Propelled by significant growth in April, average liquidity needs of banks continued to surge in Q2 of 2023 to reach TND 15.816 million, up TND 1.350 million from Q1, the Central Bank of Tunisia (French: BCT) said in its July 2023 Note on the economic situation. Liquidity pressures seen in Q2-2023 can largely be attributed to the restrictive effect of two key factors. They are mainly the Treasury current account as the principal source of liquidity withdrawal for banks in Q2-2023 through the intensive use of domestic financing. The latter absorbed roughly TND 1.781 million from banking accounts through the issuance of Treasury bonds totalling TND 3.197 million (TND 3.188 million in Short-Term Treasury bills and TND 9 million in Assimilated treasury bonds (BTA). This in addition to the second tranche of the national bond issued in May 2023 and amounting to TND 844 million. Its restrictive effect on liquidity was offset by domestic debt service payments in dinar (nearly TND 2.260 million) The second factor is net foreign currency holdings which contributed to amplifying bank liquidity needs in Q2 of 2023. This amplification was predominantly driven by currency purchase operations conducted by banks in the foreign exchange market against the dinar, notably with a persistent high level of the energy balance deficit. These operations consequently resulted in an uptick in liquidity demand for banks to nearly TND 409 million inQ2. The report emphasises that the restrictive effect of the aforementioned factors was partly offset by the expansionary effect of currency in circulation (CIC) , though less pronounced than in Q1. Actually, about TND 713 million in cash were rechannelled to banks Q2-2023, despite substantial withdrawals in June to address expenses related to Eid al-Adha, in contrast to TND 1.611 million in Q1-2023. It is important to highlight that the expansionary effect of the CIC on liquidity could be considered as structural, given that banks benefit from a significant portion of withdrawals made in Tunisian Post offices
Source: Agence Tunis Afrique Presse