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IMF Executive Board Completes First Review under the Extended Fund Facility (EFF) Arrangement with Tunisia

Author(s):
International Monetary Fund. Middle East and Central Asia Dept.
Published Date:
July 2017
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  • The government’s reform program supported by the EFF aims at reducing the fiscal deficit to stabilize public debt below 70 percent of GDP by 2020 while raising investment and social spending.

  • Monetary tightening and greater exchange rate flexibility will help contain inflation, improve competitiveness, and preserve international reserves.

  • To achieve a growth-friendly and socially-conscious fiscal consolidation, it will be critical to implement the 2018 tax package and the new Large Taxpayers Unit, which will both increase tax fairness.

On June 12, 2017, the Executive Board of the International Monetary Fund (IMF) completed the first 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 draw the equivalent of SDR 227.2917 million (about US$314.4 million), bringing total disbursements under the arrangement to the equivalent of SDR 454.5837 million (about US$628.8 million).

The four-year EFF arrangement in the amount of SDR 2.045625 billion (about US2.83 billion, 375 percent of Tunisia’s quota) was approved by the Executive Board on May 20, 2016 (see Press Release No. 16/238). The government’s reform program supported by the EFF aims at reducing the fiscal deficit to stabilize public debt below 70 percent of GDP by 2020 while raising investment and social spending, and more exchange rate flexibility combined with maintaining inflation below 4 percent. It also aims at ensuring pension sustainability and better protecting vulnerable households, as well as accelerating reforms to improve governance and foster private sector-led, job-creating growth. In completing the review, the Executive Board approved the authorities’ request for waivers for non-observance of performance criteria on net international reserves, net domestic assets, and the primary fiscal deficit. The Executive Board also approved the authorities’ request for re-phasing of remaining access into six semi-annual installments.

Following the Executive Board discussion on Tunisia, Mr. Mitsuhiro Furusawa, Deputy Managing Director, and Acting Chair, said:

“The Tunisian authorities remain firmly committed to macroeconomic stability and sustainable increases in youth employment and improvement in standards of living of Tunisia’s population. They plan to intensify their policy effort to overcome slower growth and delays in policy implementation. Their fiscal plans aim to achieve gradual debt reduction and increase spending on investment and social programs. Continued tightening of monetary policy and exchange rate flexibility will help contain inflation, improve competitiveness, and preserve international reserves. Reforms to restructure public banks, enhance governance, and improve the business climate will strengthen the foundation for inclusive growth and strong job creation.

“To achieve a growth-friendly and socially-conscious fiscal consolidation, it will be critical to adopt and implement the 2018 tax package and make the new Large Taxpayers Unit operational, which will increase revenues as well as fairness. The authorities intend to re-apply the fuel price adjustment mechanism to avoid regressive subsidies, move ahead quickly with civil service reform to improve service quality and reduce the wage bill, and enact comprehensive reforms to ensure pension sustainability and establish an effective safety net for vulnerable households. There is also room for improving the management of public enterprises.

“The Central Bank of Tunisia recently increased its policy interest rate. Further hikes may be warranted if inflationary pressures persist. The implementation of the FX auction mechanism will improve the operation and transparency of the FX market.

“The authorities have made important progress in restructuring public banks. Next steps include changes in the regulatory and legal frameworks to support the reduction of non-performing loans. It will also be important to implement further bank supervision measures, such as the start of the resolution committee’s operations.

“The authorities are committed to enhancing governance and improving the business environment. The establishment of the high anti-corruption authority, new institutions such as the planned one-stop shop for investors, and Tunisia’s participation in the G20 Compact with Africa will support these objectives. The continued support of the donor community for Tunisia’s reform efforts remains crucial.”

Tunisia: Selected Economic and Financial Indicators, 2015–18 1/
2015201620172018
Prel.Prog.Proj.Prog.Proj.Proj.
Production and income (percent change)
Real GDP1.12.01.03.02.33.0
GDP deflator3.65.15.73.35.34.2
Consumer price index (CPI), average4.93.93.73.94.54.4
Consumer price index (CPI), end of period4.14.04.23.94.54.1
Gross national savings (in percent of GDP)12.514.113.515.313.615.1
Gross investment (in percent of GDP)21.421.822.522.322.123.2
Central government (percent of GDP, unless otherwise indicated) 1/
Total revenue (excluding grants)23.223.922.624.124.024.5
Total expenditure and net lending28.828.528.728.030.230.1
Wage Bill 2/13.614.114.513.814.114.8
Social expenditures 3/1.61.71.61.61.61.9
Central government overall balance (including grants)−5.3−4.4−5.9−3.5−5.9−5.4
Structural fiscal balance 4/−4.6−4.0−5.6−3.3−6.1−4.3
Central government debt (foreign and domestic)57.254.662.954.569.172.1
Foreign currency public debt (percent of total debt)61.768.064.168.667.870.6
Total external debt
External debt (in billions of US$)27.029.327.030.729.030.6
External debt (in percent of GDP)64.969.070.071.476.980.7
Debt service ratio (percent of exports of GNFS)10.112.812.216.718.416.2
Money and credit (percent change)
Credit to the economy6.27.19.77.37.27.4
Broad money (M3 of the financial system)5.36.58.16.810.08.3
Velocity of circulation (GDP/M2)1.41.51.41.51.41.4
External sector (percent change)
Exports of goods, f.o.b. (in billions of US$)−15.9−2.6−3.65.8−1.50.4
Imports of goods, f.o.b. (in billions of US$)−18.4−4.3−3.83.9−2.6−0.6
Exports of goods, f.o.b. (volume)−2.81.60.25.52.46.8
Import of goods, f.o.b. (volume)−2.53.52.32.14.54.8
Trade balance (in percent of GDP)−11.7−10.4−11.4−10.1−11.3−11.1
Current account (in percent of GDP)−8.9−7.7−9.0−7.0−8.5−8.1
Foreign direct investment, net (in percent of GDP)2.62.12.02.22.42.8
Terms of trade (- = deterioration)3.33.72.3−1.53.1−0.9
Official reserves
Gross official reserves (in billions of US$, e.o.p)7.48.35.98.57.38.2
In months of next year’s imports of goods and services, c.i.f.4.14.63.44.54.34.6
Memorandum items:
GDP at current prices (TD millions)84,65691,65890,37697,49597,397104,603
GDP at current prices (in billions of US$)43.244.042.144.439.939.3
Sources: Tunisian authorities; and IMF staff estimates and projections.

Excludes social security accounts, public enterprises, and local governments.

The 2018 wage bill includes a cost of 0.6 percent of GDP for the voluntary departure packages.

Public capital expenditures of key ministries and social transfers and programs.

Excludes one-off revenues and costs, and corrects for the GDP cycle.

Sources: Tunisian authorities; and IMF staff estimates and projections.

Excludes social security accounts, public enterprises, and local governments.

The 2018 wage bill includes a cost of 0.6 percent of GDP for the voluntary departure packages.

Public capital expenditures of key ministries and social transfers and programs.

Excludes one-off revenues and costs, and corrects for the GDP cycle.

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