Covid-19 crisis : Financial consequences for Tunisia

Article by Dr. Soumaya Ben Khelifa, Assistant Professor of Finance at Carthage Business School (CBS), University of Tunis Carthage (UTC). Dr. Ben Khelifa’s research focuses on financial inclusion, financial markets, and hedge funds. Some of the courses she teaches at CBS are Introduction to Finance, Finance Theory, Investment and Financing Decision Making, and Financial Analysis and Cash Flow Management.

The current health situation facing our country is critical and will further sharpen the financial and economic downturn. The percentage of economic transactions between Tunisia and Europe is 85%, while the total imports from China are more than 50%.

The Covid-19 crisis can, particularly, highlight the increase in the unemployment rate. This is explained by the fact that many big businesses and MSMEs were forced to stop their activities during the crisis period.  Hence, the government and financial institutions should intervene to regulate the market and ensure the longer-term survival of those businesses. Within this framework, the Tunisian Central Bank (TCB) Governing Council decided to cut the money market interest rate by 100 basis points. It was 7.84% in February 2020 and it became 6.75% on 18 March 2020.  Figure 1 shows that the evolution of the money market interest rate was almost stable from mars 2019 to February 2020 and it dropped dramatically in March 2020.

Source : Made by author ;  Data : Tunisian Central Bank (TCB)


The TCB implemented also others series of exceptional measures aimed to reduce economic and social spill-overs from the Covid-19 crisis. Indeed, the board of directors decided to reduce the financial cost of loans for individuals, allowing them to increase their purchasing power. It decided, also, to provide liquidity for banks, which help them to continue their activities and through these tough times.

Having followed an upward trend throughout January and February 2020, TUNINDEX capitalization index reached the highest value (7204,39 point) at 28 February 2020. However, il fell sharply on 16 March 2020, closing down at 6116,16 points. Hence, the Tunis Stock Exchange is significantly affected by the Covid-19 crisis with a decline equal to 17,8% between 02 March and 16 March. This situation raises many concerns for investors and managers. The most important question is  whether Tunis Stock Exchange can resist the Covid-19 crisis ?

The Tunis Stock Exchange is not well developed. It has low levels of activity and the volume of trade is low, varying between 3 and 4 millions dinars on a daily basis. Given this, it is a fragile market, susceptible and vulnerable to shocks. Hence, the tunisian market makers and the government should take all possible measures in order to confront this multifaceted crisis. For example, they should closely monitor the speculative transactions and try to encourage transactions in all types of securities.


Figure 2 : Changes in TUNINDEX Capitalization Index

Source : http://www.bvmt.com.tn/


Even though the spread of covid-19 could lead to a major economic downturn, the tunsian financial system is contributing to increasing the level of financial inclusion in Tunisia. In fact, several measures have been implemented such as:

  • the elimination of fees on withdrawals being made from ATMs machines;
  • bank cards are issued free of charge;
  • providing customers with a broad range of e-banking services, enabling them to process their transactions without having to contact or personally go to the concerned offices.

Such measures contribute to increasing the use of the digital payment which is not developed in our country.

These measures may help substantially in enhancing the usage of financial services, which is the main dimension of financial inclusion.