IMF Executive Board Completes First Review under the Extended Fund Facility (EFF) Arrangement with Tunisia
IMF News, June 12, 2017
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Bibliographic details
- Published: June 12, 2017
Review outcome and disbursements
- On June 12, 2017, the IMF Executive Board completed the first review of Tunisia’s program under an Extended Fund Facility (EFF) arrangement.
- Completion of the review allows the authorities to draw the equivalent of SDR 227.2917 million (about US$314.4 million).
- Total disbursements under the arrangement after the review: equivalent of SDR 454.5837 million (about US$628.8 million).
- The four-year EFF arrangement amount: SDR 2.045625 billion (about US$2.83 billion, 375 percent of Tunisia’s quota).
- The Executive Board approved waivers for non-observance of performance criteria on net international reserves, net domestic assets, and the primary fiscal deficit.
- The Executive Board approved the authorities’ request for re-phasing of remaining access into six semi-annual installments.
Program objectives and fiscal targets
- Program aim: reduce the fiscal deficit to stabilize public debt below 70 percent of GDP by 2020 while raising investment and social spending.
- Additional program aims:
- More exchange rate flexibility combined with maintaining inflation below 4 percent.
- Ensure pension sustainability and better protect vulnerable households.
- Accelerate reforms to improve governance and foster private sector-led, job-creating growth.
Policy recommendations and priority actions (as stated by Mr. Mitsuhiro Furusawa)
- Fiscal policy and revenue measures:
- Adopt and implement the 2018 tax package.
- Make the new Large Taxpayers Unit operational to increase revenues and fairness.
- Re-apply the fuel price adjustment mechanism to avoid regressive subsidies.
- Move quickly with civil service reform to improve service quality and reduce the wage bill.
- Enact comprehensive reforms to ensure pension sustainability and establish an effective safety net for vulnerable households.
- Improve management of public enterprises.
- Monetary and exchange rate policy:
- Continued tightening of monetary policy; the Central Bank of Tunisia recently increased its policy interest rate.
- Further hikes may be warranted if inflationary pressures persist.
- Implementation of the FX auction mechanism to improve operation and transparency of the FX market.
- Financial sector reforms:
- Continue restructuring public banks; next steps include changes in the regulatory and legal frameworks to support reduction of non-performing loans.
- Implement further bank supervision measures, such as starting the resolution committee’s operations.
- Governance and business climate:
- Enhance governance and improve the business environment.
- Establishment of the high anti-corruption authority and new institutions such as the planned one-stop shop for investors.
- Participation in the G20 Compact with Africa.
- External support:
- Continued support of the donor community for Tunisia’s reform efforts is deemed crucial.
Selected economic and financial indicators (2015–18)
- Production and income (percent change)
- Real GDP: 2015 = 1.1; 2016 = 2.0; 2017 Prel. = 1.0; 2017 Prog. = 3.0; 2018 Proj. = 2.3
- GDP deflator: 2015 = 3.6; 2016 = 5.1; 2017 Prel. = 5.7; 2017 Prog. = 3.3; 2018 Proj. = 5.3; 4.2
- Consumer price index (CPI), average: 2015 = 4.9; 2016 = 3.9; 2017 Prel. = 3.7; 2017 Prog. = 4.5; 2018 Proj. = 4.4
- Consumer price index (CPI), end of period: 2015 = 4.1; 2016 = 4.0
- Savings and investment (percent of GDP)
- Gross national savings: 2015 = 12.5; 2016 = 14.1; 2017 Prel. = 13.5; 2017 Prog. = 15.3; 2018 Proj. = 13.6; 15.1
- Gross investment: 2015 = 21.4; 2016 = 21.8; 2017 Prel. = 22.5; 2017 Prog. = 22.3; 2018 Proj. = 22.1; 23.2
- Central government (percent of GDP)
- Total revenue (excluding grants): 2015 = 23.9; 2016 = 22.6; 2017 Prel. = 24.1; 2017 Prog. = 24.0; 2018 Proj. = 24.5
- Total expenditure and net lending: 2015 = 28.8; 2016 = 28.5; 2017 Prel. = 28.7; 2017 Prog. = 28.0; 2018 Proj. = 30.2; 30.1
- Wage Bill: 2015 = 14.5; 2016 = 13.8; 2017 Prel. = 14.8
- Note: The 2018 wage bill includes a cost of 0.6 percent of GDP for the voluntary departure packages.
- Social expenditures: 2015 = 1.6; 2016 = 1.7; 2017 Prel. = 1.9
- Central government overall balance (including grants): 2015 = -5.3; 2016 = -4.4; 2017 Prel. = -5.9; 2017 Prog. = -3.5; 2018 Proj. = -5.4
- Structural fiscal balance: 2015 = -4.6; 2016 = -4.0; 2017 Prel. = -5.6; 2017 Prog. = -3.3; 2018 Proj. = -6.1; -4.3
- Central government debt (foreign and domestic): 2015 = 57.2; 2016 = 54.6; 2017 Prel. = 62.9; 2017 Prog. = 54.5; 2018 Proj. = 69.1; 72.1
- Foreign currency public debt (percent of total debt): 2015 = 61.7; 2016 = 68.0; 2017 Prel. = 64.1; 2017 Prog. = 68.6; 2018 Proj. = 67.8; 70.6
- External debt and debt service
- External debt (in billions of US$): 2015 = 27.0; 2016 = 29.3; 2017 Prel. = 30.7; 2017 Prog. = 29.0; 2018 Proj. = 30.6
- External debt (in percent of GDP): 2015 = 64.9; 2016 = 69.0; 2017 Prel. = 70.0; 2017 Prog. = 71.4; 2018 Proj. = 76.9; 80.7
- Debt service ratio (percent of exports of GNFS): 2015 = 10.1; 2016 = 12.8; 2017 Prel. = 12.2; 2017 Prog. = 16.7; 2018 Proj. = 18.4; 16.2
- Money and credit (percent change)
- Credit to the economy: 2015 = 6.2; 2016 = 7.1; 2017 Prel. = 9.7; 2017 Prog. = 7.3; 2018 Proj. = 7.2; 7.4
- Broad money (M3 of the financial system): 2015 = 6.5; 2016 = 8.1; 2017 Prel. = 6.8; 2017 Prog. = 10.0; 2018 Proj. = 8.3
- Velocity of circulation (GDP/M2): 2015 = 1.4; 2016 = 1.5
- External sector (percent change and levels)
- Exports of goods, f.o.b. (in billions of US$): 2015 = -15.9; 2016 = -2.6; 2017 Prel. = -3.6; 2017 Prog. = 5.8; 2018 Proj. = -1.5; 0.4
- Imports of goods, f.o.b. (in billions of US$): 2015 = -18.4; 2016 = -3.8; 2017 Prel. = -0.6
- Exports of goods, f.o.b. (volume): 2015 = -2.8; 2016 = 0.2; 2017 Prel. = 5.5; 2017 Prog. = 2.4
- Import of goods, f.o.b. (volume): 2015 = -2.5; 2016 = 3.5; 2017 Prel. = 2.1; 2017 Prog. = 4.8
- Trade balance (in percent of GDP): 2015 = -11.7; 2016 = -10.4; 2017 Prel. = -11.4; 2017 Prog. = -10.1; 2018 Proj. = -11.3; -11.1
- Current account (in percent of GDP): 2015 = -8.9; 2016 = -7.7; 2017 Prel. = -9.0; 2017 Prog. = -7.0; 2018 Proj. = -8.5; -8.1
- Foreign direct investment, net (in percent of GDP): 2015 = 2.6; 2016 = 2.2; 2017 Prel. = 2.8
- Terms of trade (- = deterioration): 2015 = 3.1; 2016 = -0.9
- Official reserves
- Gross official reserves (in billions of US$, e.o.p): 2015 = 5.9; 2016 = 8.5; 2017 Prel. = 8.2
- In months of next year's imports of goods and services, c.i.f.: 2015 = 4.6; 2016 = 3.4; 2017 Prel. = 4.3
- Memorandum items
- GDP at current prices (TD millions): 2015 = 84,656; 2016 = 91,658; 2017 Prel. = 90,376; 2017 Prog. = 97,495; 2018 Proj. = 97,397; 104,603
- GDP at current prices (in billions of US$): 2015 = 43.2; 2016 = 44.0; 2017 Prel. = 42.1; 2017 Prog. = 44.4; 2018 Proj. = 39.9; 39.3
Financial sector restructuring and governance
- Important progress reported in restructuring public banks.
- Next steps:
- Changes in regulatory and legal frameworks to support reduction of non-performing loans.
- Implement further bank supervision measures, including starting the resolution committee’s operations.
- Governance and business climate measures include establishment of a high anti-corruption authority and planned one-stop shop for investors.
Italic: IMF press release dated June 12, 2017, Press Release No. 17/217.