Press Release: Statement by IMF Managing Director Rodrigo de Rato at the Conclusion of his Visit to Tunisia

March 3, 2005

Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), made the following statement on March 3, 2005 in Tunis, at the conclusion of his visit to Tunisia:

"I have today had the privilege of meeting President Mr. Ben Ali. I also had very fruitful discussions with Prime Minister Mohammed Ghannouchi, Governor Taoufik Baccar, Finance Minister Mohamed Kechiche, and President of the Parliament Fouad Mebazaa. I would like to thank the Tunisian authorities for their warm welcome. Tunisia has achieved much in terms of economic growth and improvement in social conditions as the result of reforms it has undertaken during the last decade. The IMF has supported these efforts with technical assistance and continuous policy advice. Tunisia has also provided an opportunity for the IMF to reflect on the importance of national ownership of policies for ensuring the success of reform efforts.

"Our meetings today focused on the main economic challenges Tunisia is facing. The objective is to improve the already strong economic record, raise growth, reduce unemployment, and in time place Tunisia at par with lower-tier OECD income levels. This will require both policies that favor private investment and overall productivity growth in the economy, and a strengthened macroeconomic policy framework.

"I congratulated the President for the emphasis he placed on economic reform in his electoral program. Further liberalization and improvement in the business climate are, however, essential. We agreed that export orientation will have to continue to be the cornerstone of Tunisia's development strategy, ensuring both high growth and external sustainability. In this regard, the recent expiration of the Agreement on Textiles and Clothing constitutes an additional reason to quicken the pace of economic reform.

"Against this background, the ongoing integration with the EU in the context of the New Neighborhood Policy initiative is a timely opportunity for accelerating structural reforms by harmonizing political, economic, legal and institutional frameworks with European standards. I would like to stress the importance of complementing trade integration with the EU with trade liberalization on a multilateral basis, by reducing tariffs on products from non-EU countries. "My visit to the Maghreb has, moreover, convinced me that Tunisia, and its neighbors, would greatly benefit from increased integration within the Maghreb region.

"To complete the opening of the economy, Tunisia has started a gradual liberalization of the external capital account and has taken such important steps as allowing foreign investors to enter the domestic securities market and rated domestic companies to borrow abroad. This is a new and important stage in the reform process but one which requires a strengthening of fiscal, monetary and exchange rate policies. On the fiscal front, the aim is to continue to lower the government debt-to-GDP ratio, which, although falling, remains high. The Central Bank has already made significant progress toward a more dynamic monetary policy framework, with price stability as its overriding objective, while taking steps to further deepen financial markets. A flexible approach to exchange rate management has served Tunisia well over the years. I believe that the recent elimination of the surrender requirement on export receipts will deepen the foreign exchange market and help the transition to a floating exchange rate regime. I also share the view that addressing the existing vulnerabilities in the banking sector is key to the success of this strategy. I am encouraged by the good progress made by the authorities in implementing the recommendations of the Financial Sector Assessment Program conducted in collaboration with the World Bank and the Fund. If continued, these efforts should succeed in reducing the non-performing loans in the banking system, a constraint that hampers growth.

"Finally, I would like to commend Tunisia's support for transparency in policy making. The authorities have systematically published the concluding statements of IMF missions visiting Tunisia and all Fund documents on Tunisia. Tunisia is one of the few countries in the region that have subscribed to the IMF Special Data Dissemination Standard, which reflects international best practice in the area of economic and financial statistics."


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