{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with Tunisia",
  "publication": "IMF News, February 26, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/02/26/pr2152-tunisia-imf-executive-board-concludes-2021-article-iv-consultation-with-tunisia",
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  "summary": "Selected economic indicators, 2017–20 - Real GDP growth (percent): 2017: 1.9; 2018: 2.7; 2019: 1.0; 2020 Prel.: -8.2 - Unemployment (end of period, percent): 2017: 15.5; 2018: 14.9; 2019: … - Inflation (average, percent): 2017: 5.3; 2018: 7.3; 2019: 6.7; 2020: 5.7 - Total revenue (incl. grants, perc",
  "publishDate": "2021-02-26",
  "sections": [
    {
      "heading": "Economic impact of Covid-19 and recent developments",
      "content": "- Real GDP is estimated to have contracted by 8.2 percent in 2020, the largest economic downturn since the country’s independence.\n- The unemployment rate jumped to 16.2 percent at end-September, disproportionately affecting low-skilled workers, women, and youth.\n- Inflation slowed because of the contraction in domestic demand and lower international fuel prices.\n- The current account deficit narrowed to 6.8 percent of GDP, driven by lower import demand and resilient remittances, despite a strong hit on exports and collapsing tourism receipts."
    },
    {
      "heading": "Fiscal developments and public debt",
      "content": "- The fiscal deficit (excluding grants) is estimated to have reached 11.5 percent of GDP in 2020.\n- Revenue dropped because of a lower tax intake.\n- Additional hiring (about 40 percent of which was in the health sector, including to combat Covid-19) pushed the civil service salary bill to 17.6 percent of GDP.\n- Higher outlays were offset by lower investment spending and energy subsidies.\n- Central government debt is estimated to have increased to nearly 87 percent of GDP."
    },
    {
      "heading": "Near-term outlook and risks",
      "content": "- GDP growth is projected to rebound to 3.8 percent in 2021, as the effects of the pandemic start to wane.\n- There are considerable downside risks around this projection, given the uncertainty from the duration and intensity of the pandemic and the timing of the vaccination.\n- The medium-term outlook depends critically on the future path of fiscal policy and structural and governance reforms."
    },
    {
      "heading": "Executive Board assessment — findings",
      "content": "- Directors noted that the COVID-19 crisis is exacerbating Tunisia’s socio-economic fragilities.\n- They commended the authorities' policy response to the crisis.\n- Directors noted that while growth is expected to recover modestly in 2021, downside risks dominate.\n- They agreed that the immediate priority is to save lives and livelihoods and stabilize the economy until the pandemic wanes.\n- Economic policy should also focus on restoring fiscal and debt sustainability and promoting inclusive growth.\n- Directors noted that Tunisia’s public debt would become unsustainable, unless a strong and credible reform program were adopted with broad support."
    },
    {
      "heading": "Executive Board assessment — policy recommendations",
      "content": "- Fiscal policy and reforms should aim to reduce the fiscal deficit.\n  - Underscored the need to lower the wage bill and limit energy subsidies while prioritizing health and investment expenditure and protecting targeted social spending.\n  - Called on the authorities to make taxation more equitable and growth-friendly and encouraged action to clear the accumulated arrears of the social security system.\n- Broad-ranging reform of state-owned enterprises (SOEs) is necessary to reduce contingent liabilities.\n  - Encouraged adoption of a plan to reduce fiscal and financial risks of SOEs, strengthen corporate governance, and improve financial reporting and transparency.\n- Monetary policy recommendations:\n  - Focus on inflation by steering short‑term interest rates, while preserving exchange rate flexibility.\n  - Urged the authorities to avoid monetary financing of the budget.\n  - Advised implementation of the roadmap to inflation targeting and preparation of a gradual and conditions-based plan for capital account liberalization, while closely monitoring financial sector soundness.\n- Structural and private-sector recommendations:\n  - Promote private sector activity to increase potential growth and make it more job-rich and inclusive.\n  - Reform efforts should focus on lifting monopolies, removing regulatory hurdles, and improving the business environment.\n  - Welcomed efforts to increase financial inclusion and leverage digital technologies.\n- Governance and transparency:\n  - Emphasized strengthening governance and called for effective implementation of anti-corruption and AML/CFT regimes.\n  - Emphasized that COVID-related expenditures should be effective and transparent.\n- Environmental objective:\n  - Welcomed the objective to invest in renewable energy to combat climate change."
    },
    {
      "heading": "Institutional note",
      "content": "- It is expected that the next Article IV consultation with Tunisia will be held on the standard 12-month cycle."
    },
    {
      "heading": "Key statistics and selected indicators (from Table 1)",
      "content": "- Population (2019): 11.8 million\n- Per-capita GDP (2020, US$): 3,323\n- Quota (2020): SDR 545.2 million\n- Literacy rate (2019): 82.3 percent (est.)\n- Main exports: electronic and mechanical goods, textiles, energy, olive oil, tourism\n- Poverty rate (2015): 15.2 percent\n- Key export markets: France, Italy, Germany\n\nSelected economic indicators, 2017–20\n- Real GDP growth (percent): 2017: 1.9; 2018: 2.7; 2019: 1.0; 2020 Prel.: -8.2\n- Unemployment (end of period, percent): 2017: 15.5; 2018: 14.9; 2019: …\n- Inflation (average, percent): 2017: 5.3; 2018: 7.3; 2019: 6.7; 2020: 5.7\n- Total revenue (incl. grants, percent of GDP): 2017: 24.6; 2018: 26.0; 2019: 27.7; 2020: 26.9\n- Total expenditure and net lending (percent of GDP): 2017: 30.6; 2018: 30.5; 2019: 31.6; 2020: 37.5\n- Overall balance (incl. grants, percent of GDP): 2017: -6.0; 2018: -4.5; 2019: -3.9; 2020: -10.6\n- Gross central government debt (percent of GDP): 2017: 70.9; 2018: 77.5; 2019: 71.8; 2020: 87.6\n- Broad money (percent change): 2017: 11.4; 2018: 6.6; 2019: 10.1; 2020: 11.8\n- Credit to the private sector (percent change): 2017: 12.7; 2018: 9.3; 2019: 3.6; 2020: 6.8\n- Current account (percent of GDP): 2017: -10.3; 2018: -11.1; 2019: -8.4; 2020: -6.8\n- Foreign direct investment (percent of GDP): 2017: 2.0; 2018: 2.5; 2019: 2.1; 2020: 1.6\n- Reserve coverage (months of next year's imports of GNFS): 2017: 2.6; 2018: 4.3; 2019: 4.1; 2020: (not listed)\n- External debt (percent of GDP): 2017: 84.6; 2018: 97.4; 2019: 92.8; 2020: 94.7\n- REER (end of period, percent change, \"-\": depreciation): 2017: -10.9; 2018: -7.7; 2019: 10.7\n\nPress Release No. 21/52, February 26, 2021.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Tunisia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/02/26/pr2152-tunisia-imf-executive-board-concludes-2021-article-iv-consultation-with-tunisia"
    }
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    "Published: February 26, 2021",
    "Real GDP is estimated to have contracted by 8.2 percent in 2020, the largest economic downturn since the country’s independence.",
    "The unemployment rate jumped to 16.2 percent at end-September, disproportionately affecting low-skilled workers, women, and youth.",
    "Inflation slowed because of the contraction in domestic demand and lower international fuel prices.",
    "The current account deficit narrowed to 6.8 percent of GDP, driven by lower import demand and resilient remittances, despite a strong hit on exports and collapsing tourism receipts.",
    "The fiscal deficit (excluding grants) is estimated to have reached 11.5 percent of GDP in 2020.",
    "Revenue dropped because of a lower tax intake.",
    "Additional hiring (about 40 percent of which was in the health sector, including to combat Covid-19) pushed the civil service salary bill to 17.6 percent of GDP.",
    "Higher outlays were offset by lower investment spending and energy subsidies.",
    "Central government debt is estimated to have increased to nearly 87 percent of GDP.",
    "GDP growth is projected to rebound to 3.8 percent in 2021, as the effects of the pandemic start to wane.",
    "There are considerable downside risks around this projection, given the uncertainty from the duration and intensity of the pandemic and the timing of the vaccination.",
    "The medium-term outlook depends critically on the future path of fiscal policy and structural and governance reforms.",
    "Directors noted that the COVID-19 crisis is exacerbating Tunisia’s socio-economic fragilities.",
    "They commended the authorities' policy response to the crisis.",
    "Directors noted that while growth is expected to recover modestly in 2021, downside risks dominate.",
    "They agreed that the immediate priority is to save lives and livelihoods and stabilize the economy until the pandemic wanes.",
    "Economic policy should also focus on restoring fiscal and debt sustainability and promoting inclusive growth.",
    "Directors noted that Tunisia’s public debt would become unsustainable, unless a strong and credible reform program were adopted with broad support.",
    "Fiscal policy and reforms should aim to reduce the fiscal deficit.",
    "Broad-ranging reform of state-owned enterprises (SOEs) is necessary to reduce contingent liabilities.",
    "Monetary policy recommendations:",
    "Structural and private-sector recommendations:",
    "Governance and transparency:",
    "Environmental objective:",
    "It is expected that the next Article IV consultation with Tunisia will be held on the standard 12-month cycle.",
    "Population (2019): 11.8 million",
    "Per-capita GDP (2020, US$): 3,323",
    "Quota (2020): SDR 545.2 million",
    "Literacy rate (2019): 82.3 percent (est.)",
    "Main exports: electronic and mechanical goods, textiles, energy, olive oil, tourism",
    "Poverty rate (2015): 15.2 percent",
    "Key export markets: France, Italy, Germany",
    "Real GDP growth (percent): 2017: 1.9; 2018: 2.7; 2019: 1.0; 2020 Prel.: -8.2",
    "Unemployment (end of period, percent): 2017: 15.5; 2018: 14.9; 2019: …",
    "Inflation (average, percent): 2017: 5.3; 2018: 7.3; 2019: 6.7; 2020: 5.7",
    "Total revenue (incl. grants, percent of GDP): 2017: 24.6; 2018: 26.0; 2019: 27.7; 2020: 26.9",
    "Total expenditure and net lending (percent of GDP): 2017: 30.6; 2018: 30.5; 2019: 31.6; 2020: 37.5",
    "Overall balance (incl. grants, percent of GDP): 2017: -6.0; 2018: -4.5; 2019: -3.9; 2020: -10.6",
    "Gross central government debt (percent of GDP): 2017: 70.9; 2018: 77.5; 2019: 71.8; 2020: 87.6",
    "Broad money (percent change): 2017: 11.4; 2018: 6.6; 2019: 10.1; 2020: 11.8",
    "Credit to the private sector (percent change): 2017: 12.7; 2018: 9.3; 2019: 3.6; 2020: 6.8",
    "Current account (percent of GDP): 2017: -10.3; 2018: -11.1; 2019: -8.4; 2020: -6.8",
    "Foreign direct investment (percent of GDP): 2017: 2.0; 2018: 2.5; 2019: 2.1; 2020: 1.6",
    "Reserve coverage (months of next year's imports of GNFS): 2017: 2.6; 2018: 4.3; 2019: 4.1; 2020: (not listed)",
    "External debt (percent of GDP): 2017: 84.6; 2018: 97.4; 2019: 92.8; 2020: 94.7",
    "REER (end of period, percent change, \"-\": depreciation): 2017: -10.9; 2018: -7.7; 2019: 10.7",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Tunisia and the IMF](http://www.imf.org/external/country/TUN/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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