Press Release: IMF Executive Board Approves US$2.9 billion Extended Arrangement under the Extended Fund Facility for Tunisia
IMF News, May 20, 2016
Source details
- Canonical URL
- Press Release: IMF Executive Board Approves US$2.9 billion Extended Arrangement under the Extended Fund Facility for Tunisia
Other formats
Bibliographic details
- Published: May 20, 2016
Executive Board decision and financing
- The Executive Board approved a 48-month extended arrangement under the Extended Fund Facility (EFF) for Tunisia for an amount equivalent to SDR 2.04 billion (about US$2.9 billion, or 375 percent of Tunisia’s quota).
- 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.
Program objectives and scope
- The 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.
- Implementation is centered around four pillars:
- Consolidating macroeconomic stability.
- Reforming public institutions.
- Promoting financial intermediation.
- Improving the business climate.
Key policy recommendations and priorities (as stated by Mr. Mitsuhiro Furusawa, Deputy Managing Director, and Acting Chair)
- Preserve macroeconomic stability while addressing fiscal, external, structural, and social challenges.
- Demonstrate strong commitment to sound policies, early and decisive action on key structural reforms, and consensus-building and communication efforts, particularly on socially difficult reforms.
- Fiscal policy:
- Adopt a prudent fiscal policy that puts public debt on a downward path to ease financing constraints, reduce external imbalances, and ensure sustainability.
- Implement a more progressive and efficient tax system to broaden the tax base and improve equity.
- Monitor fiscal risks and accelerate governance efforts.
- Public administration and social policy:
- Undertake a comprehensive civil service reform to improve public service delivery and increase fiscal space for priority investment and well-targeted social spending.
- Monetary and exchange rate policy:
- Enhance central bank independence to strengthen the effectiveness of monetary policy.
- Allow greater exchange rate flexibility to strengthen reserve buffers and facilitate external adjustment.
- Banking and financial sector:
- Adopt and implement critical banking sector legislation.
- Restructure public banks and strengthen the banking resolution and supervision frameworks.
- Develop credit bureaus and relax caps on lending rates to increase access to finance.
- Implement a risk-based supervision system, a proper resolution framework, and strengthened regulations.
- Implement the new bankruptcy law and support banks in resolving non-performing loans.
- Promote financial inclusion through the development of microfinance institutions.
- Business climate and structural reforms:
- Streamline existing business procedures and enhance market access through a new investment code.
- Implement the competition law and the law on public-private partnerships.
- Simplify tax, customs, and business formalities; about 530 such formalities were completed over the past two years to reduce administrative burden.
- Proceed gradually with labor market reform, building consensus to finalize a national employment strategy addressing skills mismatch and worker protection.
Recent economic developments (Annex summary)
- With the implementation of the IMF-supported Stand-By Arrangement (SBA) that expired in December 2015, Tunisia preserved macroeconomic stability and initiated fiscal and banking reforms amid a prolonged political transition, spillovers from the crisis in Libya, and exogenous shocks, including terror attacks.
- Remaining challenges: weak economic activity, low employment, lingering social tensions, deteriorated spending composition, and high external imbalances.
- In 2015 the authorities formulated a five-year economic vision with five pillars: effective public institutions; economic diversification; human development and social inclusion; regional development; and green economic growth.
Program summary measures (selected)
- Consolidating macroeconomic stability:
- Fiscal policy that creates space for priority capital spending and aims at putting public debt on a downward path.
- Prudent monetary policy aimed at containing inflation.
- Greater exchange rate flexibility to preserve reserves against exogenous shocks.
- Reforming public institutions:
- Civil service reform to improve public service delivery and contain the wage bill.
- Progress energy subsidy reform while strengthening the social safety net.
- Foster monitoring and performance of State Owned Enterprises (SOEs).
- Boost equity-friendly revenue mobilization.
- Strengthen public financial management and transparency, including enhanced anti-corruption initiatives.
- Promoting financial intermediation:
- Continue public bank restructuring.
- Strengthen supervision, resolution frameworks, and regulations.
- Implement new bankruptcy law to address non-performing loans.
- Improving the business climate:
- Adopt a new investment code.
- Streamline tax incentives and simplify procedures to reduce entry barriers and protect investor rights.
Selected economic and financial indicators (as presented)
- Real GDP (percent change): 2012: 3.9; 2013: 2.4; 2014: 2.3; 2015 (Pre.): 0.8; 2016 (Proj.): 2.0; 2017 (Proj.): 3.0.
- GDP deflator (percent change): 2012: 5.0; 2013: 4.3; 2014: 5.2; 2015 (Pre.): 4.9; 2016 (Proj.): 5.1; 2017 (Proj.): 3.3.
- Consumer price index (CPI), end of period: 2012: 5.8; 2013: 5.9; 2014: 5.7; 2015 (Pre.): 4.8; 2016 (Proj.): 4.1; 2017 (Proj.): 4.0.
- Gross national savings (in percent of GDP): 2012: 16.1; 2013: 14.4; 2014: 14.0; 2015 (Pre.): 12.9; 2016 (Proj.): 14.1; 2017 (Proj.): 15.3.
- Gross investment (in percent of GDP): 2012: 24.4; 2013: 22.7; 2014: 23.2; 2015 (Pre.): 21.8; 2016 (Proj.): 22.3; 2017 (Proj.): 22.3.
- Central government total revenue (excluding grants, percent of GDP): 2012: 24.0; 2013: 24.9; 2014: 25.4; 2015 (Pre.): 23.0; 2016 (Proj.): 23.9; 2017 (Proj.): 24.1.
- Central government total expenditure and net lending (percent of GDP): 2012: 29.8; 2013: 32.4; 2014: 29.7; 2015 (Pre.): 28.5; 2016 (Proj.): 28.0; 2017 (Proj.): 28.0.
- Central government overall balance (excluding grants, percent of GDP): 2012: -5.8; 2013: -7.5; 2014: -4.3; 2015 (Pre.): -5.5; 2016 (Proj.): -4.6; 2017 (Proj.): -3.9.
- Central government overall balance (excluding grants, cash basis, percent of GDP): 2012: -9.8; 2013: -5.4; 2014: -4.7.
- Structural fiscal balance (percent of GDP): 2012: -5.7; 2013: -6.4; 2014: -4.0; 2015 (Pre.): -3.3.
- Change in the structural fiscal balance (+: improvement, percent of GDP): 2012: -2.4; 2013: -0.7; 2014: 2.1; 2015 (Pre.): 0.0; 2016 (Proj.): 0.3; 2017 (Proj.): 0.7.
- Central government debt (foreign and domestic, percent of GDP): 2012: 45.5; 2013: 44.5; 2014: 49.0; 2015 (Pre.): 53.2; 2016 (Proj.): 54.6; 2017 (Proj.): 54.5.
- Foreign currency public debt (percent of total debt): 2012: 61.6; 2013: 59.6; 2014: 62.6; 2015 (Pre.): 68.0; 2016 (Proj.): 68.6.
- External debt (US$ billions): 2012: 26.0; 2013: 26.7; 2014: 29.3; 2015 (Pre.): 30.7.
- External debt (in percent of GDP): 2012: 52.9; 2013: 57.0; 2014: 61.4; 2015 (Pre.): 63.5; 2016 (Proj.): 69.0; 2017 (Proj.): 71.4.
- Debt service ratio (percent of exports of GNFS): 2012: 12.1; 2013: 9.5; 2014: 8.4; 2015 (Pre.): 10.2; 2016 (Proj.): 12.8; 2017 (Proj.): 16.7.
- Credit to the economy (percent change): 2012: 8.8; 2013: 6.8; 2014: 9.4; 2015 (Pre.): 6.4; 2016 (Proj.): 7.1; 2017 (Proj.): 7.3.
- Broad money (M3 of the financial system, percent change): 2012: 6.6; 2013: 7.8; 2014: 5.3; 2015 (Pre.): 6.5.
- Exports of goods, f.o.b. (in $ percent change): 2012: -1.9; 2013: -15.9; 2014: -2.6; 2015 (Pre.): 5.5.
- Imports of goods, f.o.b. (in $ percent change): 2012: -0.5; 2013: 1.8; 2014: -18.4; 2015 (Pre.): -1.7.
- Trade balance (in percent of GDP): 2012: -13.6; 2013: -12.8; 2014: -14.0; 2015 (Pre.): -11.5; 2016 (Proj.): -10.4; 2017 (Proj.): -10.1.
- Current account (in percent of GDP): 2012: -8.3; 2013: -8.4; 2014: -9.1; 2015 (Pre.): -8.9; 2016 (Proj.): -7.7; 2017 (Proj.): -7.0.
- Foreign direct investment, net (in percent of GDP): 2012: 1.5; 2013: 1.1; 2014: 2.5; 2015 (Pre.): 2.2.
- Terms of trade (deterioration -): 2012: 0.2; 2013: 1.4; 2014: 4.2; 2015 (Pre.): 3.7; 2016 (Proj.): -1.5.
- Gross official reserves (US$ billions, e.o.p): 2012: 8.7; 2013: 7.7; 2014: 7.6; 2015 (Pre.): 8.3; 2016 (Proj.): 8.5.
- Gross official reserves (in months of next year's imports of goods and services, c.i.f.): 2012: 3.4; 2013: 4.6; 2014: 4.5.
- GDP at current prices (TD millions): 2012: 70,354; 2013: 75,152; 2014: 80,816; 2015 (Pre.): 85,491; 2016 (Proj.): 91,658; 2017 (Proj.): 97,495.
- GDP at current prices (US$ billions): 2012: 45.0; 2013: 46.3; 2014: 47.6; 2015 (Pre.): 43.6; 2016 (Proj.): 44.0; 2017 (Proj.): 44.4.
- Real effective exchange rate (percent change, depreciation -): 2012: -1.49; 2013: -1.90; 2014: -0.20.
- Interest rate (money market rate, in percent, e.o.p): 2012: 4.7.
- Stock market TUNINDEX (12/31/1997=1000): 2012: 4,580; 2013: 4,381; 2014: 4,674.
Source: Press Release No. 16/238, May 20, 2016, International Monetary Fund.