May 20, 2016
IMF COMMUNICATIONS DEPARTMENT |
| Media Relations |
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| E-mail: media@imf.org |
| Phone: 202-623-7100 |
The Executive Board of the International Monetary Fund (IMF) today approved a 48-month extended arrangement under the Extended Fund Facility (EFF) with Tunisia for an amount equivalent to SDR 2.04 billion (about US$2.9 billion, or 375 percent of Tunisia’s quota) to support the country’s economic and financial reform program detailed in the authorities’ economic vision. This program aims at promoting stronger and more inclusive growth by consolidating macroeconomic stability, reforming public institutions—including the civil service, facilitating financial intermediation, and improving the business climate. Following the Board’s decision, an amount equivalent to SDR 227.29 million (about US$319.5 million) is available for immediate disbursement; the remaining amount will be phased in over the duration of the program, subject to eight program reviews.
Following the Executive Board discussion on Tunisia, Mr. Mitsuhiro Furusawa, Deputy Managing Director, and Acting Chair, said:
“Tunisia’s economy has shown resilience but continues to face important fiscal, external, structural, and social challenges. Macroeconomic stability has been preserved and important reforms have been initiated, including with the support of the recently expired Fund-supported program.
“The authorities have developed a comprehensive and new economic program—to be supported by a four-year Extended Fund Facility—to address remaining vulnerabilities. The program aims at consolidating macroeconomic stability and promoting more inclusive growth. Strong commitment to sound policies, early and decisive action on key structural reforms, and consensus-building and communication efforts, particularly on socially difficult reforms, are crucial to create jobs and yield the largest gains for Tunisia’s population.
“A prudent fiscal policy that puts public debt on a downward path will help ease financing constraints, reduce external imbalances, and ensure sustainability. A comprehensive civil service reform will improve public service delivery and increase fiscal space for priority investment and well-targeted social spending. A more progressive and efficient tax system will broaden the tax base and improve equity. Fiscal risks should continue to be monitored; and governance efforts, accelerated.
“Enhanced central bank independence will strengthen the effectiveness of monetary policy, while greater exchange rate flexibility will strengthen reserve buffers and facilitate external adjustment.
“The adoption of critical banking sector legislation is welcome. Further action is needed to restructure public banks and strengthen the banking resolution and supervision frameworks. Developing credit bureaus and relaxing caps on lending rates will increase access to finance.
“Efforts to streamline existing business procedures and enhance market access through a new investment code and the implementation of the competition law and the law on public-private partnerships are essential to promote private-sector development and create jobs.”
ANNEX
Recent Economic Developments
With the implementation of the IMF-supported Stand-By Arrangement (SBA) that expired in December 2015, Tunisia has managed to preserve macroeconomic stability and initiate fiscal and banking reforms in a context marked by a prolonged political transition, spillovers from the crisis in Libya, and numerous exogenous shocks, including terror attacks. However, important challenges remain: economic activity is weak, employment is low, social tensions linger, spending composition has deteriorated, and external imbalances are high.
To tackle these challenges, the authorities formulated in 2015 a five-year economic vision, which is being developed into a detailed plan. This vision aims at promoting stronger and more inclusive growth by transforming Tunisia’s growth model through a strategy based on macroeconomic stability and including five pillars: effective public institutions; economic diversification; human development and social inclusion; regional development; and green economic growth.
Program Summary
The new program aims at achieving more inclusive growth and create jobs, with implementation centered around four pillars: i) consolidating macroeconomic stability; ii) reforming public institutions, iii) promoting financial intermediation, iv) and improving the business climate.
Consolidating macroeconomic stability . Key measures include: (i) an appropriate fiscal policy that creates space for priority capital spending and aims at putting public debt on a downward path; (ii) a prudent monetary policy aimed at containing inflation; and (iii) greater exchange rate flexibility that preserves reserves in the face of important exogenous shocks.
Reforming public institutions and modernizing the public administration to improve its efficiency and effectiveness and support inclusive growth remains a priority. The policy package will include reforming civil service to improve public service delivery and help contain the wage bill, progressing with energy subsidy reform while strengthening the social safety net, fostering the monitoring and performance of the State Owned Enterprises (SOEs), boosting equity-friendly revenue mobilization, and strengthening public financial management and transparency efforts, including through enhanced anti-corruption initiatives.
Promoting financial intermediation . Important steps have been taken towards establishing a modern banking system, subject to strong supervision and competition. The new program will include measures aimed at strengthening banking sector resilience and promoting financial intermediation. This requires continued progress on public bank restructuring, a risk-based supervision system, a proper resolution framework, and strengthened regulations. All these reforms, and the implementation of the new bankruptcy law, will help banks actively resolve their non-performing loans. Financial inclusion will be helped through the development of microfinance institutions.
Improving the business climate. Key measures include improving the adoption of a new investment code, the streamlining of tax incentives, and the simplification of procedures to reduce entry barriers and protect investor rights. The simplification of about 530 tax, customs, and business formalities completed over the past two years are expected to reduce administrative burden faced by businesses and increase government efficiency. Labor market reform will proceed gradually by building upon consensus amongst stakeholders to finalize a national employment strategy to address the main labor market issues including skills mismatch and worker protection.
| Tunisia: Selected Economic and Financial Indicators, 2012–17 | |||||||||||
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| 2015 | 2016 | 2017 | |||||||||
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2012 | 2013 | 2014 | Pre. | Proj. | ||||||
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Production and income (percent change) |
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Real GDP |
3.9 | 2.4 | 2.3 | 0.8 |
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2.0 | 3.0 | ||||
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GDP deflator |
5.0 | 4.3 | 5.2 | 4.9 |
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5.1 | 3.3 | ||||
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Consumer price index (CPI), average |
5.1 | 5.8 | 4.9 | 4.9 |
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3.9 | 3.9 | ||||
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Consumer price index (CPI), end of period |
5.9 | 5.7 | 4.8 | 4.1 |
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4.0 | 3.9 | ||||
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Gross national savings (in percent of GDP) |
16.1 | 14.4 | 14.0 | 12.9 |
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14.1 | 15.3 | ||||
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Gross investment (in percent of GDP) |
24.4 | 22.7 | 23.2 | 21.8 |
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21.8 | 22.3 | ||||
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Central government (percent of GDP, unless indicated otherwise 1/ |
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Total revenue (excluding grants) |
24.0 | 24.9 | 25.4 | 23.0 |
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23.9 | 24.1 | ||||
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Total expenditure and net lending |
29.8 | 32.4 | 29.7 | 28.5 |
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28.5 | 28.0 | ||||
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Central government overall balance (excluding grants) |
-5.8 | -7.5 | -4.3 | -5.5 |
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-4.6 | -3.9 | ||||
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Central government overall balance (excluding grants, cash basis) |
-5.5 | -9.8 | -5.4 | -4.7 |
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-4.6 | -3.9 | ||||
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Structural fiscal balance 2/ |
-5.7 | -6.4 | -4.3 | -4.3 | -4.0 | -3.3 | |||||
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Change in the structural fiscal balance (+: improvement) |
-2.4 | -0.7 | 2.1 | 0.0 | 0.3 | 0.7 | |||||
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Central government debt (foreign and domestic) |
45.5 | 44.5 | 49.0 | 53.2 |
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54.6 | 54.5 | ||||
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Foreign currency public debt (percent of total debt) |
61.6 | 59.6 | 62.6 | 62.6 |
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68.0 | 68.6 | ||||
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Total external debt |
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External debt (US$ billions) |
24.0 | 26.0 | 26.7 | 26.7 |
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29.3 | 30.7 | ||||
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External debt (in percent of GDP) |
52.9 | 57.0 | 61.4 | 63.5 | 69.0 | 71.4 | |||||
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Debt service ratio (percent of exports of GNFS) |
12.1 | 9.5 | 8.4 | 10.2 |
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12.8 | 16.7 | ||||
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Money and credit (percent change) |
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Credit to the economy |
8.8 | 6.8 | 9.4 | 6.4 | 7.1 | 7.3 | |||||
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Broad money (M3 of the financial system) |
8.4 | 6.6 | 7.8 | 5.3 |
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6.5 | 6.8 | ||||
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Velocity of circulation (GDP/M2) |
1.46 | 1.45 | 1.45 | 1.46 |
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1.47 | 1.46 | ||||
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External sector (percent change) |
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Exports of goods, f.o.b. (in $) |
-4.6 | 0.3 | -1.9 | -15.9 |
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-2.6 | 5.8 | ||||
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Imports of goods, f.o.b. (in $) |
2.1 | -0.5 | 1.8 | -18.4 |
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-4.3 | 3.9 | ||||
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Exports of goods, f.o.b. (volume) |
1.6 | -0.7 | -2.9 | -2.8 |
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1.6 | 5.5 | ||||
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Import of goods, f.o.b. (volume) |
9.0 | -0.5 | 2.1 | -1.7 |
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3.5 | 2.1 | ||||
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Trade balance (in percent of GDP) |
-13.6 | -12.8 | -14.0 | -11.5 |
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-10.4 | -10.1 | ||||
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Current account (in percent of GDP) |
-8.3 | -8.4 | -9.1 | -8.9 | -7.7 | -7.0 | |||||
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Foreign direct investment, net (in percent of GDP) |
1.5 | 1.1 | 2.3 | 2.5 |
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2.1 | 2.2 | ||||
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Terms of trade (deterioration -) |
0.2 | 1.1 | 1.4 | 4.2 | 3.7 | -1.5 | |||||
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Official reserves |
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Gross official reserves (US$ billions, e.o.p) |
8.7 | 7.7 | 7.7 | 7.6 |
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8.3 | 8.5 | ||||
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In months of next year's imports of goods and services, c.i.f. |
3.9 | 3.4 | 4.2 | 4.3 |
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4.6 | 4.5 | ||||
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Memorandum items: |
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GDP at current prices (TD millions) |
70,354 | 75,152 | 80,816 | 85,491 |
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91,658 | 97,495 | ||||
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GDP at current prices (US$ billions) |
45.0 | 46.3 | 47.6 | 43.6 |
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44.0 | 44.4 | ||||
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Real effective exchange rate (percent change, depreciation -) 3/ |
-1.49 | -1.90 | -0.20 | ... | ... | ... | |||||
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Interest rate (money market rate, in percent, e.o.p) |
3.3 | 4.8 | 4.7 | … | … | ... | |||||
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Stock market TUNINDEX (12/31/1997=1000) |
4,580 | 4,381 | 4,674 | … | … | … | |||||
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Sources: Tunisian authorities; and IMF staff estimates and projections. |
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1/ Excludes the social security accounts. |
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2/ Excludes banking recapitalization costs and one-off arrears payments for energy subsidies. Different figures from sixth SBA review account for updated output gap estimation. |
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3/ Information Notice System. |
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