Tunisia government propose firing central bank governor

Reuters, Monday 28 May 2012

Struggling to emerge from recession, Tunisia has held steady on inflation, interest and exchange rates - but latest suggestions shows it may be hard to hold that line

The parties that make up Tunisia's coalition government have proposed removing the governor of the central bank, two party sources said, a step which could alarm investors already jittery after last year's revolution.

Tunisia, struggling to emerge from recession, has held a steady course on inflation, interest and exchange rates even in the turmoil that followed the ousting of its president, but talk of firing the central bank chief suggests it may be hard to hold that line.
Tensions have emerged in the past few months between the government and the central bank over who has the last say on monetary policy.
The government unveiled a target for inflation but bank governor Mustapha Kamel Nabli responded by saying this figure was set by the bank and that he would not accept political interference in its work.
Removing Nabli is the prerogative of the constitutional assembly, Tunisia's interim parliament. The government therefore cannot itself fire him, but it has a majority in the assembly.
"There is a proposal from the three parties to replace the central bank governor," said an official with Ennahda, the moderate Islamist party which dominates the coalition.
"We are leaning towards discussing this ...[proposal] in the constitutional assembly, which has the right to make this change," he said.
A source from the second-biggest party in the coalition, the Congress for the Republic, confirmed that removing Nabli has been discussed at a meeting of the coalition, but he declined to give any details.
A spokesman for the central bank said he knew nothing about any plan to remove Nabli and that the bank was functioning as normal. There was no immediate comment from Ettakatol, the third party in the governing coalition.
The central bank chief is an academic who used to be chief Middle East economist for the World Bank.
He was appointed a few days after the revolution which forced out long-standing Tunisian leader Zine Al-Abidine Ben Ali and inspired the wave of upheavals that swept aside veteran heads of state in Egypt, Libya and Yemen.
The violence and upheaval of the revolution scared off tourists and foreign investors. They are slowly returning, but the financial crisis in the euro zone, Tunisia's biggest trading partner, is now taking its toll.
Government ministers, with their eyes on winning a round of elections scheduled to take place in 2013, want to restore growth as fast as possible. The central bank though is worried by inflation which accelerated to 5.7 per cent in April.
In a statement issued after its board met earlier this month, the bank said it would have to raise interest rates if inflationary pressures persist, a step that risks hurting the country's tentative economic recovery. 
Short link: