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Tunisia issues third bond | ASHARQ AL-AWSAT English Archive 2005 -2017
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A man walks towards the Central Bank in Tunis on December 27, 2013. (Reuters/Zoubeir Souissi)

A man walks towards the Central Bank in Tunis on December 27, 2013. (Reuters/Zoubeir Souissi)

A man walks towards the Central Bank in Tunis on December 27, 2013. (Reuters/Zoubeir Souissi)

Tunis, Asharq Al-Awsat—Tunisia launched its third bond on Monday, aiming to raise some 500 million Tunisian dinars (312 million US dollars) to cover government expenditure allocated for the 2014 state budget.

Tunisian Finance Minister Hakim Ben Hamouda called on Tunisians to subscribe to the new bond, saying, “We [the government] rely on Tunisians’ understanding and solidarity to support the issue and contribute to its success.” He added that all cabinet ministers would be purchasing bonds worth 10 percent of their salaries.

Hammouda also said the 500 million dinars targeted by the government was “a realistic and objective figure,” dismissing reservations expressed by some political parties regarding the bond, which is being issued amid a decline in individual spending power and family income in Tunisia.

Some observers have expressed fear regarding a potential increase in borrowing among households and a decline in national savings as a result of the bond issue—if it managed to secure a high subscription rate among the public. In reality, however, the government is relying on private investors and the private sector to drive the success of the bond, which offers higher rates of interest than those offered by Tunisian banks.

Subscribers will be able to choose from three options: a 10-dinar (6.20-dollar) bond with a 5.95 percent coupon rate, with the principal and interest payable in four installments over five years; a 100-dinar (62-dollar) bond paying back principal and interest in five installments over seven years at a 6.15 percent coupon rate; and a third option, another 100-dinar bond but paying back principal and interest in eight installments over 10 years at 6.35 percent.

The bond issue comes as Tunisia has seen declining receipts from tourism, agriculture and mining—its traditional sources of income—following the overthrow of former president Zine El-Abidine Ben Ali in January 2011.

The country’s central bank announced in April it was revising its growth forecast for 2014 from its initial estimate of 2.8 percent to 3 percent. It has estimated a budget deficit of 7.5–8 percent for this year.

This is Tunisia’s third bond since it gained independence in 1956. The first came in 1964, with the second following in 1986. Last Thursday, Hammouda told Reuters the country will be issuing more bonds in September, worth 300–500 million dollars and guaranteed by the Japanese government.

In related news, Tunisian Prime Minister Mehdi Jomaa will hold a news conference on Wednesday to highlight his government’s achievements during its first 100 days in office and answer questions on political, security and economic issues.

Jomaa is also expected to discuss the reform programs carried out by the government and the progress of preparations for the Economic Dialogue Conference due to be held on May 28.

Following the end of the conference, the government is expected to begin a number of economic reforms and austerity measures—which it has described as “painful”—including reforming food subsidies, extending VAT requirements, and increasing restrictions on the import of a number of luxury goods.