Cash-strapped Tunisia wants to take the unprecedented step of borrowing billions from its central bank to plug budget deficits and heal its economic crisis, a move that experts say could cause inflation and undermine confidence in institutions.

In an emergency closed-door meeting, parliament’s finance committee on Wednesday considered President Kais Saied ‘s government’s request to borrow the funds after revising laws intended to guarantee the bank’s autonomy.

The laws added the Central Bank to a growing list of institutions that Mr. Saied has sought to weaken since coming to power, in addition to briefly suspending Parliament and rewriting the Tunisian Constitution.

His government wants the central bank to directly buy up to 7 billion Tunisian dinars ($2.25 billion) of interest-free bonds to help close a budget deficit of 10 billion dinars ($3.2 billion) .

But in Tunisia , where inflation and shortages of basic goods have become commonplace, this demand raises concerns about maintaining the bank’s independence from politics, inflation and fear. foreign lenders and investors.

The move comes as Tunisia finds itself unable to borrow from its traditional creditors, including the International Monetary Fund , whose proposed $1.9 billion bailout remains in limbo.

Although the IMF has said that buying securities such as bonds can sometimes serve monetary policy , it has warned countries that central banks should not finance government spending.

“Modifying the status of the Central Bank of Tunisia to allow it to finance the government budget and nothing else… is an ill-advised approach which carries many risks – notably inflationary – for the country’s economy and its relations with its partners ,” declared economist Aram Belhadj , professor at the Faculty of Economics and Management in Tunis.

Borrowing from the Central Bank can finance the budget in the short term, retaining subsidies for everyday goods such as flour, electricity and fuel. But with shortages of essential goods and queues for bread Tunisians remember recently, the move could further destabilize confidence in the currency and its value, said Raouf Ben Hedi, an analyst at the news agency Tunisian Business News .

Due to Tunisia’s debt and the likelihood of default, Fitch maintained Tunisia’s CCC- credit rating in December. The rating agency then warned that a borrowing program allowing the Central Bank to directly finance the government “would endanger the credibility of the Central Bank and increase pressure on prices and the exchange rate” .

The government’s unprecedented request comes as other sources of funding become scarce.

As Tunisia’s presidential elections approach, negotiations over the IMF bailout plan remain deadlocked due to Mr. Saied’s reluctance to cut subsidies or wages in the public sector. He criticized the institution’s recommended reforms as “foreign diktats” and fired his finance minister, one of the main supporters of the proposed reforms.

“Political pressures can lead to expansionary monetary policies during election periods, which is the case in Tunisia ,” said Ben Hedi, warning that such policies could lead to recessions.

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