In 2002, the International Monetary Fund (IMF) published its most recent full-scale assessment covering monetary policy transparency (it was updated in 2006), in which Tunisia's overall practices for monetary policy were judged to be transparent but nonetheless in need of certain improvements. Flaws identified in the report included a lack of clarity in the prioritization of policy objectives, insufficient autonomy of the Central Bank of Tunisia (BCT) due to the criteria by which bank board members were appointed or dismissed, the lack of an internal audit of the BCT's accounts, and the failure to make publicly available a periodic, performance-oriented assessment of monetary policy implementation. In a 2006 Update, the IMF found that the production of a performance-oriented assessment was partially implemented, whereas the problems of BCT policy prioritization, board appointment/dismissal criteria, and independent auditing were pending legislation. In 2006 the BCT law was amended to enhance the BCT's autonomy and independence. The 2007 IMF Article IV consultation reports that a provision of the amendment specifically defined the primary monetary policy objective as the maintenance of price stability. Tunisia has been a subscriber to the IMF's Special Data Dissemination Standard since 2001, and generally meets all requirements of coverage, periodicity, and timeliness.

General Overview

The most recent full-scale International Monetary Fund (IMF) Report on the Observance of Standards and Codes (ROSC) focusing on Tunisia's monetary policy transparency was published as part of a Financial System Stability Assessment in June 2002 (it was updated in 2006). According to the 2002 report, "the process of formulating and reporting monetary policy decisions is generally transparent. The Central Bank [of Tunisia, Banque Centrale de Tunisie, or BCT] explains the framework of monetary policy, including its immediate targets" (p. 43). Tunisia's primary monetary policy aims are defined in law, and the BCT makes public disclosure of the rules and procedures it follows in the formulation of policy and the conduct of monetary operations. Minutes of the BCT's board meetings, however, are not made public, although these meetings typically cover the considerations upon which monetary policy decisions are based. The ROSC also found that Tunisia did not provide specific disclosure of policy performance. On the other hand, general policy statements are made public, as are the BCT's financial statements. The ROSC did note that these statements are not subject to independent audit. Finally, the report noted that Tunisia's primary monetary policy objectives include the preservation of the value of the currency in the context of supporting government economic policy. According to the report, policy instruments are available to the BCT in pursuit of its objectives, but the ROSC observed that restrictions (to 10% or less of government recurrent revenues) are imposed on the amount of government securities it can hold for such purposes. Tunisian authorities responded to the ROSC by stating that although there is no specific legal provision that the primary goal of monetary policy is price stability, this prioritization is recognized in practice. They added that limits on BCT holdings of government securities were set to achieve two ends: first, "to force the government to seek public (nonbank) sources for its financing needs," and second, "to induce banks to hold assets that would be eligible for BCT monetary operations."

The 2006 IMF report revisited the implied and specific recommendations of the 2002 assessment and provided a progress report on Tunisia's implementation thereof. First, the 2002 assessment called for a revision of the law to more clearly prioritize BCT objectives and clarify the criteria by which board members are appointed or removed. It also called for the systematic audit of BCT accounts by an independent, preferably external, authority. Both of these recommendations were described as "pending legislation," although a 2007 IMF report noted that the policy prioritization was addressed by legislation passed in 2006. The recommendation to more systematically assess the achievement of monetary policy objectives was rated as partially implemented. The suggestion that the BCT produce a periodic report on banking supervision was not implemented.

The IMF's 2007 Article IV Consultations report went into detail regarding Tunisia's ongoing need to adapt its monetary and exchange rate policy framework. Recent inflationary pressures were offset by a tighter monetary policy that was implemented in the second half of 2006. This action was considered adequate unless oil or basic commodity prices spiked. In 2007, the Tunisian authorities set a goal of reducing broad money growth. To avoid exacerbating inflationary tendencies, the authorities expressed their intention to only gradually implement certain large infrastructure projects that were currently planned. The 2007 report noted that Tunisian monetary authorities were moving gradually toward the adoption of an inflation-targeting framework. The BCT has increasingly turned to such policy tools as open market operations and repos to achieve its goals. In 2006 the BCT law was amended to enhance the BCT's autonomy and independence. A provision of the amendment specifically defined the primary monetary policy objective as the maintenance of price stability. The 2007 IMF report made several specific recommendations regarding Tunisia's monetary policy process. These include the further enhancement of central bank autonomy, greater clarification of the exchange rate's role in the monetary policy framework, providing the BCT with greater capacity for research and forecasting, and effecting a reduction in the share of administered prices in the CPI from their current level of about 33%. The report noted that Tunisia was aware of the need to address these issues.

The IMF's 2007 report also stated that Tunisia was working toward a more flexible exchange rate, motivated by "the gradual liberalization of the capital account" (p. 11). IMF staff expressed the need to clarify the exchange rate's role in the broader policy framework, and Tunisian authorities agreed with this assessment. In the words of the IMF report, "deep and well-functioning money and foreign exchange markets are essential for an efficient and flexible monetary policy" (p. 11). To achieve this, the BCT has reduced its reliance on fine-tuning the interest and exchange rates. It has also reduced its interventions on the foreign exchange rate, reserving such actions for the purposes of managing liquidity.

In the 2007 IMF report's "Statistical Issues" annex, it is reported that the CBT's monetary statistics are based on the Guide to Money and Banking Statistics in International Financial Statistics (1984). The CBT has begun to shift to the Monetary and Financial Statistics Manual methodology, however, and has begun using the IMF's Standard Report Form for central banks when reporting monetary data to the Fund. The data provided by the BCT meets SDDS requirements -- Tunisia has been a subscriber since June 2001 -- but could be improved on several fronts, including the sectorization of banks claims on the broader domestic sector. The IMF report also noted that "monetary gold is valued at a fixed price and accrued interest on deposits is not included in the outstanding value of these deposits" (p. 35).

The Principles

Clarity of roles, responsibilities and objectives of central banks.

EN

According to the 2002 IMF report, Tunisian legislation defines the primary monetary policy objectives as including the preservation of currency valuation and the support of government economic policies. In the opinion of the IMF staff, there was therefore a need to more clearly prioritize the BCT's mission. In 2007, according to the IMF Article IV Consultation report for that year, this goal was achieved with the passage of appropriate legislation. Additionally, the 2002 report noted that the BCT is authorized to employ monetary policy instruments, but is limited in the amount of government securities it is allowed to retain to 10% or less of the government's recurrent revenues. This limit, argued the IMF, could be seen as encouraging the government's use of quasi-fiscal operations, exposing the BCT to "significant credit risk." The report found that there is a clear legal definition of the relationship between monetary and fiscal operations, except for the allocation of institutional responsibility for foreign exchange policy. In practice, however, the BCT ensures the external stability of the currency. One last area in which the IMF report found Tunisia's transparency practices lacking had to do with the procedures for appointing members to the BCT board of directors, as well as the criteria for which they might be removed. There is a general statement of these criteria in the BCT charter, but the Central Bank Law provides for a great deal of latitude for government influence over the board. This has negative implications for monetary policy transparency.

The 2006 IMF report revisited the implied and specific recommendations of the 2002 FSSA and provided a progress report on Tunisia's implementation thereof. First, the 2002 assessment called for a revision of the law to more clearly prioritize BCT objectives and to clarify the criteria by which board members are appointed or removed. It also called for the systematic audit of BCT accounts by an independent, preferably external, authority. Both of these recommendations were rated as "pending legislation," but the policy prioritization issue was the subject of legislation that has since been enacted. The recommendation to more systematically assess the achievement of monetary policy objectives was rated as partially implemented. The suggestion that the BCT produce a periodic report on banking supervision was not implemented.

Open process for formulating and reporting monetary policy decisions.

EN

The 2002 IMF report found that "the process of formulating and reporting monetary policy decisions is generally transparent" (p. 43). The framework and immediate targets of current monetary policy are explained by the BCT, which also discloses the rules and procedures governing its activities. However, there is no public disclosure of the BCT's board meeting minutes, even though the board meetings are the primary forum in which policy is discussed and decisions are taken. The IMF also noted that the BCT fails to provide specific progress reports on the implementation of policy decisions. The IMF called for a systematic assessment of monetary policy results, provided alongside a clear statement of the objectives originally sought. The 2002 report suggested that this should not be difficult to produce in Tunisia, given the monetary policy framework's emphasis on inflation targeting.

The 2006 IMF report revisited the implied and specific recommendations of the 2002 FSSA and provided a progress report on Tunisia's implementation thereof. First, the 2002 assessment called for a revision of the law to more clearly prioritize BCT objectives and to clarify the criteria by which board members are appointed or removed. It also called for the systematic audit of BCT accounts by an independent, preferably external, authority. Both of these recommendations were rated as "pending legislation," although the 2007 IMF report noted that the policy prioritization had been addressed by legislation passed in 2006. The recommendation to more systematically assess the achievement of monetary policy objectives was rated as partially implemented. The suggestion that the BCT produce a periodic report on banking supervision was not implemented.

Public availability of information on monetary policy.

EN

Tunisia became a subscriber to the IMF's SDDS in June 2001, and the SDDS website notes that it meets the requirements of coverage, periodicity, and timeliness. The website also discloses that Tunisia provides summary methodologies for all datasets and advance release calendars for most of them. The 2002 IMF report stated that the BCT's financial statements are made publicly available, as is general information regarding monetary policy. The BCT website provides public access to advance release calendars covering monetary data. In addition, the BCT website offers a range of publications containing aggregate macroeconomic data covering assets and liabilities of the banking system. However, the 2002 IMF report noted that the BCT does not provide information on the system's overall financial position. The BCT does not provide any systematic performance-based analysis of monetary policy implementation. The public release of the BCT's Annual Report is not subject to any established schedule. Although the 2002 IMF report noted that the BCT website provided public access to a great deal of regularly updated monetary policy information, it cited a number of areas where improvements could be made. It suggested that the annual policy targets be published early each year, and that the BCT board of directors publish a meeting schedule of the minutes their meetings. The IMF also called for regular, independent audits of the BCT's accounts, and suggested that the BCT make its accounting and internal governance procedures public, as well.

The 2006 IMF report revisited the implied and specific recommendations of the 2002 FSSA and provided a progress report on Tunisia's implementation thereof. First, the 2002 assessment called for a revision of the law to more clearly prioritize BCT objectives and to clarify the criteria by which board members are appointed or removed. It also called for the systematic audit of BCT accounts by an independent, preferably external, authority. Both of these recommendations were rated as "pending legislation," although the 2007 IMF report noted that the policy prioritization was addressed by legislation passed in 2006. The recommendation to more systematically assess the achievement of monetary policy objectives was rated as partially implemented. The suggestion that the BCT produce a periodic report on banking supervision was not implemented.

Accountability and assurances of integrity by the central bank.

EN

The 2002 IMF report disclosed that the BCT's responsibilities and accountability requirements are specified in law. The BCT makes available to the public general information on monetary policy, as well as its own financial statements. However, these latter are not subject to independent audit. Rather, they are audited by the government controller, who sits on the BCT's board of directors. By law, the BCT's annual report must be submitted to the president, but it does not cover issues having to do with banking supervision. The 2006 IMF report revisited the implied and specific recommendations of the 2002 FSSA and provided a progress report on Tunisia's implementation thereof. First, the 2002 assessment called for a revision of the law to more clearly prioritize BCT objectives and to clarify the criteria by which board members are appointed or removed. It also called for the systematic audit of BCT accounts by an independent, preferably external, authority. Both of these recommendations were rated as "pending legislation," although the 2007 IMF report noted that the policy prioritization was addressed by legislation passed in 2006. The recommendation to more systematically assess the achievement of monetary policy objectives was rated as partially implemented. The suggestion that the BCT produce a periodic report on banking supervision was not implemented.