On July 6, 2018 the Executive Board of the International Monetary Fund
(IMF) completed the third review of Tunisia’s economic program supported by
an arrangement under the Extended Fund Facility (EFF). The completion of
the review allows the authorities to purchase an amount equivalent to SDR
176.7824 million (about US$249.1 million), bringing total purchases under
the arrangement to the equivalent of SDR 808.1485 million (about US$1,139.0
million).
The four-year EFF arrangement in the amount of SDR 2.045625 billion (about
US$2.9 billion, or 375 percent of Tunisia’s quota at the time of approval
of the arrangement) was approved by the Executive Board on May 20, 2016
(see
Press Release No. 16/238). The government’s reform program that is supported by the EFF arrangement
aims at strengthening the recovery by reducing macroeconomic
vulnerabilities, ensuring adequate social protection, and fostering private
sector-led, job-creating growth. Priorities include growth-friendly and
socially conscious reforms aimed at stabilizing public debt while raising
investment and social spending. Monetary policy focuses on curbing
inflation, continued exchange rate flexibility, and strengthening
international reserves. Structural reforms supported under the arrangement
focus on improving governance, the business climate, fiscal institutions,
and the financial sector.
Following the Executive Board discussion on Tunisia, Mr. Mitsuhiro
Furusawa, Deputy Managing Director and Acting Chair, made the following
statement:
“Growth picked up in early 2018 and confidence has improved, but
macroeconomic imbalances persist. Unemployment has dropped only marginally,
inflation is high, the budget and current account deficits are large, and
international reserves are below the recommended level.
“Policy and reform implementation has improved markedly since the Second
Review. The Tunisian authorities remain firmly committed to a
socially-balanced, gradual approach to macroeconomic adjustment that is
supported by the four-year arrangement under the Extended Fund Facility.
The success of the authorities’ program depends on sustained efforts to
reduce macroeconomic vulnerabilities, ensure adequate social protection,
and foster job creation.
“Achieving the authorities’ fiscal targets requires addressing budget
pressures. Policy priorities for 2018 include stronger revenue collection,
energy price adjustments to limit the impact of international oil prices on
the budget, voluntary separations for civil servants, the absence of new
wage increases, unless growth surprises on the upside, and pension reform.
“The recent significant hike in the policy interest rate demonstrates the
central bank’s strong commitment to price stability. Further rate hikes may
be needed if inflation does not decelerate, especially as key interest
rates remain negative in real terms.
“Exchange rate flexibility, supported by more competitive central bank
foreign exchange auctions, is critical to help improve the current account
position and rebuild international reserves.
“The authorities have increased social transfers and progressed with the
database on vulnerable families. Pension reform, as well as efforts to
better target social policies, should be accelerated.
“The one-stop shop for investors and the negative list of investment
authorizations are positive signals for investors. Structural reform
priorities going forward include the appointment of the members of the High
Anti-Corruption and Good Governance Authority and reforms of the Anti-Money
Laundering/Combating the Financing of Terrorism regime.
“Strong implementation of the authorities’ program is essential to mitigate
economic, social, and political risks. Building on the strong partnership
with the international donor community, it will be important to sustain
strong donor financial support and capacity building to help ensure a
successful transition to an economy that fosters inclusive growth with the
private sector as its main engine.”
