## IMF Executive Board Concludes 2021 Article IV Consultation with Tunisia

_IMF News, February 26, 2021_

## Source details

**Canonical URL:** [IMF Executive Board Concludes 2021 Article IV Consultation with Tunisia](https://www.imf.org/en/news/articles/2021/02/26/pr2152-tunisia-imf-executive-board-concludes-2021-article-iv-consultation-with-tunisia)

## Other formats

- [Markdown version](/en/news/articles/2021/02/26/pr2152-tunisia-imf-executive-board-concludes-2021-article-iv-consultation-with-tunisia/index.md)
- [Structured JSON version](/en/news/articles/2021/02/26/pr2152-tunisia-imf-executive-board-concludes-2021-article-iv-consultation-with-tunisia/index.json)
- [Bundle manifest](/en/news/articles/2021/02/26/pr2152-tunisia-imf-executive-board-concludes-2021-article-iv-consultation-with-tunisia/bundle-manifest.json)

## Bibliographic details
- Published: February 26, 2021

---

### Economic impact of Covid-19 and recent developments
- 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.

### Fiscal developments and public debt
- 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.

### Near-term outlook and risks
- 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.

### Executive Board assessment — findings
- 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.

### Executive Board assessment — policy recommendations
- Fiscal policy and reforms should aim to reduce the fiscal deficit.
  - Underscored the need to lower the wage bill and limit energy subsidies while prioritizing health and investment expenditure and protecting targeted social spending.
  - 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.
- Broad-ranging reform of state-owned enterprises (SOEs) is necessary to reduce contingent liabilities.
  - Encouraged adoption of a plan to reduce fiscal and financial risks of SOEs, strengthen corporate governance, and improve financial reporting and transparency.
- Monetary policy recommendations:
  - Focus on inflation by steering short‑term interest rates, while preserving exchange rate flexibility.
  - Urged the authorities to avoid monetary financing of the budget.
  - 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.
- Structural and private-sector recommendations:
  - Promote private sector activity to increase potential growth and make it more job-rich and inclusive.
  - Reform efforts should focus on lifting monopolies, removing regulatory hurdles, and improving the business environment.
  - Welcomed efforts to increase financial inclusion and leverage digital technologies.
- Governance and transparency:
  - Emphasized strengthening governance and called for effective implementation of anti-corruption and AML/CFT regimes.
  - Emphasized that COVID-related expenditures should be effective and transparent.
- Environmental objective:
  - Welcomed the objective to invest in renewable energy to combat climate change.

### Institutional note
- It is expected that the next Article IV consultation with Tunisia will be held on the standard 12-month cycle.

### Key statistics and selected indicators (from Table 1)
- 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

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, 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

*Press Release No. 21/52, February 26, 2021.*

---


## References

- [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)

_Source: https://www.imf.org/en/news/articles/2021/02/26/pr2152-tunisia-imf-executive-board-concludes-2021-article-iv-consultation-with-tunisia_