
Equity 26 Capital 6 000 000 6 000 000 Reserves 346 130 494 140 728 867 Other equity - 77 945
Total equity prior to financial year results 352 130 494 146 806 812
Financial year results 1 049 156 252 881 320 531
Total equity prior to allocation 1 401 286 746 1 028 127 343
Total liabilities and equity 34 558 190 701 31 353 557 128 The attached notes are an integral part of the financial statements
Annual Report 2019 164
Financial statements of the Central Bank of Tunisia
Statement Of Off Balance Sheet Commitments as at 31 December 2019
(In Tunisian dinars)
Notes 31/12/2019 31/12/2018 27
Pledged commitments and collaterals 33 005 776 986 35 259 896 242
Collateral commitments pledged in the framework of external borrowings 32 420 474 414 32 957 527 074
Debenture loans 25 547 257 048 26 493 025 218
Other external borrowings 6 873 217 366 6 464 501 856
Commitments pledged on refinancing operations 585 302 572 2 302 369 168
Currency to be delivered on foreign exchange swap operations 585 302 572 2 302 369 168
Commitments and collaterals received 9 336 470 815 13 307 757 280
Commitments received on refinancing operations 609 616 820 2 305 572 331
Dinars to be received on foreign exchange swap 601 470 400 2 280 000 000 operations Carry over amounts on foreign exchange swap 8 146 420 25 572 331 operations Collaterals received in coverage of refinancing operations 8 721 814 532 11 001 004 847
Current claims 5 291 761 253 6 357 547 098
Bonds equivalent to Treasury bonds 3 430 053 279 4 643 457 749
Other commitments received 5 039 463 1 180 102
Temporary guarantee received 918 000 112 000
Final guarantee received 4 121 463 1 068 102
Other commitments 4 503 012 4 846 226
Banknotes confiscated and detained at the BCT 4 503 012 4 846 226
The attached notes are an integral part of the financial statements
Annual Report 2019 165
Statement of Result as at 31 December 2019 (In Tunisian dinars) Notes 31/12/2019 31/12/2018
Proceeds Proceeds from intervention transactions on the money 28 1 201 815 729 1 021 627 239 market Interests on forward investments in foreign currency 29 149 953 427 165 399 655
Other proceeds on foreign currency transactions 30 86 756 220 32 432 293 Proceeds on transactions with international 31 4 695 075 4 567 412 organisations Interests on banks and financial institutions’ accounts 1 320 138 1 134 485
Miscellaneous proceeds 32 9 247 801 5 826 874
Write back of provisions for risks and costs 5 574 593 15 869 766
Total proceeds 1 459 362 983 1 246 857 724
Costs Costs related to money market intervention 33 31 659 808 19 870 510 transactions Interests paid on transactions in foreign currency 34 72 640 002 29 849 099
Other costs on transactions in foreign currency 35 36 514 267 101 279 140
Costs on transactions with international organisations 36 9 942 186 10 567 064
Miscellaneous costs 613 445 870 263
Staff costs 37 96 050 844 89 046 334
General operating costs 38 25 829 608 20 795 571
Costs for banknotes and coins manufacturing 39 6 617 801 36 287 603
Allocations for fixed asset depreciation 7 311 069 8 478 609 Allocation of provisions and results of value 2 268 618 660 000 adjustment on shareholdings Allocation of provisions for risks and costs 40 120 759 083 47 833 000
Total costs 410 206 731 365 537 193 Financial year result 1 049 156 252 881 320 531
The attached notes are an integral part of the financial statements
Annual Report 2019 166
Financial statements of the Central Bank of Tunisia
Notes related to Financial Statements of the Central Bank of Tunisia as at 31 December 2019
I - Legal framework and accounting referential The Central Bank of Tunisia’s financial statements are drawn up in conformity with the terms of law n°2016-35 of 25 April 2016 on the statute of the Central Bank of Tunisia and the Tunisian accounting standards, taking into account the specific nature of the Central Bank’s activities.
Central Bank of Tunisia financial statements include:
• a balance sheet,
• a statement of off balance sheet commitments,
• a statement of results, and
• notes related to the financial statements.
II - Accounting principles and rules of assessment 1) Gold holdings The Bank’s gold holdings are made up of ingots and commemorative coins. Assets in the form of ingots are assessed on the last working day of each month at market price by using morning London fixing. Latent gains resulting from this revaluation are entered in the balance sheet liabilities under a revaluation difference account. It can in no way be entered with the Bank’s results. The latent losses are accounted for in the debit of the above-mentioned account. When closing the accounting year, the possible debit balance of the mentioned account is entered in the financial year costs. Gold assets in the form of commemorative coins are assessed at the official rate set at 0.6498475 dinar for a gram of fine gold, a rate applied since 19 August 1986, date of devaluation of the dinar as per decree n°86-785 of 18 August 1986. 2) Assets and liabilities in foreign currency Assets and liabilities labelled in foreign currency are converted to dinars on the closing date, at the «accounting reference rates» that represent average rates ([bid rate + offer rate]/2) set by the Central Bank of Tunisia on the same closing day.
Annual Report 2019 167
Latent losses and gains resulting from revaluation are entered under the «differences on conversion» account. Only net latent losses are entered in the result. The «accounting reference rates» of the main foreign currencies are presented as follows at the end of the financial year:
2019 2018 Euro 3.14095000 3.42615000 US dollar 2.80325000 2.99665000 Pound Sterling 3.67675000 3.81640000 Swiss franc 2.89656500 3.03955000 Canadian dollar 2.14800000 2.20100000 United Arab Emirates dirham 0.76318000 0.81583500 Saudi riyal 0.74728500 0.79884000 Japanese Yen 0.02580000 0.02718215 Special drawing rights 3.87932200 4.15728000
3) Assumption of proceeds and costs 3-1 The entering of proceeds and costs is based on the periodicity convention and the convention of attachment of costs to proceeds. Thus, when proceeds are entered in an accounting year, all costs having contributed to achievement of these proceeds are determined and attached to this same financial year. 3-2 Proceeds and costs resulting from transactions in foreign currency are converted into dinars at the rate of exchange in effect on the day of the transaction. 3-3 At the end of the financial year, the balance of the account «differences on conversion» is processed as follows: Debit balance : The total amount of the balance is entered as a cost for the financial year, Credit balance: The total amount of the balance representing unrealized gains is still entered in the account «difference on conversion». 3-4 Differences between the exchange rates in effect on the day of the transactions and the accounting reference rates set the last working day of the month preceding the one during which these transactions were carried out, are entered in the statement of results as gains or losses on exchange. 4) Fixed assets Tangible and intangible fixed assets are accounted for by applying the rule of «historic cost».
Aside from land and works of art, fixed assets are to be depreciated in a straight-line method over the projected lifespan of the fixed asset by applying the usual rates for each category of fixed asset. For certain equipment that is specific to the Central Bank of Tunisia (such as cash register equipment), lifespan and applied depreciation rate are determined by reference to the experience of their users.
Tangible fixed assets involve mostly land, buildings, technical equipment, computer hardware, cash register equipment, transport material, and office equipment.
Intangible fixed assets are made up mainly of computer software.
Annual Report 2019 168
Financial statements of the Central Bank of Tunisia
The deadlines for retained depreciation as per the nature of each fixed asset are set as follows:
Fixed assets duration Software 3 years Buildings 20 years Office equipment Between 3 and 10 years Transport materiel Between 5 and 7 years Computer hardware 3 years Reprography equipment 3 years Cash register equipment Between 5 and 10 years Fittings and improvements Between 3 and 20 years Technical installation Between 3 and 10 years Plant and technical equipment Between 3 and 10 years 5) Securities in foreign currency
Securities acquired within the framework of the management of foreign exchange reserves are classified, as of their acquisition, according to the intention of their holding, in one of the following categories: trading securities, placement securities or investment securities.
The trading securities portfolio: consists of securities acquired with the intention, from the outset, to resell them in the short term, that is to say within a period not exceeding three months and whose trading market is considered liquid. They are recorded at their acquisition price, if applicable, accrued coupons included. Gains or losses resulting from the valuation, at each closing date, at market price, are recognized in the result.
The investment securities portfolio: Investment securities are securities acquired with the clear intention of holding them until their maturities. They are entered in the balance sheet according to the following rules: they are recorded at their acquisition cost . the differences between the purchase price and the redemption value (discount or premium) are amortized on a straight-line basis over the residual life duration of the securities. Latent gains are not recognized. latent losses are only recognized if there is a probable risk of default by the issuer or when there is a high probability that the Bank will not keep securities until maturity. The placement securities portfolio: are securities acquired with the intention of holding them for a period exceeding three months, with the exception of securities that the Bank intends to keep until maturity and which meet the definition of investment securities. Their accounting follows the following rules: they are recorded at their acquisition costs . the differences between the acquisition price and the redemption value (discount or premium) are amortized on a straight-line basis over the residual life duration of securities. Latent losses from the difference between the accounting value and the market value of these securities are subject to provisions for securities depreciation. However, latent gains are not recognized.
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6) Securities in dinar
Securities in dinars purchased in the framework of open market transactions are assessed at market price on the balance sheet’s closing date. A provision for depreciation of securities is accounted for in case of latent losses resulting from the difference between the accounting value and the securities market price. Latent gains are not entered. 7) Shareholding portfolio
The Central Bank of Tunisia’s shareholding portfolio is made up of securities that it has acquired in the framework of article 36 of its statutes that represent its share in the capital of a number of non-resident organizations and companies as well as resident companies that manage common banking services. These shares are recorded at the price of acquisition. On the closing date, the portfolio is assessed at the value in use. Losses compared to the cost are subject to a provision. Latent gains are not entered. Shares granted freely and which did not yield financial flows are not recorded.
8) Operations with the international monetary fund (IMF) and the Arab monetary fund (AMF)
8-1 Operations with the IMF
8-1-1 Subscriptions The subscriptions related to the quota regularly approved by the Tunisian State in the IMF capital, both for the portion payable in foreign currency and for the portion in Tunisian dinar, are carried out by the BCT as a financial agent on behalf of the State, through an advance to the Treasury. Thus, these subscriptions are accounted for in the asset of the BCT balance sheet as an advance to the State. Its amount is equal to the counter-value in dinar of the amount of subscription expressed in special drawing rights (SDR). As for liability, the quota portion subscribed in dinar is entered in the credit of accountn°1 of the IMF. It is readjusted annually to take into account trend in SDR exchange rate compared to the Tunisian dinar, and this by reference to rates fixed by the IMF on 30 April of each year. In case of the dinar depreciation compared to SDR, this readjustment operation yields an increase in the credit balance of account n°1 of the IMF on the liability side and an increase in the advance to the State on the asset side. In case of the dinar appreciation, reverse operations are recorded. As for the quota portion subscribed in foreign currency, it is recorded under the asset heading “Reserve position at the IMF” alongside the “Advance to the State” heading as indicated above, and this to point out this heading as a component of international reserves. In this respect, a counterpart account holding the same amount is entered in the balance sheet’s liabilities among memorandum accounts. Computed in Tunisian dinar, the reserve position is annually readjusted to take into account the trend of SDR exchange rate compared to the Tunisian dinar and this, by reference to the rate fixed by the IMF on 30 April of each year. Ensuing latent gains are entered in balance sheet’s liabilities within an account of revaluation differences, and this in application of provisions of paragraph 5 of article 78 of law n°2016-35 of 25 April 2016 on the statute of the BCT.
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Financial statements of the Central Bank of Tunisia
8-1-2 Credit facilities
Credit facilities contracted from the IMF are recorded on BCT books at the level of the balance sheet and off balance sheet depending on whether these facilities are meant to the BCT as an aid to the balance of payments or to the Tunisian Government as budget support. Facilities granted to the BCT Commitments tied to these facilities are entered in the BCT balance sheet’s liabilities in account n°1 of the IMF for the counter-value in Tunisian dinar and this, by applying the SDR/TND rate fixed by the IMF on 30 April of each year. The outstanding balance of these commitments is revalued annually by applying the above- mentioned new rate. Ensuing latent gain is entered in the same account of revaluation difference which records the latent gain resulting from revaluation of the reserve position at the IMF. Facilities granted to the Tunisian Government Commitments tied to these facilities are entered in the off balance sheet in securities account in the name of the IMF for the counter-value in Tunisian dinar, and this, by applying the SDR/TND rate set by the IMF on 30 April of each year. The outstanding balance of these commitments is revalued annually through the application of the above-mentioned new rate. This revaluation does neither affect the balance sheet nor the operating result of the BCT. 8-1-3 Accounting for interests, commissions, and remuneration tied to operations and transactions with the IMF Except for the credit facilities meant for the State budget support, all interests, commissions and remunerations related to operations and transactions with the IMF are recorded, according to the case, as costs or proceeds and impact thus the operating result of the BCT and this, in application of provisions of law n°77-71 of 7 December 1977, setting the BCT relation with the IMF on the one hand and with the AMF on the other hand.
8-2 Operations with the AMF
8-2-1 Subscriptions Subscriptions tied to quota regularly approved by the Tunisian State in the capital of the AMF, both for the portion payable in foreign currency and for the portion payable in Tunisian dinar, are carried out by the BCT as a financial agent on behalf of the State through an advance to the Treasury. Thus, these subscriptions are accounted for in the asset of the BCT balance sheet as an advance to the State. Its amount is equal to the counter-value in dinar of the amount of subscription expressed in Arab Accounting dinar (AAD)1. On the liabilities side, the quota portion subscribed in dinar is entered in the AMF credit account opened in dinar on the books of the BCT. It is annually readjusted to take account of trend in AAD exchange rate compared to the Tunisian dinar and this, by reference to SDR rates set by the IMF at the end of December of each year.
1 1 1 AAD = 3 SDR
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In case of the dinar depreciation against SDR, this readjustment operation yields an increase in the credit balance of AMF account in dinar, on the liability side, and through an increase in advance to the State, on the asset side. Reverse operations are recorded in case of the dinar appreciation. Furthermore and in order to reflect the real value of advance to the State with respect to subscription to AMF capital as provided for by provisions of article 2 of the above- mentioned law n°77-71, the portion subscribed in foreign currency is revaluated at the SDR/TND rate set by the IMF at the end of December. This readjustment operation yields an increase in advance to the State on the assets side, and recording of latent gain within an account of revaluation, on the liability side, and this in case of the dinar depreciation against the SDR. Reverse transactions are recorded in case of the dinar appreciation.
8-2-2 Credit facility Credit facilities contracted by the BCT from AMF are recorded on books of the bank in its balance sheet liabilities. As for the credit facilities contracted by the Tunisian Government, only financial flows derived from drawings, settlement of interests and commissions, as well as reimbursement of maturities in principal are entered on books of the BCT. No commitment is accounted for by the BCT in this respect, neither at the level of balance sheet, nor off balance sheet.
8-2-3 Accounting for interest and commissions, relative to operations and transactions with the AMF Excluding the credit facilities contracted by the Tunisian Government, all interests and commissions tied to operations and transactions with the AMF are recorded as cost and impact thus, the operating result of the BCT; and this in application of provisions of law n°77-71 of 7 December 1977, setting the BCT relation with the IMF on the one hand and the AMF on the other hand. 9) Recording external borrowing on behalf of the state or Tunisian authorized intermediaries
Are recorded in the statement of off balance sheet commitment: - the debenture loans issued by the Central Bank of Tunisia on behalf of the Tunisian Government on the foreign financial markets, - external borrowings of the State contracted in the framework of bilateral economic cooperation and managed by the BCT on behalf of the State while signing commitments towards foreign parties (bank or foreign financial institution) for settlement of relevant maturities, - portions of loans contracted from the IMF, meant to support the State budget, and - external borrowings contracted by the BCT and retroceded to Tunisian Authorised Intermediaries. Commitments ensuing from the above-mentioned borrowings are considered as surety bonds and this, in application of the accounting convention of “pre-eminence of content over form”. Worth of note that financial commitments of the Central Bank ensuing from the above-stated borrowings have a corresponding similar commitment on the part of the State or the Tunisian
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Financial statements of the Central Bank of Tunisia
Authorised Intermediary for the reimbursement of all maturities of relevant borrowings as well as settlement of all relevant financial costs. 10) Fiduciary circulation The Central Bank exerts, on behalf of the State, the sole right to issue in Tunisia, banknotes and coins. The amount of banknotes and coins in circulation recorded at the level of the BCT balance sheet liability is obtained through the difference between the amount of banknotes and coins issued and the amount of banknotes and coins held in the BCT cash desks (headquarters and branches). 11) Taxation The Central Bank is subdued to the fiscal regime of the State, local governments and public establishment with an administrative nature, in compliance with provisions of article 72 of its statutes. It is thus exempt from the corporate tax. 12) Related parties Are considered relate parties:
- the Governor,
- the Deputy Governor
- the Secretary General and
- members of the Executive Board. Members of the Executive Board other than the Governor and the Deputy Governor perceive attendance fees charged to the bank budget, the amount of which is set by governmental decree on a proposal from the Governor. The wage and benefits of the Governor, the Deputy Governor and the Secretary General are set by the Executive Board. They are assumed by the Bank. 13) Events subsequent to closing date No significant event occurred between the closing date and the date at which the present financial statements are closed. III - Detailed explanation of the headings in the financial statements Note 1: Gold Holding Under this heading is found the Bank’s gold money assets which came at 6.8 tonnes of fine gold as at 31 December 2019, broken down as follows:
2019 2018 In grams In dinars In grams In dinars Gold Holding 6 788 434 569 491 253 6 791 388 512 906 454 Ingots 4 135 982 567 767 565 4 139 404 511 183 070
* In BCT coffers 2 729 950 374 754 297 2 730 418 337 184 577
* Deposited at the Bank of England 1 406 032 193 013 268 1 408 986 173 998 493 Commemorative coins 2 652 452 1 723 688 2 651 984 1 723 384
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Gold ingot assets are assessed at market price up to the end of December by using morning London fixing. The 56.6 MTD increase in these assets is mainly explained by the evolution of the price of an ounce of fine gold. Indeed, the price of an ounce rose from USD 1,281.65 (or USD 41.21 per gram of fine gold) at the end of December 2018 to USD 1,523 (or USD 48.97 per gram of fine gold) a year later, thus compensating for the weakening of the dollar exchange rate against the dinar which fell by 6.5%, down from 2.99665 to 2.80325 from one end of the year to the next. Given their specific features, commemorative coins are not subject to revaluation at the market price and remain valued at the official rate of 0.6498475 dinar for 1 gram of fine gold. It should be noted that the decrease in the quantity of gold ingots deposited in the Bank's coffers (- 468 grams) is explained by the reclassification of a certain number of gold ingots, not meeting the criteria of revaluation according to the market price, in the “commemorative coins” section, the quantity of which has, in turn, increased as a result (+ 468 grams). It is also important to specify that the variation in quantity of the gold ingots in deposit at the Bank of England (-2,954 grams) is explained by the fact that the placement operations of these ingots can generate variations in quantity, to upwards or downwards, at the maturity of these operations. These variations are offset by foreign currency settlements. The income generated from these placement transactions at international banks fell sharply, from one year to the next, down from 154.3 thousand dinars at the end of the 2018 financial year to 64.7 thousand dinars at the end of December 2019, a drop of 89.6 thousand dinars. Note 2: subscriptions to international organisations The amount recorded under this heading represents the total of sums paid by the BCT to certain international financial organizations as quotas subscribed in gold or foreign currency by the Republic of Tunisia in the capital of these institutions as per prevailing legislation authorizing the Central Bank to enter these shares under the assets heading of the Bank’s balance sheet. The date of the last transaction entered in this framework goes back to 1969. The State has since then assumed all subscriptions, whether in local or foreign currency. The following institutions are involved:
(In dinars)
2019* 2018* Subscription to international organizations 2 371 793 2 371 793 International Bank for Reconstruction and Development 215 408 215 408 International Development Association 87 202 87 202
International Financial Company 76 808 76 808 African Development Bank 1 992 375 1 992 375 * This concerns the exchange value in TND of amounts subscribed in gold or in foreign currency at historic exchange rates.
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Financial statements of the Central Bank of Tunisia
Note 3: IMF reserve position The amount recorded under this heading (506.1MTD2), represents the counter value in dinars of the portion of Tunisia’s quota subscribed to in foreign currency (121.8 million SDR) in the capital of IMF. This represents the difference between Tunisia’s full quota (545.2 million SDR) and IMF’s holdings in dinars, held in its account n°1 on the books of the BCT, exclusive of assets from recourse to IMF loan. In the same way as for assets in foreign currency, the IMF reserve position is part of Tunisia’s international reserves. The IMF reserve position is analyzed as follows:
2019 2018
In SDR In dinars In SDR In dinars IMF reserve position 121 779 253 506 101 907 121 221 291 423 938 124
IMF quota 545 200 000 2 265 794 483 545 200 000 1 906 687 044
Global balance of account n°1 of the IMF (423 420 747) (1 759 692 576) (423 978 709) (1 482 748 920)
Note 4: Assets and investments in special drawing rights This heading includes: • The balance of the SDR account opened in the name of the Central Bank of Tunisia on the books of the IMF. At the end of December 2019, this balance came to 6.2 million SDR, the equivalent of 24.2 million dinars3 up to this same date. • The amount in SDR representing the Central Bank of Tunisia’s contribution to the PRGF4 – HIPC5 fiduciary fund administered by the International Monetary Fund for an annual rate of 0.5% and a 20-year maturity falling due in March 2021. This contribution amounted to 2.4 million SDR, the equivalent of 9.2 million dinars.
(In dinars)
2019 2018 Variation
Assets and investments in special drawing rights 33 376 336 85 055 604 -51 679 268
Assets in Special Drawing Rights 24 214 910 75 237 751 -51 022 841 Investments in Special Drawing Rights 9 161 426 9 817 853 -656 427
Operations recorded on SDR account opened in the name of the BCT on books of the IMF are broken down as follows:
2 1 TND = 0.240622 SDR as per IMF quotation in effect since 30 April 2019. 3 1 SDR = 3.879322 TND on 31/12/2019. 4 Poverty Reduction and Growth Facility. 5 Heavily Indebted Poor Countries.
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(In SDR) 2019 2018
Assets in SDR 6 242 047 18 097 831 Initial Balance 18 097 831 19 774 726 Maturity reimbursement in principal (AMF loans) (24 154 869) (19 200 000) Maturity reimbursement in interest (IMF and AMF loans) (33 660 278) (29 019 921) Remunerations received 1 938 173 2 998 674 Commissions paid (5 978 810) (6 455 648) SDR acquisition 50 000 000 50 000 000
Note 5: Foreign currency assets Foreign currency assets are broken down as follows:
(In dinars) 2019 2018 Variation Foreign currency assets 19 722 387 797 14 525 339 281 5 197 048 516
Foreign banknotes assets 1 498 323 671 586 814 851 911 508 820 Sight assets 2 686 893 479 2 222 629 096 464 264 383 Assets in foreign currency cheques 168 006 180 307 -12 301 Deposit assets 9 714 482 978 6 789 280 921 2 925 202 057 Securities 5 178 195 571 4 261 081 370 917 114 201 Of which security sold under repurchase - 343 964 498 -343 964 498 agreement* (Provisions) (503 477) (1 636 538) 1 133 061 Foreign currency funds entrusted to external 602 950 403 627 799 222 -24 848 819 management mandate (Provisions) (322 622) (1 015 708) 693 086 Debit foreign accounts in foreign currency 42 199 788 40 205 760 1 994 028 *This involves bonds denominated in euro, granted as collaterals in the framework of tripartite repo operation, with the value amounting to 100.4 million euros on 31 December 2018.
Foreign currency assets recorded a notable increase, standing at 19,722.4 MTD at the end of the financial year 2019 against 14,525.3 MTD a year earlier, up by 35.8%. Indeed, this increase is mainly due to important external resources mobilized during 2019. It should be noted that the main drawings made in 2019 on external credits were as follows: • EUR 695 million with respect to the debenture loan released on 15/07/2019; • USD 500 million for the Saudi loan granted under the budget support programme and released on 23 January 2019; • EUR 500 million for the deposit of the Central Bank of Libya carried in July 2019;
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Financial statements of the Central Bank of Tunisia
• EUR 216.4 million with respect of the IMF credit released on 14 June 2019 under the MEDC; • EUR 298.9 million, which represent two tranches of the loan of the EU in the framework of macro-financial assistance programme II, released during July and November 2019; • EUR 119.7 million for the ADB loan released on 09 September 2019 as part of the financial sector modernization support programme; • EUR 100 million under the KFW loan released on 16 May 2019 as part of the banking and financial sector reform support programme; • EUR 50 million representing the first tranche of the AFD loan of 31 January 2018 as part of the support for the reform of the governance of public enterprises released on 22 February 2019. It is worth mentioning that during 2019, reimbursement was made for: • the debenture loan of USD 485 million in July 2019. • the first tranche of the Qatari private placement of USD 1 billion for an amount of USD 250 million in April 2019.
Structure of year-end assets: USD EUR GBP JPY Others In Share In Share In Share In Share In Share millions In % millions in % millions in % in % millions* in % millions
31-12-2018 1 448 29.9 2 570 60.6 306 8.1 1 605 0.3 129 1.1
31-12-2019 2 825 40.2 3 281 52.2 297 5.5 5 952 0.8 252 1.3
Variation 1 377 711 -9 4 347 123 (in millions) *TND
Assets in foreign banknotes: Foreign banknotes assets are broken down by currency as follows:
2019 2018 In foreign In foreign In dinar In dinar currency currency
Assets in foreign banknotes 1 498 323 671 586 814 851
EUR 362 496 237 1 138 582 556 92 024 238 315 288 842 USD 50 081 568 140 391 156 53 773 265 161 139 655 SAR 136 445 865 101 963 948 72 965 527 58 287 782 CHF 14 888 550 43 125 653 6 202 460 18 852 687 Others 74 260 358 33 245 885
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Securities portfolio: Breakdown by category of securities: The securities portfolio is broken down as follows:
(In million dinars) 2019 2018 Variation
Trading securities 1 704 396 1 308 Placement securities 1 085 312 773 Investment securities 2 389 3 553 -1 164 Total 5 178 4 261 917
Breakdown by residual maturity of securities:
(In million dinars)
2019 2018 Variation < 1 year 3 484 2 054 1 430 ≥ 1 year and ≤ 5 years 998 1 496 -498 > 5 years 696 711 -15 Total 5 178 4 261 917
Breakdown by category of issuer:
(In million dinars) 2019 2018 Variation Sovereign 3 230 2 319 911 Sovereign agencies 47 286 -239 Regional agencies 14 110 -96 Regional authorities 111 410 -299 Supranational banks 252 377 -125 Others* 1 524 759 765 Total 5 178 4 261 917 *This involves other banks like KFW and NRW Bank.
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Financial statements of the Central Bank of Tunisia
Breakdown by credit risk (Bloomberg composite credit rating) Up to 31-12-2019 (In million dinars) Regional Regional Sovereign Sovereign Supranational Others Total agencies authorities agencies banks Trading securities
F1+ - - - - - 1301 1 301 F2 - - 404 - - - 404 Placement securities AAA - 29 288 - - - 317 AA - - 27 - - - 27 AA- - 7 1 - - - 8 A- - - 728 - - - 728 B - - 5 - - - 5 Investment securities AAA 14 27 302 15 252 5 615 AA+ - - 32 - - 175 207 AA - - 599 32 - 43 674 AA- - 48 367 - - - 415 A- - - 152 - - - 152 B - - 325 - - - 325 Total 14 111 3 230 47 252 1 524 5 178
Up to 31-12-2018 (In million dinars) Regional Regional Sovereign Sovereign Supranational Others Total agencies authorities agencies banks Trading securities F1+ - - - - 24 - 24 F2 - - 372 - - - 372 Placement securities AAA - - 306 - - - 306 AA- - - 1 - - - 1 B - - 5 - - - 5 Investment securities AAA - 33 277 84 353 261 1 008 AA+ 110 23 36 - - 406 575 AA - 167 713 202 - 92 1 174 AA- - 70 382 - - - 452 A+ - 117 - - - - 117 B - - 227 - - - 227 Total 110 410 2 319 286 377 759 4 261
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Deposits: Breakdown by counterpart (In million dinars) 2019 2018 Variation Commercial Banks 7 729 5 259 2 470 Supranational 1 956 1 499 457 Central Banks 29 31 -2 Total 9 714 6 789 2 925
Breakdown of risk by geographic location (In million dinars) 2019 2018 Variation Europe 4 625 4 057 568 Japan 585 371 214 Arab countries 1 062 301 761 USA 29 31 -2 Hong Kong 563 530 33
Others* 2850 1 499 1 351 Total 9 714 6 789 2 925 *Canada and Supranational (BRI and FMA)
Breakdown of bank deposit by credit risk (In million dinars) 2019 2018 Variation Rating
Aaa and similar 2 440 2 009 431 Aa2 1 461 219 1 242 Aa3 2 978 1 273 1 705 A1 1 940 2 289 -349 A2 - 594 -594 A3 404 256 148 Baa1 392 - 392 NR 99 149 -50 Total 9 714 6 789 2 925
Note 6: Refinancing to banks related to monetary policy transactions This heading includes the outstanding balance of the Central Bank intervention on the money market to inject liquidity into banks. This outstanding balance closed the year down significantly by 2,851 MTD or 24.1%, regressing from 11,846 MTD at the end of 2018 to 8,995 MTD a year later, translating a gradual deceleration of the Central Bank intervention on the money market as from July 2019. These interventions were mainly in the form of 7-day call for bids that accounted for 77.8% of the overall outstanding balance of these interventions at the end of 2019, the amount of which came, at the same level as the one recorded from July 2017 (7,000 MTD).
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Financial statements of the Central Bank of Tunisia
In addition, the drop in banks' needs for liquidity brought about a significant reduction in foreign exchange swap operations (for monetary policy purposes) with an average amount that came at 1,258 MTD at the end of 2019 compared to 2,574.4 MTD a year earlier, down significantly by 1,316.4 MTD. This trend was also favored by the sharp decline in banks' use of 24-hour loan facilities, which regressed by 2,520 MTD, down from 2,903 MTD at the end of December 2018 to just 383 MTD a year later. It is worth mentioning that banks’ refinancing is made on presentation of collaterals in the form of Treasury bonds or current claims, amounting to 3,430 MTD and 5,291.8 MTD respectively, at the end of December 2019. Besides, part of the outstanding balance as of the end of December 2019 was guaranteed by the State with an amount of 291.7 MTD.
(In dinars) Rate % Maturity 2019 2018 Refinancing to banks related to %2019 monetary policy transactions 8 995 000 000 11 846 000 000
Injections through call for bids 7 .75 07/01/2020 7 000 000 000 7 000 000 000
Tapping actions / 24-h credit facilities 8.75 01/01/2020 383 000 000 2 903 000 000
Interventions on the money market in the form of 6-month refinancing 8 09/06/2020 1 612 000 000 1 943 000 000
Note 7: Securities purchased in the framework of open market operations This heading is made up of firm purchased securities portfolio in the framework of open market operations. This portfolio is currently made up of bonds equivalent to Treasury bonds and short term Treasury bonds. To better respond to banks’ needs for liquidity, the BCT carried out in March 2019 outright purchases of Treasury bonds in the framework of the Open Market, bringing the balance of this heading to 1,955.9 MTD at the end of 2019 compared to 1,659.8 MTD in 2018, up by 296.1 MTD. Worth of note that this balance sheet heading has recorded in 2019 portfolio exit of falling due of Treasury bonds maturities in March for an amount of 161.5 MTD. At the end of 2019, this portfolio was valorized, based on the yield curve of the Tunisian market sovereign issues, launched officially on 21 December 2017. The portfolio of bonds equivalent to Treasury bonds and short-term outright purchases by the BCT is made up of the following lines:
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(In dinars) 2019 2018 Securities purchased in the framework of open 1 955 947 547 1 659 861 562 market operations
BTA outright purchase 1 985 653 580 1 679 404 172 BTA 5.5% (March 2019) - 161 457 050 BTA 5.5% (February 2020) 181 191 388 180 269 449 BTA 5.5% (October 2020) 204 717 392 203 543 046 BTA 5.75% (January 2021) 174 295 275 173 792 494 BTA 6% (June 2021) 97 106 397 96 562 263 BTA 6.1% (November 2021) 91 348 475 39 401 729 BTA 6% (February 2022) 224 013 136 181 543 004 BTA 6.9% (May 2022) 218 273 398 147 471 951 BTA 5.6% (August 2022) 211 429 700 208 194 719 BTA 6% (April 2023) 221 433 094 187 752 514 BTA 6% (June 2023) 99 466 534 99 415 953 BTA 6.3% (December 2023) 84 420 699 - BTC (March 2020) 177 958 092 - (Provisions) (29 706 033) (19 542 610)
Note 8: Advance to the State pertaining to Monetary Funds subscriptions This heading enters, as an advance to the Treasury, the counter value in dinars of amounts paid out for subscriptions corresponding to Tunisia’s quota in the capital of the International Monetary Fund and the Arab Monetary Fund, in application of the terms of law n°77-71 of 7 December 1977 governing relations between the Central Bank of Tunisia and these two financial institutions. -International Monetary Fund : the overall amount of Tunisia’s subscription in the capital of this institution comes to 545.2 million SDR, 424 million subscribed in dinars and credited to account n°1 in the name of the International Monetary Fund and 121.8 million in convertible currency. Worth of note that Tunisia’s quota for 2016 increased by 258.7 million SDR following the 14th general review of quotas. -Arab Monetary Fund: Tunisia holds a 19.275 million Arab accounting dinar quota in the capital of this institution, of which:
7 million Arab accounting dinars as a quota subscribed in cash (6.9 million subscribed in convertible currencies and 0.1 million in local currency and credited to the AMF’s dinar account on the books of the Central Bank of Tunisia),
5.85 million Arab accounting dinars as Tunisia share as per decision n°3/2005 of the Fund’s Board of Governors approving release of the remaining portion of capital through incorporation of reserves and distribution of new shares to member states, proportionate to their initial quota, and
6.425 million Arab accounting dinar representing Tunisia quota in subscription to the Fund capital increase as per decision n°3/2013 of the Fund’s Board of Governors. Half of this amount is released through incorporation of reserves and the other is released in cash over 5 years as of 1st April 2014. The last portion was paid up in April 2018 for 642,500 Arab dinars. Worth of note that the Arab accounting dinar is worth 3 SDRs.
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Financial statements of the Central Bank of Tunisia
Subscriptions in dinars to the capital of these two institutions, recorded as a credit to their respective accounts on the books of the Central Bank of Tunisia, are adjusted annually to take into account trends in the exchange rate for the SDR against the Tunisian dinar, with reference to the rate set by the International Monetary Fund. Note 9: Shareholding portfolio The amount recorded under this heading represents the paid-up portion of the Central Bank of Tunisia’s holdings in the capital of the following institutions:
31/12/2019 31/12/2018 31/12/2019* 31/12/2018 Participation Institutions In foreign In foreign in TND in TND rate (%) currency currency Tunisian Foreign Bank 767 465.22 EUR 1 983 571.50 EUR 2 410 570 6 796 014 2.91 (Provision) (2 410 570) (4 244 SWIFT company 5 330 EUR 5 330 EUR 16 741 18000) 261 0.007
African Export - Import 10 000 000 USD 10 000 000 USD 28 032 500 29 966 500 1.975 Bank Maghreb Bank for 7 500 000 USD 5 000 000 USD 21 024 375 14 983 250 9.686 Investment and Foreign Trade Arab Trade Financing 2 065 000 USD 2 065 000 USD 5 788 711 6 188 082 0.275 Programme SIBTEL 105 000 TND 105 000 TND 105 000 105 000 3
Bank deposit guarantee 2 500 000 TND 2 500 000 TND 2 500 000 2 500 000 50 fund Total 57 467 327 56 313 107
* As per the exchange rates in effect on 31 December 2019: 1 EUR = 3.14095TND; 1 USD = 2.80325 TND
It should be noted that the main trends observed in this heading are as follows: release by the BCT of the third quarter of its participation in the capital of the Maghreb Bank for Investment and Foreign Trade in the amount of 2.5 million dollars, the equivalent of 7.1 MTD. decrease in the BCT participation in the capital of the Tunisian Foreign Bank (from 2 million euros to 0.8 million euros) explained exclusively by the capital reduction operation operated by this institution in April 2019 and which was followed by a capital increase to which the BCT did not subscribe.
It should be also noted that in application of provisions of articles 37 and 97 of its statutes, the BCT will no longer hold participations in the capital of the Tunisian foreign bank in 2020.
Annual Report 2019 183
Note 10: Fixed assets The following table shows details of the heading “fixed assets” as at the end of December 2019 (In dinars): Gross value Depreciation 31/12/2018 31/12/2019 31/12/2018 31/12/2019 Net Heading Entries 2019 Outputs 2019 Allotments 2019 Outputs 2019 Accounting Value 31/12/2019 Softwares 7 069 567 939 973 - 8 009 540 6 033 637 605 119 - 6 638 756 1 370 784 Other intangible fixed assets 44 318 - - 44 318 - - - - 44 318 Softwares : advances and 211 760 56 317 - 268 077 - - - - 268 077 on account payment Intangible fixed assets 7 325 645 996 290 - 8 321 935 6 033 637 605 119 - 6 638 756 1 683 179 Lands 4 033 518 83 721 157 - 87 754 675 - - - - 87 754 675 Buildings 55 078 148 - - 55 078 148 49 870 863 681 997 - 50 552 860 4 525 288 Office equipment 1 145 930 843 308 - 1 989 238 932 286 97 097 - 1 029 383 959 855 Transport material 3 640 794 - 443 990 3 196 804 2 790 408 181 188 443 990 2 527 606 669 198 Computer hardware 9 674 041 1 046 395 - 10 720 436 9 084 561 676 508 - 9 761 069 959 367 Reprography equipment 485 644 155 627 - 641 271 262 874 157 362 - 420 236 221 035 Cashier equipment 21 956 102 1 411 654 - 23 367 756 19 512 227 1 695 653 - 21 207 880 2 159 876 Fittings 3 451 442 111 596 - 3 563 038 2 423 930 164 193 - 2 588 123 974 915 Technical installations 32 037 458 915 132 - 32 952 590 11 753 318 2 957 287 - 14 710 605 18 241 985 Technical equipment 888 570 123 768 - 1 012 338 601 487 94 665 - 696 152 316 186 Works of art and antique coins 654 766 - 654 766 - - - - 654 766 Pending tangible fixed assets 2 504 365 4 384 807 - 6 889 172 - - - - 6 889 172 of which : Construction in progress 1 663 336 2 411 793 - 4 075 129 - - - - 4 075 129 Technical installations in progress 838 341 629 074 - 1 467 415 - - - - 1 467 415 Tangible fixed assets 135 550 92 713 444 443 990 227 820 232 97 231 954 6 705 950 443 990 103 493 124 326 318 778 914 Total 142 876 93 709 734 443 990 236 142 167 103 265 591 7 311 069 443 990 110 132 126 009 497 423 670
Annual Report 2019 184
Financial statements of the Central Bank of Tunisia
Note 11: Miscellaneous debtors The main entry under this heading is the outstanding balance of loans granted to Central Bank staff, financed from reserves for social fund as well as miscellaneous advances and payment on account granted to staff (40 MTD vs. 37.1 MTD in 2018). Note 12: Memorandum accounts and accounts calling for adjustment (assets) This heading includes mainly proceeds to be received, and other miscellaneous debtor accounts. It went up by 34.7 MTD from one year to the next following mainly the simultaneous evolution of proceeds to be received on monetary policy operations and gold stock meant for sale with respective amounts of 18.7 MTD and 13.8 MTD. It is detailed as follows:
(In dinars) 2019 2018 Variation
Memorandum accounts and accounts calling for adjustment (Assets) 165 323 916 130 634 704 34 689 212
Proceeds to be received and prepaid costs 146 147 595 127 373 113 18 774 482
Gold to be sold to jewellers 13 815 605 41 197 13 774 408 Foreign currency in current collection and calling for 3 019 755 2 142 792 876 963 adjustment Other miscellaneous debtor accounts 2 340 961 1 077 602 1 263 359
Note 13: Banknotes and coins in circulation Banknotes and coins in circulation increased by 1,054.8 MTD or 8.5%, closing for the year at 13,508.4 MTD compared to 12,453.6 MTD in 2018, with an overwhelming share of banknotes (97.1%). They are broken down as follows:
(In dinars)
2019 2018 Variation
Banknotes and coins in circulation 13 508 362 952 12 453 554 639 1 054 808 313
Banknotes 13 112 217 805 12 083 707 425 1 028 510 380
Coins 396 145 147 369 847 214 26 297 933
Annual Report 2019 185
Banknotes and coins in circulation are detailed as follows:
(In dinars) 2019 2018 Banknotes in circulation 13 112 217 805 12 083 707 425
50 dinars 2 320 905 350 2 833 213 800 20 dinars 7 802 909 460 5 961 783 540 10 dinars 2 919 850 510 3 216 004 300 5 dinars 68 552 485 72 705 785 Coins in circulation 396 145 147 369 847 214 5 dinars 100 004 970 96 009 735 2 dinars 39 563 728 26 020 228 1 dinar 141 895 193 140 633 239 500 millimes 54 114 995 49 229 347
200 millimes 7 938 694 7 733 728 100 millimes 30 617 328 29 019 242 50 millimes 9 130 117 8 575 207
20 millimes 8 095 163 7 867 400 10 millimes 2 449 143 2 423 385 5 millimes 2 202 462 2 202 400 2 millimes 73 074 73 051 1 millime 60 280 60 252
Note 14: Government’s central account It holds credit balances of accounts in foreign currency or in dinar representing resources available for the Treasury that can be mobilized by the latter in the framework of daily management of liquidity. This concerns notably, the Tunisian Treasury’s current account (905.1 MTD) and other accounts holding funds from external loans meant to support the State budget (401 MTD).
(In dinars)
2019 2018 Variation
Government’s central account 1 306 050 686 1 562 993 875 -256 943 189
Tunisian Treasury current account 905 072 074 667 888 911 237 183 163
Debenture loan of EUR 500 M of 31 October 2018 - 788 014 500 -788 014 500
EU loan of EUR 500 M - Macro-financial assistance 155 390 256 - 155 390 256 program II FMA credit of 18.532 M DAC-Support for the 106 193 078 - 106 193 078 promotion of environment favorable to PME AFD loan of EUR 60M - Modernization of farms 31 409 500 - 31 409 500 agricultural machinery PRIMEA Others 107 985 778 107 090 464 895 314
Annual Report 2019 186
Financial statements of the Central Bank of Tunisia
Note 15: Government’s special accounts This involves accounts with funds, in foreign currency or in dinar, that cannot be mobilized by the Treasury in the framework of daily management of liquidity. This heading includes, mainly, the balance of the Tunisian Government special accounts in foreign currency that enter drawings on external loans and grants meant to the State or to public institutions with the State guarantee and destined to well determined projects (1,121.9MTD), the balance of loan accounts denominated in dinar (230.7MTD), the balance of miscellaneous accounts (45.9MTD) as well as the balances of other accounts relative to miscellaneous funds held by the Central Bank on behalf of the State such as the Fund for Industrial Promotion and Decentralisation (FOPRODI) and the National Fund to Promote Handicrafts and Small Trades (FONAPRA).
(In dinars) 2019 2018 Variation
Government’s special accounts 1 446 215 071 1 218 611 380 227 603 691
Tunisian government special accounts in foreign currency 1 121 946 503 946 143 663 175 802 840 Tunisian government - loans accounts 230 691 620 180 821 190 49 870 430 Tunisian government- miscellaneous 45 876 312 53 879 240 -8 002 928 Ofaccounts which : Conjunctural mechanisms to back-up 23 471 364 22 345 740 1 125 624 businesses Central account of first housing 21 206 507 30 351 312 -9 144 805 programme Allotment line to assist recovery of small 16 253 - 16 253 and medium sized businesses
FOPRODI 34 040 114 11 125 255 22 914 859 FONAPRA 7 823 774 21 388 874 -13 565 100 Tunisian government- grants accounts 5 836 748 5 253 158 583 590
Special accounts in foreign currency are broken down as follows:
2019 2018 In foreign In dinars In foreign In dinars currency currency
Special accounts in foreign 1 121 946 503 946 143 663 currency EUR 326 340 589 1 025 019 472 238 327 309 816 545 109 USD 11 065 078 31 018 180 12 847 955 38 500 825 JPY 2 067 155 481 53 332 611 2 860 768 962 77 761 851 Others - 12 576 240 - 13 335 878
Annual Report 2019 187
Furthermore, resources and uses flows of "FOPRODI" and "FONAPRA" funds recorded over the financial year are as follows:
(In dinars) FOPRODI FONAPRA 2019 2018 2019 2018
Initial Balance 11 125 255 15 416 563 21 388 874 6 240 190
Resources 63 803 496 22 844 875 15 934 900 15 148 684
Budget allotment 60 000 000 20 000 000 - -
Collection 3 803 496 2 844 875 15 934 900 15 148 684
Uses 40 888 637 27 136 183 29 500 000 -
Final balance 34 040 114 11 125 255 7 823 774 21 388 874
Note 16: Allocations of special drawing rights This item includes the counterpart of the cumulated amounts of SDR allotted by the International Monetary Fund to Tunisia in its quality of member State. Coming to 272.8 million SDR as at the end of December 2019, these allocations are to be returned to the International Monetary Fund if SDR are cancelled. Thus, they constitute an open- ended commitment towards the International Monetary Fund.
(In thousands of SDR) 2019 2018 Allocations in SDR 272 776 272 776 Allocation / January 1970 5 880 5 880 Allocation / January 1971 3 745 3 745 Allocation / January 1972 5 088 5 088 Allocation / January 1979 6 552 6 552 Allocation / January 1980 6 552 6 552 Allocation / January 1981 6 426 6 426 Allocation / August 2009 212 385 212 385 Allocation / September 2009 26 148 26 148
The last use of this account was operated in 2009 for a global amount of 238.5 million SDR, when the IMF granted to member countries general and special allotments. The downward variation of 75.8 MTD or 6.7% recorded at the end of 2019 financial year is exclusively explained by SDR exchange rate depreciation against the dinar. Note 17: Current accounts in dinars of foreign institutions This heading posts the balances of accounts opened in dinars in the name of foreign institutions such as the International Monetary Fund, the World Bank, the African Development Bank, and
Annual Report 2019 188
Financial statements of the Central Bank of Tunisia the Arab Monetary Fund. Worth of note that the IMF accounts kept on BCT books represent the main component of this heading. These accounts are detailed as follows:
(In dinars)
2019 2018
IMF accounts 1 761 892 393 1 482 759 083 IMF Account n°1 1 759 692 576 1 482 748 920 IMF share subscribed in dinars 1 759 692 576 1 482 748 920 IMF Account n°2 2 199 817 10 163
Worth of note that the IMF securities’ account held on the books of the BCT and with the balance coming in, at the end of December 2019, at 5,274.5 MTD is entered in the offbalance sheet commitment statement at the level of «Other external borrowings» sub-heading. It holds the counter value in dinars of the portions of the two IMF loans granted in the framework of the Stand-by agreement and Extended Fund Facility arrangement, meant to support the State budget. Note 18: Commitments towards banks tied to monetary policy operations This item enters the intervention operations of the BCT on the money market in the form of a liquidity drain. The outstanding amount under these interventions amounted to 120 MTD as of 31 December 2019. This concerns notably an outstanding amount of liquidity drawdown in the form of 24-hour deposit facilities. Note 19: Commitments in foreign currency towards Tunisian authorised intermediaries This heading includes the sight assets in foreign currency of Tunisian authorised intermediaries (5,333.8 MTD) and the outstanding balance of borrowings by the Central Bank on the money market in foreign currency (1,937.9 MTD). These commitments are broken down as follows:
2019 2018 In foreign In dinar In foreign In dinar
currency currency Commitments in foreign 7 271 650 393 6 932 889 693 currency towards Tunisian EUR 1 426 491 139 4 480 537 343 1 373 188 996 4 704 751 480 authorised intermediaries USD 890 923 175 2 497 480 392 611 648 365 1 832 896 072 CHF 30 005 647 86 913 308 43 383 239 131 865 523 GBP 22 987 125 84 517 911 24 017 435 91 660 141 SAR 45 241 617 33 808 382 48 158 080 38 470 601 AED 22 036 136 16 817 538 44 320 384 36 158 120 CAD 10 749 203 23 089 287 16 887 021 37 168 334 Others 48 486 232 59 919 422
Annual Report 2019 189
Note 20: Foreign accounts in foreign currency This heading records the credit balance of accounts in foreign currency or convertible Tunisian dinars in the name of non-resident banks or institutions. Note 21: Other commitments in foreign currency The amount under this heading represents the exchange value in dinars of forward commitment amounts in foreign currency of the Central Bank of Tunisia with respect to external borrowings or deposits. It is broken down as follows: 50 million US dollar (140.2 MTD) representing deposit made by the Bank of Algeria at the Central Bank of Tunisia pursuant to the convention signed by the two central Banks on 28 April 2011, 200 million US dollar (560.7 MTD) representing two deposits, 100 million US dollar each carried out by the Bank of Algeria at the Central Bank of Tunisia as per the conventions concluded in this respect between the two Central Banks on 04 May 2014 and 17 March 2015 respectively. 500 million Euro (1,570.5 MTD) representing the deposit carried by the Central Bank of Libya at the Central Bank of Tunisia under the agreement concluded in this respect, between the two central banks, dated 4 July 2019. Worth of note in this respect that 2019 was marked by reimbursement of maturities relative to the AMF loan contracted in the framework of credit facilities for structural adjustment V with an amount worth 3.6 million SDR (15.2 MTD). Note 22: Current collection of values The amount recorded under this heading represents the net credit balance of values collection accounts, notably drawn cheques and bills in favour of the Treasury as well as transfers made by the Bank’s departments through the electronic clearing system. Note 23: Differences on conversion and revaluation This category includes: The accumulated net gains on revaluation of foreign currency accounts for 2,246.1 MTD. Worth of note that foreign currency accounts revaluation over 2019 yielded a net loss of 373.8 MTD, totally absorbed by net gains carried forward from 2018 financial year for an amount of 2,620 MTD, The accumulated net gains from revaluation at market price of gold ingots assets for 561.1 MTD, 504.2 MTD of which were carried forward from 2018 financial year, The accumulated net gains with respect to readjustment of operations with the IMF and the AMF worth 206.7 MTD, 135.5 MTD of which were carried forward from 2018 financial year. Note 24: Miscellaneous creditors This heading includes mainly the deposit accounts of the Bank staff, provisions constituted with respect to retirement benefits and leave allowance to be paid, withholding taxes due to the State, contributions for social coverage pending payment, the attachment orders on current accounts and other accounts in the name of national entities.
Annual Report 2019 190
Financial statements of the Central Bank of Tunisia
(In dinars)
2019 2018 Variation
Miscellaneous creditors 142 174 801 102 384 004 39 790 797 Trust fund accounts (staff accounts, staff 24 655 367 20 928 412 3 726 955 association account,…) Provision for retirement benefit 9 009 721 8 692 241 317 480
Provision for leave to be paid 7 622 550 6 478 769 1 143 781 Withholding tax, VAT collected and other taxes 6 710 335 2 966 923 3 743 412 and levies due to the State Contributions with respect to social coverage – suspense account 1 839 738 1 763 261 76 477 Other miscellaneous creditors 92 337 090 61 554 398 30 782 692 of which : Attachment orders 33 957 394 22 341 073 11 616 321 High independent Authority for elections 4 837 390 28 551 777 -23 714 387 Bank Deposit Guarantee Fund 23 227 076 5 980 731 17 246 345
Note 25: Memorandum accounts and accounts calling for adjustment (liabilities) This heading includes mainly the counterpart of the IMF reserve position, provisions for risks and costs, and costs to be paid.
(In dinars)
2019 2018 Variation
Memorandum accounts and accounts calling for 764 940 246 559 128 112 205 812 134 adjustment (liabilities)
Counterpart of the IMF reserve position 506 101 907 423 938 124 82 163 783
Staff costs to be paid 18 175 080 18 387 463 -212 383
Costs to be paid and miscellaneous proceeds paid in 15 759 126 12 573 575 3 185 551 advance
Expenditure to be paid for specific and exceptional 3 130 272 2 546 658 583 614 purposes
Foreign currency pending assignment 1 521 698 1 654 646 -132 948
Provisions for risks and costs 213 811 600 98 627 110 115 184 490
Other memorandum and adjustment accounts 6 440 563 1 400 536 5 040 027
Note 26: Equity Equity prior to the appropriation of 2019 result came to 1,401.3 MTD at the end of December 2019, compared to 1,028.1 MTD in 2018, an increase by 373.2 MTD or 36.3%. Breakdown is as follows:
Annual Report 2019 191
(In dinars)
2019 2018
Capital 6 000 000 6 000 000
Reserves 346 130 494 140 728 867
Legal reserve 3 000 000 3 000 000
Special reserve 307 794 668 102 794 668
Social fund reserve 35 335 826 34 934 199
Other equity - 77 945
Total equity prior to financial year results 352 130 494 146 806 812
Financial year results 1 049 156 252 881 320 531
Total equity prior to allocation 1 401 286 746 1 028 127 343
The Executive Board of the Bank approved in its meeting held on 21 March 2019, breakdown of 2018 year results as follows:
Results for the year 881 320 531 Special reserve 205 000 000 Share due to the State 676 320 531
Equity movements, recorded over the financial year closed on 31 December 2019, are presented as follows:
(In dinars)
Balance on Allocation Reserve for social Other Financial Balance on Description 31/12/2018 of result fund equity year result 31/12/2019
Capital 6 000 000 - - - - 6 000 000
Legal reserve 3 000 000 - - - - 3 000 000
Special reserve 102 794 668 205 000 000 - - - 307 794 668 Reserve for social 34 934 199 - 401 627 - - 35 335 826 fund
Other equity 77 945 - - (77 945) - - Financial year 881 320 531 (881 320 531) - - 1 049 156 252 1 049 156 252 result
Total equity 1 028 127 343 (676 320 531) 401 627 (77 945) 1 049 156 252 1 401 286 746
Annual Report 2019 192
Financial statements of the Central Bank of Tunisia
Social fund resources and uses as at the end of December 2019, are presented as follows:
(In dinars)
Resources Uses Balance on Description Balance on 31-12-2018 Allotment Reimbursement 31-12-2019 Loans
Resources 34 934 199 - 401 627 - 35 335 826 Allotment 27 038 126 - - - 27 038 126 Interest on long term 4 087 801 - 160 928 - 4 248 729 loans
Interest on medium 3 808 272 - 240 699 - 4 048 971 term loans
Uses (31 157 142) - 10 086 601 (13 234 070) (34 304 611) Housing loans (14 781 585) - 1 676 436 (3 353 289) (16 458 438) Medium term loans (8 211 394) - 2 662 072 (2 833 383) (8 382 705) Short term loans (8 164 163) - 5 748 093 (7 047 398) (9 463 468)
Available Resources 3 777 057 - 10 488 228 (13 234 070) 1 031 215
Note 27: Off balance sheet commitments The statement of off balance sheet commitments includes:
Pledged commitments and collaterals Collateral commitments pledged in the framework of external borrowings: Debenture loans and other external borrowings : This involves commitments with respect to:
- debenture loans issued by the Central Bank of Tunisia on behalf of the Tunisian Government on foreign financial markets; - external borrowings by the State in the framework of bilateral economic cooperation and managed by the Central Bank on behalf of the State while signing commitments towards the foreign party (foreign bank or financial institution) for settlement of relevant payments due, and - external borrowings contracted by the BCT and retroceded to Tunisian Authorised Intermediaries (particularly loans from the Arab Trade Financing Programme). Under this heading are also entered the BCT commitments towards the IMF for the fund credit portions meant to boost the State budget. This concerns the loan granted in the framework of the Stand-by agreement as well as the loan granted in the framework of Extended Fund Facility arrangement with the sixth portion released in June 2019 for a global amount of 734.7MTD. Worth of note, in this framework, that the outstanding balance of debenture loans went from 26,493 MTD in December 2018 to 25,547.3 MTD a year later: down by 945.7 MTD explained for the most part, on the one hand, by the repayment of the debenture loan of USD 485 million
Annual Report 2019 193
(July 2019) and on the other hand, by the repayment of the first tranche of the Qatari private placement of USD 1 billion for an amount equal to USD 250 million (April 2019). It should be noted that this decline would have been more significant had it not been for the sharp increase induced by the EUR 695 million debenture loan released on 15 July 2019. These commitments are in fact considered to be surety bonds (off balance sheet), in accordance with the accounting convention «pre-eminence of content over form». Worth of note that the Central Bank’s financial commitments coming from the above-mentioned borrowings mean a similar commitment on the part of the State or the Tunisian Authorised Intermediary for repayment of all borrowings maturities as well as settlement of all related financial costs.
(In dinars) Description 2019 2018 Variation Debenture loans 25 547 257 048 26 493 025 218 -945 768 170 Other external borrowings 6 873 217 366 6 464 501 856 408 715 510
State external borrowings contracted in the framework 1 128 703 097 1 270 980 443 -142 277 346 of bilateral economic cooperation
External borrowings contracted by the BCT and retroceded to Tunisian authorised intermediaries 470 055 572 413 699 177 56 356 395
IMF loans meant to boost the State budget 5 274 458 697 4 779 822 236 494 636 461
Pledged commitments on refinancing operations: This concerns given commitments related to exchange swap operations as a monetary policy instrument, introduced by the Central Bank as of May 2015 to meet banks’ liquidity needs. As at the end of December 2019, the amount entered under this heading (585.3 MTD) represents the counter-value in dinar, at the exchange rate of the closing date, of the currencies to be delivered to banks on the date of swap transaction achievement concluded in October, November and December 2019 for three-month maturities. Commitments and collaterals received
Commitments received on refinancing operations: This involves commitments received from banks participating in exchange swap operations. They are made up of amounts of dinars to be received on the date of the close-up (601.5 MTD) and non-accrued carry-over amounts with respect to these transactions (8.1 MTD).
Collaterals received in coverage of refinancing operations This concerns collaterals received as a counterpart of bank refinancing operations other than those carried up through exchange swap. They totalled 8,721.8 MTD at the end of December 2019 and are broken down into current claims and Treasury bonds, amounting to 5,291.8 MTD and 3,430 MTD respectively.
Annual Report 2019 194
Financial statements of the Central Bank of Tunisia
Other commitments received: This concerns provisional and final guarantees received from tenderers in the Framework of calls for bids launched by the Central Bank. At the end of December 2019, the amount of these collaterals came to 5 MTD compared to 1.2 MTD in 2018. Other commitments This involves Tunisian and foreign banknotes, confiscated by the legal authorities and the customs’ duties, and entrusted to the BCT for conservation. At the end of December 2019, the amount of these banknotes came to 4.5 MTD against 4.8 MTD in 2018. Worth of note that the operations with the outcome dependent on the BCT policies are only accounted for when carried out. Note 28: Proceeds from intervention on the money market Remaining the most important heading in the statement of result, proceeds from refinancing operations, whose weight in the total income of the Bank was up to 82.4%, reached 1,201.8 MTD at the end of December 2019 against 1,021.6 MTD, a year earlier, increasing by of 180.2 MTD. This item includes, mainly, interests collected with respect to the Central Bank intervention on the money market through calls for bids, which amounted to 542.5 MTD at the end of December 2019, compared to 464.1 MTD over the corresponding period of the previous year, up by 78.4 MTD or 16.9%. The Central Bank of Tunisia initiated also outright purchase operations of Treasury bonds in the framework of the open market, yielding some 145 MTD in proceeds over December 2019 compared to 79.6 MTD in the previous financial year. Furthermore, proceeds from 24-hour loan facilities fell by 6.1 MTD from one end of the year to the next, thus reflecting the less and less significant recourse of banks to these operations, due to the drop in their liquidity needs. Proceeds encashed with respect to carry-over amounts on exchange swap operations were down significantly by 90 MTD, coming to 104 MTD at the end of 2019 compared to 194 MTD a year before. This was led by an ongoing reduction in swap exchange operations which regressed, in annual average, from 2,574.4 MTD in 2018 to 1,258 MTD at the end of 2019.
(In dinars) 2019 2018 Variation Proceeds from intervention on the money 1 201 815 729 1 021 627 239 180 188 490 market Interests on interventions on the money market in the 542 509 078 464 071 743 78 437 335 form of purchase on calls for bids Proceeds on securities purchased firm 144 964 540 79 563 194 65 401 346 Interests on 24-hour credit facility 232 896 889 239 034 090 -6 137 201 Carry-over on foreign exchange swap operations 103 987 780 194 019 659 -90 031 879 Interest on money market intervention in the form of allowance uptake of Treasury bonds for a 3-month - 22 727 156 -22 727 156 duration Interest on money market intervention in the form of refinancing operation with a six-month duration 142 289 772 10 637 925 131 651 847 Other proceeds 35 167 670 11 573 472 23 594 198 Of which : Penalty interests 15 625 060 6 557 960 9 067 100
Annual Report 2019 195
Note 29: Interests on forward investments in foreign currency This heading includes, mainly, interests on securities in foreign currency which totalled 73.9 MTD at the end of December 2019 compared to 71.6 MTD a year earlier yielding thus a slight 2.3 MTD increase. In addition, the interest received on securities in foreign currencies constitutes a non-negligible part of the total of this heading, reaching 62.3 MTD at the end of the financial year 2019 against 82.8 MTD a year earlier, down by 20.5 MTD mainly explained by falling due of several securities denominated in Euro. It is broken down as follows:
(In dinars)
2019 2018 Variation
Interests on forward investments in foreign currency 149 953 427 165 399 655 -15 446 228 Interests on securities in foreign currency 62 255 120 82 785 875 -20 530 755 EUR 36 114 979 49 616 880 -13 501 901
USD 22 897 046 20 451 229 2 445 817
GBP 3 067 211 12 552 952 -9 485 741
JPY 175 884 164 814 11 070
Interests on deposits in foreign 73 928 402 71 579 607 2 348 795 currency USD 67 407 031 69 107 783 -1 700 752
GBP 6 146 073 1 707 478 4 438 595
EUR 305 461 606 350 -300 889
Others 69 837 157 996 -88 159
Interests on foreign currency funds entrusted for external management 13 769 905 11 034 173 2 735 732 USD 13 769 905 11 034 173 2 735 732
Note 30: Other proceeds on foreign currency transactions This heading includes mainly net foreign exchange gains on foreign currency transactions (28.6 MTD) as well as interest received on sight foreign currency assets which went up by 23.7 MTD from the end of the year to the other.
Annual Report 2019 196
Financial statements of the Central Bank of Tunisia
It is broken down as follows:
(In dinars)
2019 2018 Variation
Other proceeds on foreign currency transactions 86 756 220 32 432 293 54 323 927
Commissions on exchange operations 10 068 837 14 513 640 -4 444 803
Exchange gains on current operations 28 560 556 - 28 560 556
Interest on sight foreign currency assets 26 245 683 2 511 692 23 733 991
Commissions on non-resident foreign banknotes 2 499 876 2 527 886 -28 010
Discount spread on foreign currency securities 3 079 860 2 976 878 102 982
Commissions on banks’ transfer of foreign banknotes 3 703 631 4 543 917 -840 286
Write back of provisions on foreign currency funds entrusted 1 015 708 3 355 601 -2 339 893 for external management Gains on foreign currency funds entrusted for external 6 373 128 954 651 5 418 477 management Write back of provisions on available for sale securities in 1 333 733 394 328 939 405 foreign currency
Other proceeds 3 875 208 653 700 3 221 508
Note 31: Proceeds on transactions with international organisations This involves proceeds entered with respect to operations with the IMF. They went up slightly from one year to the next, coming to 4.7 MTD at the end of 2019 financial year compared to 4.6 MTD a year earlier. They are detailed as follows:
(In dinars)
2019 2018 Variation
Proceeds on transactions with international organisations 4 695 075 4 567 412 127 663
Remuneration / reserve position at the IMF 3 955 199 3 880 467 74 732
Interest on assets in SDR at IMF 702 270 642 629 59 641
Interest on SDR investment 37 606 44 316 -6 710
Note 32: Miscellaneous proceeds This item posted an increase of 3.4 MTD or 58.7% following, mainly, the increase in the remaining amount from unused budget allocations.
Annual Report 2019 197
2019 2018 Variation
Miscellaneous proceeds 9 247 801 5 826 874 3 420 927 Income from shareholding securities 3 459 853 3 225 284 234 569 Cost recovery 686 518 776 365 -89 847 Proceeds from services related to gross payment system 311 587 311 365 222 Write back of unused budget expenditure 3 151 110 893 511 2 257 599 Recovery of complementary retirement pensions for seconded staff 31 600 25 225 6 375 Commissions on sale of gold to jewellers 39 642 52 637 -12 995 Net proceeds on fixed asset transfers and other gains on non- recurring or exceptional items 322 521 - 322 521 Other proceeds 1 244 970 542 487 702 483
Note 33: Costs related to money market intervention This heading holds, mainly, costs on securities purchased firm, which increased by 10.1 MTD from one year to the next, following the constitution of a provision for depreciation of securities worth an amount of 29.7MTD.
(In dinars) 2019 2018 Variation
Costs related to intervention on the money market 31 659 808 19 870 510 11 789 298
Costs on outright purchased securities 29 721 703 19 632 457 10 089 246 Interests on 24-hour deposit facility 1 789 125 63 333 1 725 792 Other costs 148 980 174 720 -25 740
Note 34: Interests paid on transactions in foreign currency Interests on foreign currency transactions rose by 42.8 MTD from one end of year to the next, coming to 72.6 MTD at the end of the financial year 2019 compared to 29.8 MTD in December 2018. This increase is explained in major part by high interest paid in the framework of the intervention on the money market in foreign currency and to a lesser degree the increase in debit interest on sight assets in foreign currency.
Annual Report 2019 198
Financial statements of the Central Bank of Tunisia
(In dinars)
2019 2018 Variation
Interests paid on transactions in foreign currency 72 640 002 29 849 099 42 790 903 Interests on intervention on the money market in foreign 48 041 739 19 333 029 28 708 710 currency Costs of interests on term investment of foreign currency 10 040 043 4 645 348 5 394 695
Sight debit interests on foreign currencies 12 712 001 5 870 722 6 841 279
Interests on the deposit of the Central Bank of Libya 1 846 219 - 1 846 219
Note 35: Other costs on transactions in foreign currency This item recorded a significant drop of 64.8 MTD due mainly to the non-recognition of exchange losses on current transactions as well as the reduction in charges relating to spread of premiums on foreign currency securities by 18.2 MTD. It is detailed as follows:
(In dinars) 2019 2018 Variation Other costs on transactions in foreign currency 36 514 267 101 279 140 -64 764 873
Spreading of the premium on securities in foreign currency 26 587 097 44 758 792 -18 171 695
Exchange losses on current operations - 43 714 718 -43 714 718 Allotment to provisions for depreciation of foreign currency 322 622 1 015 708 -693 086 funds entrusted to external management Loss on foreign currency funds entrusted for external 3 672 714 6 170 206 -2 497 492 management
Costs / securities at negative yield rate 965 971 1 517 690 -551 719 Allotment to provisions for depreciation of available for sale 408 374 1 133 496 -725 122 securities
Fees / external reserves management mandate services 858 333 964 514 -106 181
Costs for management of foreign currency securities 517 470 568 146 -50 676
Loss / transfer of available for sale securities 463 887 1 077 061 -613 174
Fees for foreign currency account management 268 861 218 116 50 745
Loss on trading securities in foreign currency 1 349 756 - 1 349 756
Other costs in foreign currency 1 099 182 140 693 958 489
Note 36: Costs on transactions with international organisations This concerns mainly interests paid on loans granted by the AMF and the IMF and commissions on SDR allocations.
Annual Report 2019 199
(In dinars)
2019 2018 Variation
Costs on transactions with international organisations 9 942 186 10 567 064 -624 878
IMF commissions on SDR allocations 9 914 409 9 746 564 167 845
Interests on IMF loans - 493 126 -493 126
Interests on AMF loans 20 182 301 925 -281 743
Other costs 7 595 25 449 -17 854
Note 37: Staff costs This heading came to 96 MTD at the end of December 2019 compared to 89 MTD at the end of December 2018, up by 7 MTD in line mainly with salary increases and new recruitments at the Bank. It is broken down as follows:
(In dinars)
2019 2018 Variation
Staff costs 96 050 844 89 046 334 7 004 510
Salaries, salaries complements and related costs 33 506 731 30 270 544 3 236 187
Bonuses 17 815 650 19 482 800 -1 667 150
Social costs 43 089 936 38 019 710 5 070 226
Of which supplementary retirement pension 27 401 836 24 132 800 3 269 036
Allotment to provisions for retirement benefits 317 480 - 317 480
Staff training costs 828 647 804 080 24 567
Taxes, duties and similar payments on remunerations 492 400 469 200 23 200
Worth of note that supplementary retirement pensions are entered into costs when paying them to retired agents. Note 38: General operating costs General operating costs came to 25.8 MTD at the end of December 2019 compared to 20.8 MTD in 2018. They are broken down as follows:
Annual Report 2019 200
Financial statements of the Central Bank of Tunisia
2019 2018 Variation
General operating costs 25 829 608 20 795 571 5 034 037
Purchases 4 883 294 3 533 200 1 350 094 Consummate purchases : consumables and stationery 4 860 558 3 525 199 1 335 359 Small tools purchases 22 736 8 001 14 735 External services 11 492 454 9 732 103 1 760 351 Maintenance, repair and maintenance contracts 4 927 140 4 017 534 909 606 Post office and telecommunications costs 3 291 354 2 846 110 445 244 Insurance premium 1 663 782 912 716 751 066 Advertising, publication and public relations’ fees 477 486 793 080 -315 594
Transport and customs clearance of foreign banknotes’ 472 538 613 646 -141 108 costs Miscellaneous costs 660 154 549 017 111 137 Miscellaneous ordinary costs 9 414 922 7 500 261 1 914 661
Taxes, duties and similar payments other than on 38 938 30 007 8 931 remuneration
Note 39: Costs to manufacture banknotes and coins Costs of banknotes and coins manufacturing incurred in the framework of the programme extending over the three years 2017-2019, totalled 6.6 MTD at the end of 2019 compared to 36.3 MTD over the previous financial year. Note 40: Allocation of provisions for risks and costs Given its exposure to several risks (financial and operational) and as per the prudence principle, the BCT constituted over 2019 financial year, provisions for risks and costs with a global amount of 120.8 MTD compared to 47.8 MTD a year earlier, detailed as follows:
2019 2018 Allotment for risks and costs 120 759 083 47 833 000 Allotment to provisions in coverage of operational risk 89 000 000 39 000 000 Allotment to provisions / monetary policy operations 30 447 400 7 700 000 Allotment to provisions for files in litigation - 1 103 000 Other allotments 1 311 683 30 000
Worth of note that as of 2017 financial year, the BCT proceeded to gradual entry of provision for operational risk meant to cover risk of loss ensuing from inadequacy or failure attributable to procedures, staff or systems of the Bank, or with external risks, and this by retaining, as an indicator, a 15% rate from the net average financial proceed of the three previous financial years.
Annual Report 2019 201
Auditors' Report
Statutory Auditor's Report to the Chairman of the Executive Board of Central Bank of Tunisia Opinion In compliance with the assignment confided to us, we have audited the financial statements of the Central Bank of Tunisia which comprise the balance sheet and the statement of off balance sheet commitments as at 31 December 2019, and the income statement, for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. These financial statements show a net balance sheet total of 34,558,191 thousand dinars and positive shareholders' equity of 1,401,287 thousand dinars, including the profit for the year amounting to 1,049,156 thousand dinars. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Central Bank of Tunisia as at 31 December 2019, and of the results of its operations for the year then ended in accordance with the generally accepted accounting principles in Tunisia, taking into account the specific nature of the Central Bank's activities. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing applicable in Tunisia. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Central Bank of Tunisia in accordance with the ethical requirements that are relevant to our audit of the financial statements in Tunisia and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Executive Board and those charged with governance for the Financial Statements With respect to these financial statements, the Executive Board is responsible for their preparation and fair presentation in accordance with the generally accepted accounting principles in Tunisia, taking into account the specific nature of the Central Bank's activities and for such internal control as the Executive Board determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Annual Report 2019 202
Financial statements of the Central Bank of Tunisia
Inpreparingthefinancialstatements,theExecutiveBoardisresponsibleforassessingtheBank'sabilityt o continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Executive Board either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing Bank's financial process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error; and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Auditing Standards applicable in Tunisia will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with the International Auditing Standards applicable in Tunisia, we exercise professional judgment and maintain professional skepticism throughout the audit, we also: - Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Executive Board. - Conclude on the appropriateness of the Executive Board's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Central Bank's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Central Bank to cease to continue as a going concern.
Annual Report 2019 203
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies m internal control that we identify during our audit.
Tunis, 17 March 2020
The Auditors
Annual Report 2019 204
Financial statements of the Central Bank of Tunisia
Breakdown of Results for 2019
In compliance with the terms of article 78 of Law 2016-35 dated 25 April 2016 providing for the Statute of the Central Bank of Tunisia, the Bank’s Executive Board at its meeting on 17 March 2020 approved breakdown of 2019 results as follows (Amounts in TND):
Results for the year 1,049,156,252
Special reserve 250,000,000
Reserves for social fund 5,000,000
Reserves for building the new headoffice 90,000,000
Share going to the State 704,156,252
The 250 MTD that was allocated to the special reserve to boost the bank’s equity is broken down as follows:
50 MTD to finance the investment budget as approved by the Bank’s Executive Board in its meeting held on 27 December 2019,
200 MTD with respect to the gradual constitution of reserves helping to face up to impacts of the expected migration towards IFRS in the framework of targets of the Bank’s strategic plan.
Annual Report 2019 205
Table of content
Note of the Governor GOVERNANCE AND STRATEGY 1. The Executive Board ...... 7 2. Organization and human resources ...... 9 3. International cooperation...... 13 4. Strategic plan 2019-2021 ...... 17 5. BCT initiative to the promote financial innovation in Tunisia ...... 19 6. Risk management, control and compliance ...... 21 I- ECONOMIC, MONETARY AND FINANCIAL SITUATION Chapter 1- International environment ...... 27 1-1. International situation ...... 27 1-1-1 Economic Activity ...... 28 1-1-2 World trade ...... 29 1-1-3 International investments ...... 30 1-1-4 Monetary policies ...... 30 1-1-5 Public finances ...... 31 1-1-6 Inflation ...... 32 1-2. Capital markets ...... 32 1-2-1 Stock exchange markets ...... 32 1-2-2 Bond markets ...... 32 1-3.International foreign exchange and gold markets ...... 33 1-4. Commodity prices ...... 34 1-4-1 Foodstuff ...... 35 1-4-2 Industrial raw materials ...... 36 1-4-3 Crude oil ...... 37 Chapter 2- National economic and financial environment ...... 39 2-1. Overview ...... 39 2-2. sectorial Analysis of economic growth ...... 42 2-3. Global demand ...... 43 2-3-1 Domestic demand ...... 44 2-3-2 External demand ...... 45 2-4. Structure and financing of investments ...... 45 2-4-1 Structure of investments ...... 46 2-4-2 Financing of investments ...... 46 2-5. Job market and wages ...... 47 2-5-1 Job market ...... 47 2-5-2 Wages ...... 50 2-6. Public Finances ...... 50 2-6-1 State budget resources ...... 51
2-6-1-1 Core Resources and grants ...... 52 2-6-1-2 Borrowings resources ...... 53 2-6-2 State Budget expenditure ...... 53 2-6-2-1 Expenditure excluding the debt service ...... 53 2-6-2-2 Debt service ...... 55 2-6-3 Financing the budget deficit and trends in the outstanding balance of public debt ...... 55 2-7. Total indebtedness ...... 57 2-7-1 Domestic indebtedness ...... 58 2-7-2 External indebtedness ...... 59 2-7-3 Main financing indicators ...... 59 Chapter 3- External payments ...... 61 3-1. Balance of payments ...... 61 3-1-1 Current balance ...... 62 3-1-1-1 Trade balance ...... 63 3-1-1-2 Balance of services ...... 65 3-1-1-3 Balance of factor income and current transfers ...... 67 3-1-2 Balance of in capital and financial operations ...... 68 3-2. Overall external position ...... 72 3-2-1 Liabilities ...... 74 3-2-1-1- Foreign investments ...... 74 3-2-1-2 Other investments ...... 74 3-2-2 Assets ...... 75 3-3. Trends in competitiveness indicators ...... 81 3-3-1 Trends in the market share of exports ...... 81 3-3-2. Trend in the dinar’s foreign exchange rate ...... 83 Chapter 4- Money and financing of the economy ...... 85 4-1. Money and sources of monetary creation ...... 85 4-1-1 Money aggregates ...... 85 4-1-2 Sources of monetary creation ...... 88 4-2 Financing of the economy ...... 90 4-2-1 Trend in loans to the economy ...... 90 4-2-2 Trend in the outstanding balance of loans to professionals ...... 92 4-2-2-1 Breakdown of the outstanding balance of loans to professionals ...... 92 4-2-2-2 Breakdown of the outstanding balance of loans to professionals by sector of activity .. 93 4-2-2-2-1 Financing agriculture and fishing sector ...... 93 4-4-2-2-2 Financing of industry ...... 94 4-2-2-2-3 Financing of the services sector ...... 95 4-2-2-3 Unpaid and disputed claims ...... 96 4-2-3 Financing of individuals ...... 97 II-MISSIONS OF THE BANK Chapter 1 – Monetary policy ...... 101 1-1. Monetary policy ...... 101 1-1-1 Liquidity managements ...... 102
1-1-2 Interbank market activity ...... 106 1-1-3. Activity of the market for negotiable debt securities ...... 110 1-1-4. Collateral policy ...... 110 1-1-5 Trend in interest rates and transmission of monetary policy actions ...... 111 1-2. Monetary policy and inflation ...... 114 1-2-1 Trend in inflation ...... 114 1-2-2 Determinants of Inflation ...... 116 Chapter 2- Management of international reserves ...... 121 2-1. Trends in reserves ...... 121 2-2. Performance of reserves ...... 121 2-3. Risk analysis ...... 121 2-3-1 Duration ...... 121 2-3-2 Key Rate Duration (KRD) of portfolio-securities ...... 122 Chapter 3- Payment systems and means ...... 123 3-1. Trend in payments activity ...... 123 3-1-1 Electronic clearing ...... 123 3-1-2 Manual clearing ...... 124 3-1-3 Monetic system ...... 124 3-1-4 Tunisia’s large amounts transfer system (SGMT) ...... 125 3-2. Trend in payments environment ...... 126 3-2-1 Trend in the regulatory system ...... 126 3-2-2 Trend in the payment ecosystem ...... 126 3-2-3 Trend in the operational oversight system ...... 127 Chapter 4- Fiduciary circulation ...... 129 4-1. Issue of banknotes and coins ...... 129 4-1-1 Issue of banknotes ...... 129 4-1-2 Issue of coins ...... 129 4-2. Maintenance of fiduciary money ...... 130 4-3. Cash supply ...... 131 4-4. Total fiduciary circulation ...... 131 Chapter 5- Banking Supervision ...... 133 5-1. Residents banks ...... 133 5-1-1 Activity ...... 133 5-1-1-1 Trend in resources ...... 133 5-1-1-2 Trend in uses ...... 135 5-1-2 Operating results ...... 136 5-2. Leasing institutions ...... 138 5-2-1 Activity ...... 138 5-2-2 Operating results ...... 138 5-3. Non-residents banks ...... 138 5-3-1 Activity ...... 138 5-3-1-1 Operating resources ...... 138
5-3-1-2 Trend in uses ...... 139 5-3-2 Operating results ...... 141 5-4. Factoring companies ...... 141 5-4-1 Activity ...... 141 5-4-2 Operating result ...... 142 Chapter 6- Financial stability...... 143 6-1. Macro-financial risks ...... 143 6-1-1 Macroeconomic conditions ...... 144 6-1-2 Credit risk ...... 144 6-1-3 The banking sector’s resilience ...... 145 6-1-4 Liquidity ...... 146 6-2. Risks tied to capital markets and collective savings activity ...... 146 Chapter 7: Financial inclusion and protection of banking services’ users ...... 149 7-1. Protection of banking services’ users...... 149 7-1-1 Strategic vision ...... 149 7-1-2 Operational activity ...... 149 7-2. BCT initiatives for financial inclusion promotion ...... 150 FINANCIAL SITUATION OF THE CENTRAL BANK Analysis of the financial situation and results ...... 155 1-1. Main trends in the asset situation ...... 156 1-2. Main trends in the statement of results ...... 158 Financial statements and statutory auditors' report ...... 163