IMF Executive Board Concludes 2010 Article IV Consultation with Tunisia

Public Information Notice (PIN) No. 10/121
September 1, 2010

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On August 27, 2010, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Tunisia.1


Thanks to sound policies and reforms implemented over the years, Tunisia entered the global crisis with strong fundamentals. The authorities’ timely and adequate policy response contributed to mitigating the impact of lower external demand in 2009. Moreover, the financial sector was not affected by the global financial crisis, as banks continued to rely on steady domestic resources. As a result, real gross domestic product (GDP) growth exceeded 3 percent in 2009. With solid exports of services and remittances as well as lower imports, the current account deficit declined and external reserves increased to the equivalent of 6 months of imports of goods and services by end-2009. Inflation remained moderate at 3.7 percent on average.

Economic growth has gathered momentum since mid-2009, on the back of the recovery in exports and solid domestic demand. At the same time, with even stronger import growth, the current account deficit widened significantly and external reserves declined during the first part of 2010, while remaining at a comfortable level. For the year as a whole, as the recovery in Tunisia’s main partners is expected to be modest, Tunisia’s real GDP growth is projected to reach 3.8 percent, supported by a rebound in industrial activity and investment, while agricultural performance will likely be weaker than last year. Inflation edged up slightly to5 percent (year-on-year) in May 2010, due to rising food prices, but non-food price increases have remained very moderate at around 3 percent.

Risks to the outlook are related to the significant downside risks to growth in Tunisia’s European partners, entailing a possible escalation of financial stress and contagion and a more severe impact than currently expected of the planned fiscal consolidation on still-weak domestic demand. The strength of the recovery in Europe will determine to a large extent the pace of Tunisian exports growth, tourism receipts and remittances. On the other hand, the recent depreciation of the euro could boost exports of the euro area, and could benefit Tunisian exports in sectors such as electrical and mechanical industries. The medium-term outlook is subject to similar risks, with Tunisia’s traditional partners expected to be a less buoyant source of external demand than prior to the crisis.

Executive Board Assessment

Executive Directors noted that Tunisia weathered the global crisis well, largely reflecting its sound macroeconomic management and structural reforms over the last decade, and timely policy responses since the onset of the crisis. Nonetheless, Directors observed that risks to the outlook remain on the downside given the economy’s high dependence on trade with Europe. Amid continued uncertainties for the external environment, they emphasized the need to maintain macroeconomic policies that support the recovery and to intensify structural reforms that would enhance competitiveness, diversify exports, and promote job creation.

Directors agreed that the fiscal stance in 2010 strikes the right balance between supporting growth and preserving the significant gains achieved in reducing the level of public debt. They welcomed the commitment to resume fiscal consolidation, starting with the 2011 budget, and to further bring down the public debt. This will help maintain investors’ confidence and retain sufficient fiscal space to mitigate the impact of possible future shocks. To that end, Directors stressed the importance of following through with plans to expand the tax base, reform the social security system, and contain public spending on wages and food and fuel subsidies, while maintaining public investment on infrastructure.

Noting that credit to the economy continues to grow strongly, Directors concurred that monetary and exchange rate policies should be geared toward avoiding a build-up of inflationary pressures and ensuring that the recent weakening of the external balance does not persist. They considered that the authorities’ medium-term objectives to move to inflation targeting, full convertibility of the dinar, and an open capital account could help the economy to adapt better to changes in the external environment. At the same time, Directors stressed that significant preparatory measures are still needed, particularly continued strengthening of the banking system, further deepening of the foreign exchange market, and improving the effectiveness of monetary policy transmission. While noting the progress achieved in strengthening the financial system, Directors encouraged the authorities to move forward with plans for further improvements, including measures that would lead to a continued reduction in the level of non-performing loans and strengthen financial sector supervision.

Directors stressed that continued structural reforms remain critical to boost growth, enhance competitiveness and address the problem of persistent high unemployment, particularly among the young. They welcomed the envisaged measures to increase productivity by improving the business environment, reforming labor market policy, increasing capital investment, and modernizing and strengthening the financial sector.

Tunisia: Selected Economic and Financial Indicators, 2005–11

2005 2006 2007 2008 2009 2010 2011


Production and income (percent change)


Nominal GDP

7.8 9.3 9.0 10.9 6.3 10.0 8.0

Real GDP

4.0 5.7 6.3 4.5 3.1 3.8 4.8

Consumer price index (CPI), average

2.0 4.5 3.1 5.0 3.7 4.8 3.5

Gross national savings (in percent of GDP)

20.8 21.6 21.5 22.1 21.8 23.1 23.3

Gross investment (in percent of GDP)

21.7 23.4 23.8 25.9 24.8 27.6 27.4

External sector (percent change)


Exports of goods, f.o.b. (in $)

9.8 9.9 29.6 26.6 -24.8 1.7 4.6

Imports of goods, f.o.b. (in $)

3.4 12.8 26.9 28.7 -21.9 7.1 3.0

Trade balance (in percent of GDP)

-6.1 -7.3 -7.4 -8.9 -8.5 -10.9 -10.4

Current account, excluding grants (in percent of GDP)

-0.9 -1.8 -2.4 -3.8 -2.9 -4.5 -4.1

Foreign direct investment (percent of GDP)

2.2 9.6 4.0 5.7 3.3 3.3 3.9

Terms of trade (deterioration -)

-2.3 -3.6 -2.0 0.8 8.0 -4.1 1.3

Real effective exchange rate (depreciation -) 1/

-4.2 -0.8 -2.8 -0.6 -0.6 ... ...

Central government (percent of GDP, unless


otherwise indicated) 2/


Total revenue, excluding grants and privatization

21.3 21.2 21.8 23.8 22.8 21.7 21.7

Total expenditure and net lending

24.2 24.0 24.5 24.8 25.8 24.8 24.5

Central government balance, excluding grants and privatization

-2.9 -2.8 -2.7 -1.0 -3.0 -3.0 -2.8

Central government balance, including grants,


excluding privatization

-2.7 -2.6 -2.6 -0.7 -2.7 -2.9 -2.5

Total government debt (foreign and domestic)

52.5 48.8 45.9 43.3 42.8 43.1 42.7

Money and credit (percent change)


Credit to the economy

6.3 6.6 9.7 14.0 10.3 11.4 ...

Broad money (M3) 3/

11.0 11.4 12.5 14.4 13.0 11.7 ...

Velocity of circulation (GDP/M3, deposit money banks)

1.76 1.72 1.62 1.52 1.50 1.45 ...

Interest rate (money market rate, in percent, e.o.p) 4/

5.00 5.33 5.10 4.90 4.10 4.05 ...

Official reserves


Gross official reserves (US$ billions, e.o.p)

4.4 6.8 7.9 9.0 10.6 10.1 10.6

In months of imports of goods and services, c.i.f. 5/

4.0 5.4 5.0 4.4 6.7 6.0 6.1

Total external debt


External debt (US$ billions)

18.1 18.5 20.1 20.6 21.4 19.9 20.2

External debt (in percent of GDP)

58.9 52.5 49.3 48.8 48.1 47.9 46.4

Debt service ratio (percent of exports of GNFS)

14.5 18.4 13.2 8.6 11.9 10.7 11.6

Memorandum items:


GDP at current prices (US$ billions)

32.3 34.4 38.9 44.9 43.5 43.5 44.7

GDP per capita (US$)

3,218 3,394 3,807 4,346 4,171 4,125 4,195

Unemployment rate (in percent) 6/

12.8 12.5 12.4 12.6 13.3 ... ...

Population (millions)

10.0 10.1 10.2 10.3 10.4 10.5 10.7

Exchange rate: dinar/US$ (average)

1.30 1.33 1.28 1.23 1.35

Sources: Tunisian authorities; and IMF staff estimates and projections.
1/Information Notice System.

2/Excludes the social security accounts.

3/ Financial system (deposit money banks and development banks).

4/ 2010 data is the money market rate at end-June.

5/ End of year reserves over current year imports of goods and services.

6/ New series based on the ILO definition of the Labor force.


1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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