The Forex Club of Tunisia Partners with REFINITIV to spread awareness on Risks of Raw Material Prices Volatility

Under Mr. Taoufik RAJIHI auspices, the Minister in charge of Reforms, the Forex Club of Tunisia organized, in partnership with REFINITIV, a seminar on the Coverage against the Risks of Raw Material Prices Volatility.

In his opening speech, Minister Taoufik RAJIHI indicated that Tunisia chose this year, to get for the first time, coverage on financial asset markets, against the barrel price rise, which is a source of inflation, entailing a decrease in the Tunisian purchasing power, an increased trade deficit and a price adjustment of fuel and electricity.

He added that the deal is the first of its kind, and its assessment for the first six months is positive, since the market paid Tunisia almost 4 USD per insured barrel. Tunisia has partially covered itself, by paying an insurance that allows it to be reimbursed, for the difference between a barrel price above the floor one, being of 65 USD / barrel, while taking advantage of any decline, in the physical oil market, less than 65 USD. He recalled that the floor/basic price is well below the price LF2019 adopted and which is of 75 USD.

The Minister also recalled that coverage is a culture, which must develop in Tunisia, whether for rates (interest rate, exchange rate) or for raw materials (oil, wheat ...), because it allows ensuring a better management of the State’s cash position, in foreign and local currencies. He added that the government prepared a strategic hedging document, in relation to commodity prices fluctuations, which will be used by subsequent governments and he stressed that this culture should also be developed in public enterprises, especially STIR, STEG, Tunis Air and the Office of Cereals.

Mr. Habib Belhaj Gouider, President of APTBEF and Director General of BNA, insisted in his speech, for his part, on the problem of Fear of Hedge in Tunisia.

The Coverage fear: According to him, this is due to the lack of a clear framework in Tunisian companies that defines the hedging policy and guidelines, and which may ensure the continuity of the Coverage hedging function within the company as a main axis of governance, and it also provides coverage, in terms of accountability, of the executives involved in setting up and managing these operations.

The absence of a clear framework for Hedging activity makes any Coverage operation a short-term challenge for the company, being sanctioned by Market fluctuations and erratic movements, thus that coverage becomes “gambling”, while the purpose is not to defeat the market, but to be protected against the risks, it holds over time, so that their impact is globally neutral, regarding the company’s performance.

The President of APTBEF also said that the BCT, in cooperation with the APTBEF and the Forex Club of Tunisia, is moving forward on a very ambitious project, to overhaul the regulatory framework governing the hedging activity in Tunisia, including the interest rate risks, as well as the exchange rates or commodity prices, which would provide the place with a regulatory infrastructure, able of promoting this much needed hedging activity for the sustainability of our businesses and for the viability of our external balances.

Nadim Najjar, Managing Director, Middle East And Africa, REFINITI, said:  "Tunisian companies, being subject to market risks, especially public companies, are looking to institutionalize the risk coverage function, through the definition of a hedging policy to identify risks and quantify exposure and tolerance to these risks. This hedging policy also address a number of key questions, concerning accountability in decision-making, the proper procedure to adopt for the development of market risk management strategies, and the monitoring and reporting processes."

Tarek Fleihan
Corporate Communications
Middle East, Africa, Central & Eastern Europe
Refinitiv
Office  +97144536527

Mobile +971562162575
tarek.fleihan@refinitiv.com 

© Press Release 2019