It is the only second time the bank has lowered borrowing costs since 2011 and follows a 100 basis point rate cut in March responding to the coronavirus outbreak.

Tunisia's tourism-dependent economy shrank 21.6 pct in the second quarter of 2020 compared to the same period last year as a result of the pandemic and measures to curb it.

Foreign investment decreased by 14 percent in the first half of this year, to 1.1 billion Tunisian dinars ($398 million).

Central bank figures showed that Tunisia's foreign exchange reserves are now 21.12 billion dinars, equivalent to only 141 days of imports compared to 101 days of imports a year ago.

New Prime Minister Hichem Mechichi has said fixing public finances will be among the priorities for his government.

Tunisia is the only Arab state that managed a peaceful transition to democracy after the "Arab Spring" uprisings that swept through the region in 2011.

But its economy has been crippled by high debt and deteriorating public services, made worse by the global coronavirus outbreak, and a year of political uncertainty has complicated efforts to address those problems.

($1 = 2.7645 Tunisian dinars)

By Tarek Amara