Central Bank Governor Nabli’s Dismissal: A Crisis for Tunisia’s Ruling Troika?

Tunisia’s National Constituent Assembly

The imminent dismissal of the Governor of the Tunisian Central Bank (BCT), Mustapha Kamel Nabli, has whipped up a firestorm of criticism, both from Tunisia’s Constituent Assembly (CA) and members of the financial community.

The Tunisian president’s office announced on Wednesday that Prime Minister Hamadi Jebali and President Moncef Marzouki had agreed to remove Nabli. Now, the CA has less than two weeks to make its final decision.

CA members in the opposition to the ruling Troika – made up of Ennahdha, Congress for the Republic (CPR), and Ettakatol – have expressed their distrust of calls for Nabli’s replacement.

“The decision is random and wasn’t based on objective reasons,” said Noomane Fehri, CA member of the Afek Tounes party. “What concerns me is the timing [of the decision].”

Hamma Hammami, leader of the Communist Workers’ Party of Tunisia (POCT), went further, stating that, “It’s an action and reaction without taking into account the interests of the country.” He referred to the widespread speculations that are currently circulating around the decision, suggesting that it was all a political maneuver by Marzouki to shore up his image after the much criticized extradition of former Libyan Prime Minister Baghdadi Mahmoudi on June 24.

“It reflects that the foundation of the Troika is weak,” Hammami added.

President Marzouki has faced criticism for his office’s announcement to replace BCT Governor Nabli

CA members from the Troika, however, have readily defended the decision by the presidency and prime ministry.

“The president would not have made this decision without consulting economic experts,” said Larbi Abidi, a CA member from the CPR party. It may have looked like a reaction, continued Abidi, but it wasn’t.

While some CA members find the reasoning behind the dismissal based on political maneuvering, others recognize the economic grounds for the decision.

Mohsen Hassen, a Tunisian businessman and economics professor at the Higher Institute of Commercial Studies in Carthage, speculated that the economic climate had an impact on the decision.  “The Central Bank did not play its role in fighting inflation,” he stated.

The BCT’s “lack of effectiveness” in controlling inflation has had a negative effect on many sectors of the economy, especially the banking sector, pointed out Hassen.

During the era of former President Zine el-Abidine Ben Ali, inflation hovered around 3%. However, since the revolution, inflation has been steadily rising, reaching over 5% in April. Such an elevated rate of inflation has eroded the value of Tunisians’ bank deposits and thrust local banks into a liquidity crisis as a result of decreasing savings rates.

No matter how serious the shortcomings in the BCT’s management of the economy since the revolution, the dismissal of Nabli does not come as comforting news for some financial experts who worry about the implications of  Nabli’s departure from the BCT.

“It’ll be a huge loss for Tunisia,” contended Hassen.

“Tunisia will lose a knowledgeable expert,” Hassan Zargouni, CEO of Sigma Conseil, echoed.

Nabli may be hard to replace because of his strong reputation abroad and the wide network of personal relationships that he has forged among foreign backers, such as the International Monetary Fund (IMF) and the World Bank, explained Zargouni.

When foreign backers and investors come to a country, one of the first things that they look at is how trustworthy the person in charge of the economy is, said Zargouni. Nabli was that rare financial expert, who had great ties with institutional investors around the world, and attracted their trust, he added.

Nabli, respected in international finance circles, speaks at the World Economic Forum

One should not forget that on May 30 Nabli was celebrated by the African Development Bank as the “Best Central Bank Governor in Africa for 2012” during the bank’s Annual Assemblies event in Tanzania.

That trust and respect may be called into question if Nabli is indeed replaced, Zargouni fears.

“Removing him in this way could really hinder the interests of our country abroad,” added Hassen.

It should be noted that representatives from the international credit rating agency Moody’s are visiting Tunisia from tomorrow until July 4. When asked what effect the ongoing controversy surrounding Nabli’s imminent dismissal could have on Moody’s outlook on Tunisia’s creditworthiness, Zargouni worried that it would only have a negative impact.

Hassen looks not only at the damage that the dismissal may cause to the image of Tunisia in international finance circles, but also that among the Tunisian public. “The Troika should convince public opinion,” he asserted. The public should be constantly informed during such an important process as Nabli’s removal, given its implications on the country’s monetary policies, Hassen argued.

In Hassen’s eyes, the government’s handling of Nabli’s replacement was done with little transparency, amidst the absence of any convincing reasoning.  “It is my right as an economic analyst to know why he was removed,” he said.

Besides the government’s lack of transparency, the lack of communication between the BCT and the government was egregious, according to Hassen. No matter how independent the BCT is, it still has to work alongside the government to coordinate a uniform monetary policy without either side impinging upon the other’s prerogatives, he contended.

In this respect, “the blame is shared,” Hassen concluded.