Statement by IMF Staff Mission to Tunisia

Press Release No. 06/01
January 4, 2006

The following statement was issued by an International Monetary Fund (IMF) staff mission in Tunis on December 19, 2005:

"An International Monetary Fund mission led by Mr. Domenico Fanizza has been in Tunis since December 5, 2005 to conduct the regular consultations under Article IV of the IMF Articles of Agreement, which requires an annual review of the economic policies of all IMF member countries. This review will conclude with the preparation of a report that will be discussed and approved by the Executive Board of the IMF in March 2006.

"The preliminary conclusions of the mission as well as the final report on the consultations will be published on the IMF's website. They can be found, along with reports for previous years and other IMF publications on Tunisia, at the following Internet address: www.imf.org/external/country/TUN/index.htm.

"The discussions focused on the economic policies currently being implemented by the authorities, as well as the short- and medium-term economic outlook. The mission held wide-ranging discussions with His Excellency Mr. Baccar, Governor of the Central Bank of Tunisia, as well as His Excellency Mr. Kechiche, Minister of Finance, His Excellency Mr. Jouini, Minister of Economic Development and International Cooperation, His Excellency Mr. Zenaidi, Minister of Commerce and Craft, His Excellency Mr. Laroussi, Minister of Employment and Vocational Integration of Youth, His Excellency Mr. Chelbi, Minister of Industry, Energy, and SME, and His Excellency Mr. Haddad, Minister of Tourism. The mission met with representatives of the banking and business sectors, and with the social partners. The IMF staff would like to thank the Tunisian authorities for their warm welcome, and for the high quality and depth of the discussions.

"Economic performance remained strong in 2005. Macroeconomic stability was maintained, despite rising oil prices on the international markets, stagnating European demand, and the negative, albeit limited, impact of the expiration of the Agreement on Textiles and Clothing. The real GDP growth rate stands at around 4¼ percent, inflation remains under control, and the unemployment rate continues to decline. The external current account deficit is projected at 1.8 percent of GDP, an improvement of almost 0.2 percentage point over 2004 and this, together with substantial capital inflows, made it possible to increase international reserves to the equivalent of over 3½ months of imports of goods and services.

"Tunisia's economic outlook remains broadly favorable, with relatively high growth in a stable macroeconomic environment reflecting appropriate economic policies. Nonetheless, to catch up with per capita income levels in the OECD emerging countries and significantly reduce unemployment, which is increasingly affecting graduates, additional efforts are required. Further and deeper reforms are needed. Economic reforms have transformed the structure of the economy, but their benefits could be eroded unless the impetus for reform is maintained. The mission identified the following priorities:

Improve the business climate. Simple, stable, and transparent rules are essential to make Tunisia more attractive for private investment. Tax reform also has an important role to play in this area.

Strengthen the banking and financial sector. The mission welcomes the reforms introduced by the authorities and supports the strategy of the Central Bank of Tunisia to improve the quality of banks' portfolios. This strategy focuses on strengthening the credit culture, promoting good governance, and improving the legislative and judicial framework for the recovery of loans.

Consolidate the macroeconomic policies needed to advance the authorities' strategy of gradual liberalization of the external capital account to make it possible to finance higher levels of investment. This involves a gradual transition to a floating exchange rate, reform of the monetary policy framework, and fiscal consolidation.

Liberalize the labor market. The mission welcomes the authorities' active labor market policies to facilitate matching labor supply with demand. However, the mission encourages the authorities to consider easing labor market regulations while bearing in mind the importance of the ongoing dialogue among the social partners."



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