An International Monetary Fund (IMF) staff team, led by Björn Rother,
visited Tunisia from May 17–30 to discuss the authorities’ policy plans
under the Third Review of Tunisia’s economic reform program supported by a
four-year IMF Extended Fund Facility (EFF) arrangement
(see Press Release 16/238):
“The Tunisian authorities held constructive discussions with the IMF team
on the policies needed to complete the Third Review under Tunisia’s EFF
arrangement. The discussions progressed significantly. The Tunisian
authorities expressed firm commitment to act swiftly on urgent economic
reforms to pave the way for the consideration of the Third Review by the
IMF’s Executive Board, tentatively scheduled for early July. Completion of
the review would make available SDR 177 million (about US$257 million),
bringing total disbursements under the EFF to about US$1.2 billion.
“The Tunisian economy showed signs of recovery in the first quarter of this
year. Economic growth at 2.5 percent (year-on-year) was the highest since
2014, based on strong agricultural production and exports. The current
account deficit improved somewhat, helped by a more flexible exchange rate.
Inflows of foreign direct investment have also picked-up, and the new
one-stop shop for investors “Tunisia Investment Authority” will further
improve the business climate. Planned reforms to reinforce governance and
improve access to finance will help the recovery to create more jobs in the
private sector.
“Nevertheless, risks to macroeconomic stability have become more
pronounced. Inflation reached 7.7 percent (year-on-year) in April, the
highest level since 1991. Monetary and credit aggregates continue to grow
rapidly and will put additional upward pressure on prices in the months
ahead. Foreign exchange reserve coverage of imports has declined further.
In addition, Tunisia’s external environment has become less favorable in
recent months due to the increase in international oil prices and greater
risk aversion in international financial markets.
“Decisive action is necessary this year to fight inflation, reduce the
fiscal deficit, and protect the poor—prerequisites for creating more
economic opportunity for Tunisians and shielding the young from an
excessive debt burden in the future. The IMF team agrees with the central
bank that more tightening of monetary conditions is necessary to reduce the
gap between interest rates and inflation. On the budget, three priorities
stand out in the near term: (i) pressing ahead with efforts to reduce
energy subsidies that disproportionately favor the better-off; (ii)
containing the public-sector wage bill, which is among the highest in the
world as a share of GDP; (iii) and adopting the pension reform bill to
improve the financial viability of social security. Increased transfers to
the most vulnerable families to shield them from the impact of higher
prices will accompany the reforms efforts.
“The IMF team met with the Minister of Finance Chalghoum, Minister of
Investment Laâdhari, Minister of Major Reforms Rajhi, and Central Bank
Governor El Abassi. It also had discussions with representatives of Union
Générale Tunisienne du Travail (UGTT), Union Tunisienne de l’Industrie, du
Commerce et de l’Artisanat (UTICA), and civil society. The mission would
like to thank the authorities and all those with whom it met for their warm
welcome and constructive discussions.”
