IMF Statement on Tunisia

IMF News, May 30, 2018

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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 discussions progressed significantly and 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 2018.
Economic growth was 2.5 percent (year-on-year), the highest since 2014, driven by strong agricultural production and exports.
The current account deficit improved somewhat, helped by a more flexible exchange rate.
Inflows of foreign direct investment have picked-up.
A new one-stop shop for investors, “Tunisia Investment Authority,” is expected to further improve the business climate.
Planned reforms to reinforce governance and improve access to finance are expected to help the recovery create more jobs in the private sector.

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.
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.
The IMF team concurs with the central bank that more tightening of monetary conditions is necessary to reduce the gap between interest rates and inflation.
Three near-term budget priorities:
- (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) adopting the pension reform bill to improve the financial viability of social security.
Increased transfers to the most vulnerable families will accompany the reform efforts to shield them from the impact of higher prices.

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.
The team 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.
Staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

Source: IMF Statement on Tunisia, May 30, 2018.