IMF Statement on Tunisia

IMF News, April 13, 2018

Source details

An IMF staff team, led by Bjoern Rother, visited Tunisia from April 4–11 to discuss recent economic developments and the authorities’ policy plans under Tunisia’s economic reform program supported by a four-year IMF Extended Fund Facility (EFF) arrangement (see Press Release 16/238).
Discussions on near-term economic reform priorities will continue in Washington during the IMF’s Spring Meetings from April 20–22.

Economic growth is picking up, led by a good agriculture season, increases in investment and an early recovery in exports.
Opposite trends characterize the economy: while growth is strengthening, macroeconomic stability risks have risen.
Exact indicators cited:
- Inflation has risen rapidly to 7.6 percent in March.
- International reserves remain below 90 days of import cover.
- Public debt reached 71 percent of GDP.
- External debt reached 80 percent of GDP.

Rising inflation and low reserve coverage increase macroeconomic vulnerability.
A very large public-sector wage bill poses fiscal sustainability risks; any further wage increase would be very difficult to sustain unless growth surprises on the upside.
Deficits in the social security system require reform to be contained over time.

Contain economic imbalances to keep the recovery on-track and strengthen foundations for fair and equitable economic growth.
Fiscal measures:
- Reduce unfair energy subsidies through increases in domestic energy prices that follow international oil prices to ensure the budget deficit declines in line with the objective of the 2018 Budget Law.
- Implement parametric pension reforms, including raising the retirement age, to contain social security system deficits.
- Avoid unsustainable increases in the public-sector wage bill absent stronger-than-expected growth.
Monetary and exchange-rate policy:
- Anchor inflation expectations through additional increases in the policy interest rate if inflation does not come down quickly.
- Allow a more flexible exchange rate to help rebuild international reserves and encourage exports; correct the dinar’s remaining overvaluation without an abrupt adjustment.
Social objective:
- Lowering inflation is emphasized as a protection for the poor and to maintain purchasing power.

The IMF team met with Head of Government Chahed, Minister of Finance Chalghoum, Minister of Investment Laâdhari, Minister of Major Reforms Rajhi, and Central Bank Governor El Abassi.
The team also held 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 thanked the authorities and those met for their warm welcome and constructive discussions.

Press Release No. 18/128 — IMF Statement on Tunisia (April 13, 2018).