Key Questions on Tunisia
Last Updated: April 10, 2020
Read the key questions regarding the IMF agreement with Tunisia
Frequently Asked Questions on Tunisia
Last Updated: April 10, 2020
Read the key questions regarding the IMF agreement with Tunisia
Tunisia’s economy has been severely hit by the Covid-19 outbreak. Growth in 2020 is expected to drop to -4.3 percent, the lowest level since Tunisia’s independence in 1956. The authorities have taken pro-active measures to contain the spread of Coronavirus by closing Tunisia’s borders, isolating affected individuals, and imposing confinement and a night curfew. They also acted quickly to limit the social and economic impact of the pandemic on lower-income households and small- and medium-sized firms through a series of emergency response measures.
The large tourism sector, which represents 7 percent of GDP, and exporters, who supply the European automotive and textile industries, have already felt a strong negative impact. More stress will occur, as the crisis spreads through the domestic economy. Households will have to draw down savings and cut consumption. Unemployment, already at 15 percent, will rise further, incomes will fall, and import prices will increase. Many businesses are likely to face cash flow shortages because of temporary closures and lower revenues from consumption and exports.
On April 10, less than three weeks after receiving the request from the Tunisian authorities for emergency financial assistance, the IMF Executive Board approved emergency financing of US$745 million or two percent of Tunisia’s GDP under its Rapid Financing Instrument (RFI) to help the authorities’ cope with the COVID-19 pandemic.
IMF financing will support the authorities’ pro-active efforts to contain the spread of the virus and mitigate its human, social and economic toll. The IMF resources will enable the authorities to increase health spending, strengthen social safety nets for low-income families and the unemployed, and support small- and medium-sized firms hit by the crisis. It will also help catalyze additional donor financing.
In addition, the RFI will prevent Tunisia’s reserve cover from falling to the critical threshold of 3 months of imports. This will ensure an adequate reserve buffer amidst unprecedented uncertainty and shore up confidence. Importantly, it will offer stronger protection against further shocks or in the event of a protracted recovery from the Covid-19 outbreak.
Being faced with the unanticipated shock of the virus outbreak, the government has taken steps to limit fiscal pressures and reduce financing needs through:
