Response to The Guardian's Opinion Piece on Tunisia
IMF Blog, January 18, 2018
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Bibliographic details
- Published: January 18, 2018
Context and opening
- Publication date: January 18, 2018
- From Gerry Rice, Head of Communications at the IMF
- Purpose: Reply to Jihen Chandoul’s January 17 article and correct perceived misstatements about Tunisia’s economic situation and the IMF’s policy stance
Diagnosis of Tunisia’s economic situation
- Tunisia’s fragile economic condition results from both external shocks and domestic policy choices:
- External shocks cited include terrorist attacks and weak growth in Europe
- Domestic factor: a model of state patronage in which the public sector provides every fifth job
- Tunisia has an outsized wage bill—among the highest in the world—which represents almost half of Tunisia’s total budget
- The large wage bill has come at the expense of social programs for the vulnerable
Link between reforms, growth, and fairness
- Jobs and fairness will come with economic growth
- Growth will come with improved business and investor confidence, which in turn will come once Tunisia can:
- cut its deficits
- control debt
- control inflation
- These objectives are described as the rationale underlying the government’s 2018 budget, which in addition to strengthening tax revenue, aims at:
- funding pensions on a more sustainable basis
- maintaining public investment levels
- increasing spending on social programs
IMF policy stance and principles
- The IMF does not advocate austerity
- The IMF advocates well-designed, well-implemented, socially-balanced reforms
- The IMF has consistently highlighted the need to:
- spread the adjustment burden in a fair way
- protect the most vulnerable from the effects of adjustment
Specific policy recommendations and measures emphasized
- Maintain subsidies on basic food products
- Increase taxes on products mostly consumed by the more affluent
- Strengthen tax collection
- Crack down on tax evasion
- Ensure any reduction in wage reliance is based on voluntary departure and early retirement schemes, not mandatory layoffs
Risks of reversing reforms
- Reversing the reforms currently underway will increase the bill, which will grow and fall on future generations
IMF blog post — Response to The Guardian's Opinion Piece on Tunisia (January 18, 2018) by Gerry Rice