Tunisian government proposes bill to enable it recover bad loans from public banks

As Tunisia restructures its banking sector, the government plans to recover 6.5 billion dinars ($2.72 billion) worth of bad loans in three main publicly owned financial institutions. In recent years, these banks have seen a reduction in available liquidity due to current account deficit, which according to a World Bank data reached a high of around 9% of GDP in 2014.

Following the reoccurring deficit in accounts and a high ratio of non-performing loans (NPL), an audit of the three public banks’ finances was carried out in 2014. After this, the Tunisian government decided to do a banking reform with the assistance of the International Monetary Fund in 2016. They both agreed to a four-year loan programme worth about $2.8 billion.

Meanwhile, prior to the government’s decision to carry out banking reforms, in 2015, $400 million was injected to re-capitalize struggling state lenders Societe Tunisienne de Banque (STB), Banque Nationale Agricole (BNA) and Bank de l’Habitat (BH). However, despite these lenders facing tight liquidity, new players continue to enter the market.

On the decision to restructure the industry, the minister of economic reforms Taoufik Rajhi told Reuters, “We started to reform public banks through new plans for good governance, then we raised their capital, and now we are trying to improve the performance and by seeking to recover bad loans amounting to 6.5 billions dinar.”

Noting steps the government plans to take in this recovery process, Rajhi stated that “the government has sent a bill to the parliament to give banks legal tools to recover bad loans such as the possibility of canceling the delay penalties and give these banks the right of reconciliation with clients.”

The most recent available data from the Banque Centrale de Tunisie (BCT) states that the country has a total of 23 onshore banks, in addition to seven offshore institutions. And as at November 2016, the total banking sector assets were worth TD96.4bn (€41.3bn). This was up 8.3% from TD89bn (€38.2bn) at the end of 2015.