IMF Staff Concludes Mission to Tunisia with Good Progress

IMF News, July 19, 2022

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Press Release No. 22/267
Date: July 19, 2022
An IMF mission led by Björn Rother visited Tunis from July 4 to July 18 to discuss potential IMF financial support for the authorities’ program of economic policies and reforms.
End-of-Mission statement conveys preliminary findings; views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
Staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

Tunisia faces the economic impact of the Ukraine war as a major external shock on top of the Covid-19 pandemic.
These pressures add to the economy’s underlying structural weaknesses.
Near-term outlook is challenging:
- Growth will likely decelerate.
- Higher international prices for energy and food are adding to already high inflation.
- Fiscal and external deficits and debt are increasing.
Urgent measures are needed to reduce imbalances in a socially sustainable manner.

IMF Staff supports the priorities of the authorities’ program of economic policies and reforms.
Key policy areas to build on recent progress:
- Improve tax equity.
- Expand coverage of social safety nets and increase cash transfers.
- Turn around loss-making public enterprises.
- Contain current public expenditures.
Specific fiscal and subsidy measures noted:
- Reduce the growth of the civil service wage bill during the years ahead.
- Gradually phase out energy subsidies through regular price hikes that link domestic prices to global prices for oil and natural gas.
- Strengthen tax equity by bringing the informal sector into the tax net and ensuring stronger contributions from liberal professions.
Social protection measures:
- Swift progress to strengthen the social safety net and expand its coverage to compensate for the impact of higher prices for administered goods through cash transfers to vulnerable households and some relief to the middle class.
Monetary policy:
- The Central Bank of Tunisia has started monetary policy tightening to protect purchasing power in the face of high and accelerating inflation.
- IMF staff agree that this action should continue.

The authorities are advancing their economic reform agenda to maintain macroeconomic stability, support inclusive growth, and strengthen social safety nets as well as tax equity.
The IMF welcomes the openness of the government and social partners for a constructive dialogue on implementing a socially-conscious and growth-friendly reform program.
Broad buy-in from social partners and other important stakeholders is essential to:
- Reduce macroeconomic imbalances.
- Shore up stability.
- Support job-creating growth to activate Tunisia’s substantial economic potential for the benefit of all Tunisians.

The international community will need to again play an important role in facilitating the authorities’ program through the rapid release of financing.
Rapid financing will be indispensable to ensure the success of the authorities’ policy and reform efforts.
Discussions on a new Extended Fund Facility (EFF) have been productive and will continue over the coming weeks towards reaching a staff-level agreement.
Final agreement on a program arrangement would be subject to approval of the IMF's Executive Board.

The mission met with:
- Head of Government Najla Bouden Romdhane
- Minister of Finance Sihem Boughdiri Nemsia
- Minister of Economy and Planning Samir Saïed
- Minister of Social Affairs Malek Zahi
- Minister of Industry, Mines and Energy Neila Nouira Gongi
- Minister of Commerce and Export Development Fadhila Rebhi Ben Hamza
- Minister of Agriculture, Hydraulic Resources and Fishing Mahmoud Elyes Hamza
- Minister of Health Ali Mrabet
- Minister of Technology and Communication Nizar Ben Neji
- Minister of Transport Rabi Majidi
- Minister of Environment Leila Chikhaoui
- Minister of Tourism Mohamed Moez Belhassine
- Central Bank of Tunisia Governor Marouane El Abassi
- Their staff
The mission also held discussions with the UGTT labor union and the UTICA and CONECT employers’ federations, civil society, development partners, and the diplomatic community.
The mission thanked the Tunisian authorities and all interlocutors for their warm welcome and the frank and productive discussions.

IMF press release, July 19, 2022. Press Release No. 22/267.