IMF Concludes the 2017 Article IV Consultation and Announces Staff-Level Agreement for Completion of Second Review of Tunisia’s Extended Fund Facility

IMF News, December 13, 2017

Source details

Canonical URL: IMF Concludes the 2017 Article IV Consultation and Announces Staff-Level Agreement for Completion of Second Review of Tunisia’s Extended Fund Facility

IMF mission led by Mr. Björn Rother visited Tunis from November 30 to December 13, 2017, to complete the 2017 Article IV consultation and conduct the second review of Tunisia’s economic program under the four-year Extended Fund Facility (EFF) approved in May 2016 (Press Release No. 16/238).
The IMF team and the Tunisian authorities reached staff-level agreement on the policies needed to complete the second review of Tunisia’s EFF.
Completion of the review would make available SDR 227.3 million (about US$320 million), bringing total disbursements under the EFF to about US$1 billion.

Growth has firmed up to reach about 2 percent, supported by sustained improvements in security.
Tourism arrivals rose by 30 percent.
Phosphate production rebounded strongly.
Investment (foreign and domestic) shows early signs of picking up.
Macroeconomic vulnerabilities have become more accentuated:
- Public debt will reach 70 percent of GDP by the end of the year.
- The record current account deficit will be in double digits.
- The international reserves of the Central Bank of Tunisia have fallen.
Inflation moved above 6 percent in November, driven by significant increases in food prices.

The Tunisian authorities adopted a bold budget law for 2018 aiming at reducing the fiscal deficit to below 5 percent of GDP.
Achieving the budget’s ambitious fiscal target will require:
- Putting into effect the government’s tax strategy.
- Implementing the comprehensive civil service reform strategy.
- Reducing energy subsidies, which disproportionately benefit the rich.
- Pressing ahead with the reform of the social security system.
The IMF supports convergence between the on- and off-shore tax regimes and modernization of tax administration to improve tax compliance.
Making full use of the recently created Large Taxpayers Unit is a reform commitment supported by the EFF.

Rising inflationary pressures require a strong response.
Continuing the Central Bank of Tunisia’s strategy to tighten monetary policy, including by containing bank refinancing, will help anchor inflation expectations and provide support for the dinar in the foreign exchange market.
Exchange rate flexibility will continue to contribute to making the Tunisian economy more competitive.

Overhaul of the regulatory framework for the resolution of non-performing loans and of the governance of public banks is essential to improve SME access to bank finance.
Public bank reform is expected to make the overall banking sector more efficient and directly ease a key constraint on growth and jobs.
The imminent appointment of the executive board of the High Anti-Corruption Agency is highlighted as an important milestone in the government’s fight against corruption.

Tunisia’s ongoing participation in the G20 initiative Compact with Africa underscores commitment to international trade, foreign investment, and economic integration.
The IMF notes Tunisia’s objective to be removed from the EU’s list of non-cooperative tax jurisdictions.

Staff met with the Head of Government Chahed, Minister of Finance Chalghoum, Minister of Investment Laâdhari, Minister of Major Reforms Rajhi, and Central Bank Governor Ayari.
The mission also held discussions with representatives of the private sector and civil society, and coordinated closely with the World Bank and other external partners of Tunisia.

Press Release No. 17/490 — December 13, 2017