Journal Issue


International Monetary Fund
Published Date:
May 1996
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I. Summary

Despite adverse exogenous developments, including the Middle East crisis, weak economic growth in key European export markets and a severe drought, Tunisia achieved a strong economic performance during 1991-95. Real GDP growth rose to an annual average of 4.2 percent, resulting in an increase in per capita income of some 2 percent per annum. Inflation fell from an average of 7 percent during the preceding five years to 5.8 percent during 1991-95. At the same time, the balance of payments was strengthened as the external current account was reduced to about 3.5 percent in 1994-95 following a widening to 7 percent in 1992-93 related to large foreign-financed investments in the energy sector. This outcome, which attests to the increased diversification and resilience of the economy to adverse factors, was made possible by continued implementation of comprehensive structural reforms and prudent macroeconomic policies.

The program of structural reforms that was initiated in 1986, aimed at increasing efficiency and enhancing the growth prospects through liberalizing external trade and payments, decontrolling domestic prices, reforming the financial sector, revamping the direct and indirect tax systems, and reforming the public enterprise system. During 1991-95, a broad range of measures were put in place in order to deepen and accelerate reforms in various areas.

Tunisia further pursued trade and exchange liberalization; in successive steps, the share of the economy protected by quantitative import restrictions was reduced form 74 percent in 1990 to 8 percent in 1995. Also, in 1994, the principle of free trade was adopted with restrictions limited to products contained in a negative list. Tunisia, which had acceded to the GATT in 1990 and joined the multilateral trading framework, became a founding member of the World Trade Organization. In July 1995, it concluded an Association Agreement with the European Union, involving the establishment of a free trade area. Further exchange liberalization was undertaken, and in 1993, Tunisia established the convertibility of the dinar for current account transactions. Inward foreign investment was also liberalized, while some limited liberalization of outward foreign investment was introduced in 1993. In early 1994, an interbank foreign exchange market was established, and since then, has developed rapidly so as to capture 80 percent of foreign exchange transactions in 1995.

With regard to domestic trade, the principle of free market determination of prices was established and the price control system simplified. The share of producer prices set freely was gradually increased from 70 percent of production in 1990 to some 90 percent in 1994, while the proportion of liberalized retail prices rose from less than 30 percent of domestic absorption in 1990 to 81 percent at the end of 1995. Measures were also enacted to enhance the distribution system, encourage competition, and prevent monopolistic practices. A unified investment code was enacted in late 1993, with incentives targeted toward promoting economic objectives across sectors.

In the area of financial sector reform, further progress was made in liberalizing interest rates. Following further easing in 1991, restrictions on lending rates were eliminated in 1994, and preferential interest rates were raised in 1991 and 1992, bringing their level closer to the money market interest rate. The share of loans with preferential interest rates in total credit has fallen considerably since 1991.

After being strengthened in 1991, prudential regulations were codified in the new banking law of 1994. In particular, the loan concentration ratio was gradually lowered from 40 percent to 25 percent, while efforts were undertaken to strengthen the capital base of the banks in order to meet international prudential standards. Also, the regulatory powers of the central bank and its supervision of banks were strengthened. In addition, the new banking law provided for the creation of universal banks and investment banks. For the period 1991-95, several new financial instruments were introduced, including treasury bills with maturities ranging from more than 1 year to 10 years, treasury bills negotiable on the stock market, investment trusts, and priority shares and equity loans; also, the fiscal position of mutual funds was clarified. The new stock market legislation became effective in late 1995, with the transformation of the bourse into a privately owned organization and the establishment of an independent supervisory commission.

In the areas of public finance, measures introduced in 1991-95 were directed at consolidating tax reforms. The role of the VAT was enhanced by extending its coverage, concentrating taxation at the normal rate, and reducing the coverage of excise taxes. For direct taxes, the global income tax was reinforced through harmonizing the treatment of various sources of income. Over the period, tax administration and collection was reinforced, while customs administration was strengthened.

The reform of public enterprises continued during 1991-95, and performance contracts were drawn up with several major enterprises. In 1995, the practice of contract programs was extended to all public enterprises. In addition, the privatization program accelerated and equity shares of public enterprises were sold at the stock exchange.

Owing to the impact of the drought on agriculture, economic growth remained subject to large annual fluctuations in 1991-95. Exports were the main contributing factor to GDP growth, while domestic demand was subdued. The national savings rate remained fairly stable during the period 1991-95, whereas the investment-to-GDP ratio declined in 1994-95, reflecting uncertainties related to the introduction of a new investment code and the elimination of imports duties on equipment goods. The manufacturing and services sectors contributed for more than four-fifths of real growth, while the share of agriculture in total value added dropped by some 4 percentage points of GDP to less than 12 percent in 1995. In the manufacturing sector, the largest gains were achieved by the export industries (chemical and rubber industry, textiles, and clothing and leather). To assist enterprises in preparing for the increased competition stemming from the implementation of a free trade area with the EU, the Government has launched a program aimed at upgrading the manufacturing sector (mise à niveau).

Following a widening in 1991, the overall budget deficit narrowed by about three percentage points of GDP to 2.8 percent in 1992, reflecting mainly a slowing in the growth of expenditure and net lending. Subsequently the overall deficit fluctuated around 3 percent of GDP in 1993-95. The sharp drop in nontax revenue (as a share of GDP) on account of the petroleum sector in 1991 was fully offset in following years by the increase of tax revenue, driven mainly by the growth in taxes from income and profits and from goods and services. Reflecting the rapid growth of the government wage bill in 1995, current expenditure in relation to GDP was slightly above its level in 1990-91, while capital outlays declined by more than one percentage point of GDP during the same period.

Over 1991-95, the increase in broad monetary aggregates was contained below that of nominal GDP. With the deepening of the nonbank financial system, there was a gradual increase in velocity. Net foreign assets growth accelerated in 1994-95, reflecting the improvement in the overall balance of payments position. A steady decline in net bank claims on the Government from its 1991 level allowed for a faster expansion in credit to the private sector, concentrated in the manufacturing and tourism sectors. While central bank refinancing rates were reduced by more than two percentage points, interest rates remained positive. Owing to weak interest-based competition among banks, there was a lack of variability in market interest rates.

With strong growth in the tradable sector, the share of both exports and imports in GDP rose steadily in 1991-95. Average non-energy export growth, especially in the textile and light manufacturing sectors was in excess of partner countries’ demand, resulting in continued gains in market share; it also exceeded that of non-energy imports. The composition of imports shifted toward consumer and equipment goods, as dependence on imports of raw materials and food was reduced and the openness of the economy increased. The debt-to-GDP ratio stabilized at about 54 percent, while gross official reserves rose to the equivalent of about three months of imports of goods by 1995.

II. Real Sector Developments

1. Aggregate demand, investment, and saving

Although Tunisia was faced with adverse exogenous factors in the early 1990s, including the Middle-East crisis (1990-91), the economic recession in Europe (1992-93), and persisting drought (1993-95), the economy performed relatively well during 1991-95, as reflected in an average real GDP growth of 4.2 percent that largely exceeded the population growth rate of 1.9 percent. However, growth remained subject to large annual fluctuations--stemming from the vulnerability of the agriculture sector to shifting weather conditions--and was mainly driven by rising exports of manufactured goods and tourism. Despite these fluctuations, the national savings rate remained relatively stable at about 22 percent of GDP, while the share of investment in GDP, including two large foreign-financed projects in the energy sector, averaged 27 percent of GDP. 1/ As a result, the resource gap averaged 5 percent of GDP, with the annual fluctuations reflecting mainly the changes in foreign-financed investment in the energy sector (Chart 1).


Source: Data provided by the Tunisian authorities.

1/ Excluding Gazoduc and Miskar.

During 1991-95, economic growth was primarily driven by exports. resulting in increased openness of the Tunisian economy. The ratio of exports of goods and nonfactor services to GDP rose by 4 percentage points to an estimated 44.8 percent in 1995. Exports of goods and nonfactor services grew on average by 5.1 percent in real terms, while the annual real growth rate of domestic demand averaged 3.5 percent a year (Table 1). Imports of goods and nonfactor services grew by 3.6 percent per year on average during the period, in line with the growth of the domestic demand, reflecting in particular the quasi-stagnation in investment in 1993-95. Imports are estimated to have rebounded by 6.2 percent in 1995 as a result of large imports of cereals products and further trade liberalization (Chart 2).

Table 1.Tunisia: Supply and Use of Resources, 1991–95
(Annual percentage change in real terms)
Private sector 1/
Central government10.
Gross fixed capital formation3.016.38.5–5.6–0.3
Private sector 1/–3.730.08.0–5.6–4.4
Central government31.5–26.811.1–5.122.1
Domestic demand1.39.42.3–1.25.5
Exports of goods and nonfactor services–
Imports of goods and nonfactor services–5.611.
GDP at market prices3.
(In percent of GDP)
Gross investment26.029.128.823.825.0
Of which: Gazoduc and Miskar– –
Changes in stocks2.02.1– ––2.4–0.4
Gross domestic savings21.022.321.721.821.0
Gross national savings21.722.221.321.421.1
Savings–investment gap–4.3–6.9–7.4–2.4–3.9
Private sector 1/–1.1–6.9–7.2–2.2–2.6
Central government–3.2– ––0.2–0.2–1.3
Source: Ministry of Economic Development.

Includes all economic agents except the central government.

Source: Ministry of Economic Development.

Includes all economic agents except the central government.


Source: Data provided by the Tunisian authorities.

On the domestic demand side, central government consumption expanded in real terms by 6.5 percent a year in 1991-95, while noncentral government consumption grew by 3.3 percent on average. During 1991-93, total investment rose by 9.3 percent in real terms on average, with non-government investment (including public enterprises, but excluding changes in inventories) expanding by more than 6 percentage points of GDP, of which more than half on account of the Gazoduc and Miskar projects. However, in 1994, investment declined by 5.6 percent, mainly in the manufacturing and tourism sectors, reflecting a wait-and-see attitude of the business community during the preparation and promulgation of the new Investment Code and the near completion of the Gazoduc and Miskar projects. An increase in investment in the agricultural, transport, communications, and electricity sectors was mainly on account of public enterprises. In tourism, investment slowed in 1994 after several years of rapid expansion. Noncentral government investment is estimated to have declined in 1995 as manufacturing companies delayed investment decisions pending the elimination of import duties on equipment goods under the Association Agreement with the European Union (EU). This sluggish investment performance seems to have had little effect on overall output, especially in the manufacturing sector, which registered improvements in productivity and better utilization of existing capacity.

A unified investment code was adopted in late 1993 to replace the sectoral codes of the 1980s. The incentives under the new code aim at promoting economic objectives across sectors, such as export development, acquisition of modern technology, regional development, and protection of the environment. However, specific provisions and incentives still apply to agriculture.

2. Output by sectors

Since 1991, the pattern of output has continued to reflect the vulnerability of the non-irrigated agricultural sector to changing weather conditions, although the economy as a whole was becoming more diversified and more resilient. 1/ During 1991-95, the share of agriculture and fishing in total output declined from 16.7 percent to 11.7 percent. Nevertheless, the agricultural sector in Tunisia remained an important source of employment, accounting for about one-fourth of total employment.

While agricultural output, together with the food processing industry, has declined by about 5 percent in real terms since 1991, manufacturing and services continued to be the main sources of growth, with their combined contribution amounting to 3.4 percentage points per year over 1991-95. Within the manufacturing sector, chemical and rubber industries registered the fastest sectoral growth rates, followed by textile, clothing, and leather activities (Table 2).

Table 2.Tunisia: Sectoral Origin of GDP, 1991–95
(Annual percentage change in real terms)
Agriculture and fishing13.95.5–5.3–9.9–9.0
Hydrocarbons, electricity, and water4.35.9–6.6–2.05.7
Food processing–5.83.8–5.19.2–5.5
Construction materials and glass3.
Mechanical and electrical industries4.
Chemical and rubber industries20.617.63.211.412.0
Textiles, clothing, and leather6.
Woodwork, paper, and other5.
Construction and public works–0.713.
Transport and telecommunications–0.614.
Commerce and other services2.
Government wages and salaries6.
Indirect taxes minus susbsidies2.
GDP (at market prices)
Excluding agriculture and fishing2.
Excluding agriculture, fishing, and food processing2.
Excluding agriculture, fishing, food processing, mining, and hydrocarbons2.
(In percent of GDP)
Agriculture and fishing16.716.114.713.011.7
Hydrocarbons, electricity, and water7.
Agriculture and fishing16.916.516.817.317.8
Construction and public works3.
Transport and telecommunications6.
Commerce and other services17.416.818.018.519.2
Government wages and salaries13.513.113.513.613.6
Source: Ministry of Economic Development.
Source: Ministry of Economic Development.

a. Agriculture and fishing

The country’s main agricultural products are cereals (hard and soft wheat, barley), olives, citrus fruits, and vegetables. Olives are mainly processed into olive oil, a major export. Favorable weather conditions in 1991 and 1992 led to an increase of agricultural output of 14 percent and 5.5 percent, respectively. In 1993, a return to average weather conditions resulted in a decline of agricultural output of about 5 percent. By contrast, due to the drought in 1994-95 agricultural value added declined by more than 9 percent in each year. In particular, the drought severely affected nonirrigated production, while its effects on olive production in 1994 had been mitigated. During this period a policy of tight management of water resources was implemented in order to meet competing needs of agriculture, urban demand, and tourism. 1/

Cereal production declined for the fourth year in a row in 1995 to 620 thousand tons or about 25 percent of the average level in 1991-92 (Chart 3). This reflected a decline in the sown surface by about 25 percent over the period, coupled with lower yields, despite the increasing use of high-yield seeds and fertilizers. Unlike the two previous years, producer prices for cereals were increased in May 1995 to mitigate the continuous losses in farmers’ income. The prices of hard and soft wheat were increased by 5.7 percent and 6.7 percent, respectively. As a result of the fall in production in 1994, Tunisia imported hard wheat for the first time since 1991. Imports of cereals rose by more than threefold during 1991-95, to reach more than 2 million tons in 1995, including 600 thousand tons of barley to feed the livestock. To alleviate the impact of consecutive droughts on agricultural output, the irrigation system for cereals was upgraded in 1994-95 and the price of water for irrigation was lowered.


Source: Data provided by the Tunisian authorities.

As a result of the upgraded irrigation system and expansion in arable land, the production of fruits and vegetables has been increasingly protected from the variations in weather conditions. While cereals output dropped in 1993-95, the production of tomatoes, potatoes, melons, and other fruits and vegetables was virtually stable during the period (Table 3).

Table 3.Tunisia: Production of Major Agricultural Crops, 1991–95
(In thousands of metric tons)
Hard wheat1,4241,3231,134436472
Soft wheat3632612796659
Fruits and vegetables
Citrus fruit226185281208194
Red peppers180190180165150
Melons and watermelons450380330375300
Table grapes6050605560
Olives for oil8251,3256751,050350
Sugar beets210291245232268
Source: Ministry of Agriculture.
Source: Ministry of Agriculture.

By contrast, olive oil production has shown large cyclical fluctuations in recent years. The production, which rose to 1.3 million tons during the 1992 crop year, was halved in 1993 before recovering to one million tons in 1994. In 1995, olive oil production collapsed to 350 thousand tons as a result of the combination of the drought and the olive production cycle.

Livestock production has also suffered from the consecutive droughts. However, government efforts helped attenuate the impact of the drought on herd sizes and thus increase self-sufficiency in meat and dairy products. Despite the increase in imports of lucerne and the authorities’ decision to subsidize the price of barley, the size of the livestock declined slightly as a result of a drop in fodder crop. The sheep population decreased by 5 percent in 1994 and is estimated to have declined further in 1995, while the size of the cattle population had been maintained as a result of imports of live animals for reproduction, allowing an increase in the production of meat and milk in 1994-95.

Regarding fishing, production has been stable at about 87 thousand tons since 1991, notwithstanding large annual fluctuations in output of the various fishing activities. Coastal fishery, the main fishing activity in Tunisia, declined by 13 percent in 1994, while tuna fishing increased by 32 percent. As the scope for increasing the catch remained limited, efforts have been made to develop fish processing with a view to increasing the value added in Tunisia. Fishing activities have been fully privatized, and the Government remained responsible only for the management of dams and lakes.

The government’s program in the agricultural sector, under the Eighth Development Plan (1992-96), aimed at increasing the contribution of the agricultural sector to economic growth and achieving food self-sufficiency in the long run. Agricultural policy was directed at: (i) improving the mobilization and use of water resources; (ii) enhancing the conservation of land and natural resources; (iii) improving agricultural productivity, in particular through the promotion of research programs to adapt the farming system to semi-arid climate conditions; (iv) increasing production (cereals, fruits and vegetable, and olive oil) and developing agro-industries; and (v) improving the institutional framework, including a reform of land tenure. 1/

A policy of agricultural diversification has been pursued, in particular through expansion of investment and restructuring of the agricultural sector, including with World Bank support under two agricultural sector adjustment loans. Extension services have been strengthened and better integrated with the activities of training centers, while agricultural research and teaching have been upgraded. Also, progress has been made in registering land titles. However, in certain regions, the scope for diversification of crops remained somewhat limited as there was no substitute for olive production due to weather and soil conditions (for example, almond trees had been largely wiped out in the late eighties by consecutive droughts). Nonetheless, some diversification has taken place, in particular into the niches of exports to the European market, especially of fruits, cut flowers, and spices.

Productivity in the agricultural sector has been increasing, but the gains varied widely between regions and crops. Progress has been made mainly in cereal and olive production, and was due to better management by cooperatives and availability of credit. In addition, to reduce crop losses, efforts have been made to improve transport and storage facilities. Steps have also been taken to diversify export markets and to adapt the production to the EU’s quality and sanitary standards. However, the marketing of a number of food commodities, including cereals, olive oil, and most subsidized products, continued to be dominated by government agencies, such as the cereal office (Office des Céréales), the oil office (Office National de l’Huile), and the trade office (Office du Commerce de Tunisie). 1/ While the import monopoly of the cereal office has been relaxed and the export of olive oil liberalized in 1994, these offices have retained a significant role in marketing, as they continued to channel government support to domestic producers. Similarly, the monopoly of the trade office over the import of sugar, tea, coffee, and tobacco has been maintained.

The new unified investment code continued to grant important incentives to investment in the agricultural sector. In particular, the agriculture and fishing sectors, including related services such as the collection and storage of cereals, are exempted from personal and corporate income taxes. Moreover, a subsidy amounting to up to 7 percent of the cost of investment can be granted subject to approval by the Ministry of Agriculture.

b. Energy and water

Real value added in the energy sector (including hydrocarbons, electricity, and water) had stagnated in 1991-95. The sector’s contribution to real GDP growth had been marginal (0.1 percentage point on average) and its share in total GDP declined from 7.4 percent in 1991 to below 5.6 percent in 1995. The sector’s performance was entirely attributable to the decline in hydrocarbon activities (which constitute 70 percent of the sector’s value added) while the increase in production of electricity and water has been comparable to that of the economy as a whole. Energy exports, which accounted for about 55 percent of total merchandise exports in the early 1980s, have declined steadily over the past decade to 14 percent in 1991 and about 10 percent in 1995. As a result of this long-term decline, Tunisia became a net importer of energy in 1993.

Total hydrocarbon output (crude petroleum and natural gas 2/) declined from 6.1 million tons of oil equivalent in 1991 to 5.3 million tons in 1994 (Table 4). This development is mainly due to the dwindling of reserves in the two most productive hydrocarbon fields in Tunisia. The crude oil production at the El Borma field in southwestern Tunisia decreased from 2.2 million tons in 1991 to 1.7 million tons in 1994. 3/ The production at Ashtart also fell from 1.2 million tons in 1991 to less than one million tons in 1995. 1/ Smaller fields such as Ezzaouia and Belli registered even sharper falls in production over recent years. The new production from Cercina field in the Sfax area in 1994 and the doubling of the production at Sidi El Kilani compensated only partly for the decline of the traditional fields. The domestic supply of natural gas, which has also been mainly extracted at the El Borma field, has stagnated in the last few years. However, production is expected to rebound in 1996 as activity in the Miskar field increases. 2/ It is estimated that Miskar could produce 1.5 billion of cubic meters of gas when operating at full capacity. In addition, fees paid in kind by Algeria from the use of the first trans-Tunisia gas pipeline reached 711 thousand metric tons (12 percent of total hydrocarbon production) in 1992, but declined sharply thereafter as a result of falling international oil prices. By 1994, the fees have dropped by 16 percent compared to the 1992 level. However, the opening of a second transnational pipeline to Italy (Gazoduc) in 1995 has increased the fees from the export of Algerian gas.

Table 4.Tunisia: Energy Production and Consumption, 1991–95
19911992199319941995 4/
(In thousands of metric tons)
Crude petroleum5,1895,1884,6414,3642,798
Gas 1/898948942944737
Fees 2/660711580594518
Liquefied petroleum gas253272282290201
Fuel oil1,4921,2521,351999548
Lighting oil144153164154107
Jet fuel132186217251159
Natural gas 1/7901,1781,1951,6871,274
(In millions of kilowatt–hours)
Electricity production 3/5,0965,4795,7056,0314,389
Sources: Ministry of Industry; and Direction Générale des Mines.

In thousands of tons of oil equivalent.

Fees from the trans–Tunisia pipeline carrying gas from Algeria to Italy are received in kind.

Production by the state company STEG (excluding production by private plants).

Estimate for the first eight months.

Sources: Ministry of Industry; and Direction Générale des Mines.

In thousands of tons of oil equivalent.

Fees from the trans–Tunisia pipeline carrying gas from Algeria to Italy are received in kind.

Production by the state company STEG (excluding production by private plants).

Estimate for the first eight months.

Over the past several years, electricity production has grown steadily (5 percent on average over 1991-94) to 6700 million kwh in 1994, of which 90 percent was produced by the state company for electricity and gas (STEG) and the remainder by private industrial plants for their own consumption. The production of STEG is generated almost exclusively (99 percent) by thermic plants that use fuel-oil and natural gas. The consumption of high-and medium-voltage electricity accounted, in 1994, for 60 percent of total consumption, low-voltage consumption represented 30 percent, and the remainder were losses in the distribution network. The main users of high-and medium-voltage electricity are the manufacturing and mining industries (60 percent of the total) as well as the tourism and agriculture sectors.

Water scarcity is an important long-term resource issue facing Tunisia and the sub-region. Despite adverse climatic conditions, water production has increased in line with the overall economic activity in recent years. This reflected mainly the Government’s large investments in the development of water resources, including the construction of several dams under the Eighth Development Plan, with the aim of mobilizing fully the water potential by the year 2000. In addition, actions were taken to improve water management and limit the losses in the distribution network, estimated at about 30 percent of the production in 1992. However, despite regular price increases, water continued to be heavily subsidized, particularly for agriculture and domestic use. 1/

c. Mining

The mining sector, which includes mainly lime phosphate, iron ore, and sea salt, contributes less than one percent to GDP. However, together with the phosphate derivatives industries, it accounts for about 8 percent of Tunisia’s foreign exchange earnings.

Lime phosphate extraction is by far the largest mining industry-activity in Tunisia. However, the phosphate production which amounted to about 6.3 million tons per year during 1990-92, declined sharply in 1993 (14 percent) as a result of adverse external and domestic developments. The world demand for phosphates declined in 1993-94, while world supply increased and competition among producers in developing countries and economies in transition intensified. On the domestic side, phosphate extraction in Tunisia has been characterized by high production costs due in part to the dominance of underground mining, as opposed to open-pit mining in major competitors. In addition, the relatively low grade of Tunisia’s phosphate rocks has required the development of a costly technique of enrichment. The ongoing restructuring of this industry aims at improving productivity and cutting operating costs through the rationalization of production and the exploitation of open-pit mining. Accordingly, underground mines have been gradually closed with the goal to terminate this type of extraction by the year 2000. While the extraction of iron ore has been stable at 300 thousand tons per year in the early 1990s, the production declined sharply to an all-time low of 240,000 tons in 1994, as a result of the closure for maintenance of a main furnace. By contrast, sea salt output rose sharply in 1994 to 528 thousand tons following a surge in external demand.

d. Manufacturing

The manufacturing sector in Tunisia is relatively diversified. It consists of the following main industries: textiles, clothing and leather goods; food processing (especially the processing of cereal derivatives, meat, and olive oil); construction materials and glass; mechanical and electrical goods; chemical and rubber; and woodwork and paper. The sector is mostly export-oriented and composed of small- and medium-size family-owned enterprises. Value added varies greatly across activities. 2/ In 1994, the sector accounted for about two thirds of total merchandise exports, 17.5 percent of GDP, and about 20 percent of total employment. 1/ Although the manufacturing sector has undergone significant diversification, it has remained highly dependent on textiles, and leather goods, which in 1994, accounted together for 23 percent of the total investment in manufacturing; 34 percent of the sector’s value added, 38 percent of employment creation. It is estimated that public enterprises account for a large share of the value added and investment in certain segments of the manufacturing sector, such as the chemical and construction industries. However, the weight of the public sector has gradually declined in recent years, reflecting the government disengagement from a number of activities in the mechanical, construction and textile industries. Since 1987, 18 enterprises in the manufacturing sector have been partially or totally privatized, and other enterprises have been liquidated.

The performance of the manufacturing sector has been particularly strong in recent years. Since 1991, the value added, at constant prices, has grown at an average annual rate of 5.2 percent (6.7 percent, excluding the food-processing industry) exceeding the growth rate of the economy as a whole. The sector’s share in total GDP increased from 16.9 percent in 1990 to an estimated 17.8 percent in 1995. Chemical and rubber industries experienced the largest value added growth in the sector with an annual average increase of 13 percent in real terms, resulting from a sustained world demand for phosphate derivatives. Textiles, clothing, and leather goods also expanded at a rapid pace. The growth of the value added of the mechanical and electric industries has been broadly in line with the rest of the economy, and the sector’s expansion was largely driven by exports. Reflecting largely developments in the agriculture sector, the value added of the food processing industry fluctuated widely throughout the period. In 1994, the sector’s strong performance reflected the large production of olive oil and canned food. However, the value added is estimated to have declined by 5.5 percent in real terms in 1995, consistent with the drop in the production of olive oil.

The good performance of the manufacturing sector in 1991-95 reflected mainly important productivity gains achieved by a better use of the existing capital, whereas investment in the sector declined in real terms during the period. In particular, investments in the mechanical, electrical and textile industries have been declining in absolute nominal terms since 1992, even though the Eighth Development Plan had targeted an acceleration of investment in the manufacturing sector (Table 5). This was to be achieved in the context of the Government’s industrial strategy to promote domestic and foreign direct investment (FDI) in Tunisia, in particular through two public specialized agencies: the Agence de Promotion de l’Industrie (API) and the Agence de Promotion de l’ Investissement Extérieur (APIE). 1/ API was established to promote investments in the manufacturing and services sectors; encourage the creation of enterprises, particularly small- and medium-size enterprises; and help diffuse technological innovation and other market-related information. APIE, which was created in January 1994, is entrusted with promoting foreign direct investment and publicizing the investment incentives offered by Tunisia, including the provision of information on the macroeconomic and institutional environment and factor costs. However, foreign direct investment in the manufacturing sector has remained modest.

Table 5.Tunisia: Gross Fixed Investment by Economic Sector and Financing, 1991–95
(In millions of dinars)
Agriculture and fishing425459483520662
Hydrocarbons 1/154478706464342
Electricity and water120158278311210
Food processing94100110115130
Construction materials and glass77889492104
Mechanical and electrical goods8083807777
Chemical and rubber products3442556365
Textiles and leather products160135132121131
Woodwork and other5566636170
Construction and public infrastructure8309541,0581,0681,183
Construction and public works5960704858
Public infrastructure263332380420485
Transport and communications463636542680807
Lodging, food, and beverages114219290280280
Commerce and other249233247250275
Central government697560653648835
Private sector 2/2,1953,1353,5543,5033,532
Financing requirements 3/3,1273,9894,2023,7744,302
Gross national savings2,6143,0493,1143,3893,625
(in percent of GDP)21.722.221.321.421.1
Foreign resources5139401,087385678
(in percent of GDP)
Sources: Ministiy of Economic Development; and staff estimates.

Includes Gazoduc (1992–94) and Miskar (1992–95) projects.

Includes all economic agents except the central government.

Includes changes in stocks.

Sources: Ministiy of Economic Development; and staff estimates.

Includes Gazoduc (1992–94) and Miskar (1992–95) projects.

Includes all economic agents except the central government.

Includes changes in stocks.

In 1994-95, to complement the actions of the specialized agencies, the Government launched an ambitious industrial restructuring program for the private sector (programme de mise à niveau de l’industrie), to help the Tunisian industries face the increased competition stemming from the implementation of a free trade area with the EU. The program aims at upgrading about half of the Tunisian private industry, or about 4,000 enterprises, over a period of 10 years. It involves actions to strengthen competitiveness by allocating more efficiently factors of production in the short- and medium-term and by enhancing the enterprises’ capacity to adopt modern technology and efficient management practices over the long run. Enterprises have the primary responsibility in initiating and financing such restructuring efforts, while the Government’s intervention and financial support will remain limited. The program’s total cost is estimated at D 2.5 billion over the next five years (1996-2000), to be financed from parafiscal levies on the industries concerned, budget resources through special funds, such as the Fonds pour le développement de la compétitivité industrielle (FODEC) and the Fonds de promotion et de la maîtrise de la technologie industrielle (FOPROMAP), and external assistance from the EU, the European Investment Bank, and the World Bank. A pilot program comprising 108 enterprises and covering a large spectrum of the Tunisian industry has been launched while an additional 160 enterprises are in the pipeline.

The program has two components: support for the restructuring of eligible enterprises, which is estimated to represent about 60 percent of the total cost, and improvement in the enterprises’ economic environment. On the basis of independent audits, financial support to eligible enterprises is provided to: (i) increase physical investments in modern equipments and technology; (ii) support actions to upgrade quality, and meet European norms and standards in order to obtain certification and licenses; and (iii) help strengthen the balance sheet of enterprises by increasing permanent resources and reducing their bank debts. 1/ The financial support is provided in the form of a subsidy equivalent to 10 percent of the cost of physical investments when the investment is also financed with bank credit, or 20 percent when the enterprise increases its permanent resources. In addition, a subsidy equivalent to 50 percent of the nonphysical investment costs is also provided up to a limit of D 50,000. Another component of the program includes an improvement of the enterprise’s environment to enhance vocational training programs; strengthening the existing technical centers (centres techniques) and creating new ones; developing research activities; upgrading the existing infrastructure; creating new industrial parks; and improving the provision and diffusion of economic information and statistics.

The Ministry of Industry is in charge of the preparation of the restructuring program through a specialized unit (Bureau de la mise à niveau), while a committee (Comité de pilotage. COPIL) including representatives of the private industry, the trade union, and the employers’ association is in charge of its supervision and implementation. The Bureau de la mise à niveau has the responsibility of coordinating the government actions; carrying out sectoral studies; catalyzing sources of financing from bilateral and multilateral donors. In addition, the Government is seeking to mobilize external technical assistance, particularly within the framework of the Association Agreement with the EU, as well as to ensure full support by the domestic financial institutions, including the investment companies, investment banks, and risk-capital companies.

e. Services

Excluding government wages and salaries, which represented about 13.5 percent of GDP over the period, services account for nearly a third of GDP in 1994. The main service activities include domestic trade; transport and telecommunications; and tourism. In the past several years, service activities grew by 5.7 percent on average and the sector’s contribution to economic growth averaged 1.8 percentage points. The sector accounted for 50 percent of the job creation in the economy in 1994.

Despite the adverse impact of the recent droughts, domestic trade, which represented about 9 percent of GDP during 1991-95, grew by 3.9 percent on average over the period. A new law regulating the distribution of agricultural and fishing products was adopted in 1994 to enhance the transparency and efficiency of the distribution system. The law defines distinct regulations governing the markets at the level of production, wholesale, and retail trade, and creates an agency to monitor price developments and distribution (Observatoire national de l’approvisionnement et des prix). At the same time, it strengthens administrative controls of quality and sanitary conditions in order to improve consumer protection.

After a decline in the wake of the 1991 Middle East crisis, the transport and telecommunications sector recovered strongly in 1992-95 with a rate of real growth averaging 8.6 percent. 1/ This performance was mainly the result of implementation of the sectoral reforms under the Eighth Development Plan. Accordingly, the sector has been gradually liberalized, public enterprises restructured, and action plans (contrat programme) drawn up for the major public enterprises with a view to enhancing efficiency and improving quality. 2/ The program of government retrenchment from transport activities, in particular merchandise transport, accelerated in 1995 with the privatization of most ground transport companies and the sale on the stock exchange of a part of the State’s shares in the national airline company (Tunisair). However, notwithstanding the rapid development of private carriers in recent years, the sector was still characterized by the predominance of public companies, including in passenger and maritime transport. Investment in the sector increased sharply in the past several years, including by 22 percent and 18 percent in 1994 and 1995, respectively.

Tunisia has a relatively well-developed tourism sector, which, in 1995, accounted for about 5.6 percent of GDP and 16 percent of external current receipts, employing directly about 60,000 people and indirectly another 80,000. Although tourism activity declined by 15 percent in the aftermath of the 1991 Middle-East crisis, the sector recovered strongly in 1992, and reached an average annual growth of 11 percent in real terms during 1992-95, notwithstanding the political and security problems in the region, as well as strong competition from other Mediterranean countries. This performance reflected Tunisia’s increased competitiveness in the tourism industry, together with a well-established image of quality and diversification of tourism activities. The number of tourists visiting Tunisia increased by 7 percent during the period, and reached 3.8 million in 1994 (Table 6). Tourists from the EU, in particular from Germany, represented in 1994 about 55 percent of the total; the share of Eastern European tourists has been increasing in recent years and in 1994 represented about 2 percent of arrivals. While the average daily spending per tourist has increased slightly in the recent past, to the equivalent of US$55 in 1994, the average length of stay has been stable at 6 days since the early 1990s. At the same time, local tourism continued to develop, helped by off-season discounts, and the number of bed-nights spent by residents increased by about 15 percent in 1994 to 1.8 million units. The buoyant investment in the sector rose to D 290 million in 1993, resulting in the near doubling of hotel accommodations in recent years, to about 150,000 beds. Investment projects already in the pipeline are expected to bring capacity to 200,000 beds by the year 2000.

Table 6.Tunisia: Indicators of Tourism Activity, 1991–95
19911992199319941995 1/
Annual fixed investment in tourism (in millions of dinars)114219290280280
Accommodation available (in thousands of beds)123136144153158
Number of foreign visitors (in thousands)3,2243,5403,6563,8562,776
Visitor bed–nights (in thousands)13,79321,71823,69326,44017,159
Of which: foreigners12,44320,20622,11924,68115,900
Average length of stay (in days)46666
Average occupancy rate (in percent)37.652.051.653.050.0
Tourism receipts (in millions of dinars)6329451,1141,317811
Daily expenditure per tourist (in dinars)5147505351
Sources: National Tourist Board; and Central Bank of Tunisia.

Estimates for the first eight months, except for investment and capacity which are projected for the year as a whole.

Sources: National Tourist Board; and Central Bank of Tunisia.

Estimates for the first eight months, except for investment and capacity which are projected for the year as a whole.

Faster growth in the tourism sector has been essentially constrained by the difficulty to find appropriate lots to build, the scarcity of water, the relatively limited training capacity, the risk of pollution of beaches, and other environmental problems. Although mass tourism in the seaside resorts remained the backbone of the industry, efforts have been made to exploit further Tunisia’s wealth of historical monuments and cultural activities. Furthermore, geographical diversification of markets has been pursued through efforts to attract tourists from the Gulf countries, Canada, the United States, Japan, and Eastern Europe. Although the sector had benefitted from tax-incentives and subsidies on interest rates on medium-and long-term borrowing for investments, after 1994 the unified investment code abolished these fiscal incentives, except for certain less developed regions (the south and the northern mountains regions), and to encourage new entrepreneurs in the sector.

3. Price developments

Inflation, as measured by the consumer price index (CPI), decelerated significantly in 1991-93, but picked up thereafter, as result of the supply effects of the persistent drought. On average, consumer prices rose by 5.7 percent over the period 1991-94, an outcome lower than during the period 1987-90 (7.4 percent on average). In 1995, food prices are estimated to have increased by more than 8 percent, thus contributing 1.8 percentage points to the general increase in the consumer price index estimated at 6.2 percent. Excluding food items (whose weight represents 41 percent in the general index), inflation has gradually declined over the period from 7.9 percent in 1991 to an estimated 4.7 percent in 1995 (Table 7).

Table 7.Tunisia: Consumer Price Index, 1991–95

(in percent)
(Annual average: 1990 = 100)
Food41.2108.7114.0116.9121.9130.7 1/
Housing18.7105.3111.8116.1120.6124.9 1/
Clothing10.4108.0116.9125.4129.0137.2 1/
Health9.1106.6112.8119.6128.3134.5 1/
Transportation8.8109.9118.7127.1131.9133.5 1/
Other (including services)11.8111.3116.9121.2128.6135.4 1/
General index100.0108.2114.5119.1124.6131.4 1/
(Annual percentage change)
Food8. 2/
Housing5. 2/
Clothing8. 2/
Health6. 2/
Transportation9. 2/
Other (including services) 2/
General index8. 2/
General index excluding food7. 2/
Source: Central Bank of Tunisia.

Average for the first nine months.

Nine months over nine months.

Source: Central Bank of Tunisia.

Average for the first nine months.

Nine months over nine months.

Domestic prices, which were subject to differing degrees of control, including fixed prices for food staples, basic commodities and public utilities, and various regimes of price regulation and government certification, have been liberalized in recent years. 1/ Following the introduction in 1991 of a competition law that regulated access to markets and distribution procedures and introduced the general principle of free price determination for agricultural and manufactured goods, the regimes of fixed prices and certification were abolished in 1992. However, prices of several products continued to be set administratively or remained subject to government control. 1/ Several legislative changes, including on competition and price policies, consumer protection (1992), distribution of agricultural and fishing products (1994), and market monopolies (1995) have led to the gradual dismantling of administered prices. As of end-1995, retail prices were liberalized for about 81 percent of domestic absorption while producer prices were set freely for about 90 percent of domestic production. 2/ Most of the remaining controls at the production stage concern the agro-industries and construction material. At the distribution stage, controls still prevail in other sectors, such as agriculture and fishing, and mechanical and electrical industries, and are motivated by weak competition.

Overall food subsidies provided through the Caisse Générale de Compensation have gradually declined from 4.2 percent to 1.8 percent of GDP between 1988 and 1994 (see section III). In the past several years, a number of producer subsidies have been eliminated, including those for fertilizers and animal feed. However, prices of subsidized food products, mainly cereal-based commodities and cooking oil, were not raised in 1995 out of concern of the adverse effects of the drought.

The annual rate of increase of the producer price index averaged 2 percent over 1991-94, with a decline in producer prices in the mining sector and a quasi-stagnation in sectors such as hydrocarbons and mechanical and electric industries. This has been offset by increases in the food processing and some other manufacturing industries.

4. Labor market

a. Wages and salaries

Based on available information, average annual wages increased by 2 percent per year in real terms during 1991-92. Since 1993, real wages are estimated to have continued to increase following the general wage increase of up to 6 percent per annum resulting from the three-year wage agreement in the civil service (1993-96) and the associated sectoral collective agreements (conventions collectives). The three-year wage agreement between the Labor Union and the Employers’ Association may have reinforced downward rigidity of wages and salaries in Tunisia, although in exceptional cases, lower wages increases can be determined at the firm level. 1/ While minimum wages in the agricultural sector (SMAG) and in the nonagricultural sector (SMIG) had increased in nominal terms by about 5 percent per year on average during 1991-95, they declined in real terms by about 0.7 percent. In 1992, the minimum wage (SMIG) was estimated to represent about 40 percent of the average wage in the economy.

Social security charges represented about 25 percent of wages in the private sector in 1994, a level commensurate with that of countries in Eastern and Southern Europe and the Middle East, but substantially higher than those of South-East Asian countries. In 1994, social security contributions were raised for both the private and public sectors. The base for determining pensions and adjustments for the cost of living had also been revised. A review of the benefits and services provided by the social security funds is underway, with a view to improving pension schemes and health insurance, including broadening the coverage and establishing a uniform base for benefits.

b. Employment

Despite relatively strong economic growth, unemployment has declined only moderately since the early 1990s. With about 350,000 job-seekers, the official unemployment rate stood at 15 percent in 1994. 2/ This relatively high unemployment rate stems primarily from the high growth rate of the labor force, the entrance of more women in the labor market, rural migration, as well as the slowdown of emigration to European countries. Moreover, rigidities in the labor market (on hiring and firing) may have also hindered employment creation. Unemployment is particularly high among the young, women, and urban population, while under-employment prevails in rural areas.

Over the past four years, the government has promoted a number of programs aimed at fostering employment among the young and first time job-seekers through a variety of national and regional labor-intensive activities, mainly in the agricultural sector. Several vocational and training programs promote employment in small industries and the handicraft sector.

The authorities have introduced modifications to the labor legislation in the recent past. Legislation adopted in February 1994 introduced flexibility in the area of conflict resolution inside the enterprise, for which arbitration was established; created enterprise committees for consultation between management and workers on all issues affecting the enterprise; and clarified the conditions for terminating employment and setting severance payments and dismissals without cause. In addition, the role of labor inspectors (inspection du travail) was strengthened and sanctions for labor code violations were reinforced. Changes in other labor regulations were also introduced, in particular those on working conditions. Moreover, temporary and part-time employment were introduced, and the conditions for terminating employment on economic grounds were made more specific, with enforcement being entrusted to a tripartite committee (commission de contrôle des licenciements) composed of representatives of labor, employers, and the administration. Although administrative procedures have remained somewhat cumbersome, labor market legislation has been gradually improved and made more flexible.

III. Government Finance

1. Structure of the nonfinancial public sector

The Central Government consists of the Presidency, the National Assembly and 22 ministries. In addition, there are various central government units with their own budgets comprising the social security funds and a number of administrative, economic, and social government agencies. Local governments include 21 councils of governorships and 257 municipalities, for which no aggregate financial information is available. There is also a large number of public enterprises, some of which are mere extensions of the Central Government (see below).

In this report, the consolidated financial operations of the Central Government refer to the operations of the Treasury, including extrabudgetary operations directly financed from abroad, and the operations of the social security funds. The Treasury accounts include the current and capital budgets (Titres I et II), the Special Funds (Fonds Spéciaux), the most important being the Subsidy Fund (Caisse Générale de Compensation), the Joint Funds (Fonds de Concours), and the Treasury’s net loans. The financial operations of administrative, economic, and social agencies attached to ministries, and the operations of the Post and Telecommunications Office (PTT) and Tunisian Radio and Television (RTT) are not consolidated.

Tunisia’s budget year coincides with the calendar year. The complementary period ending on January 20 of the following year was discontinued with the 1993 budget. Revenues are recorded on a cash or checks deposited basis, while expenditure is on a payment orders basis.

2. Overview of budgetary trends in 1991-95

Budget policies formulated in the context of the Eighth Development Plan (1992-96) aimed at supporting the widening role of the private sector while enhancing the Government’s economic development strategy. Priorities reflected the continued support of education and the social sectors, the need to expand economic infrastructure, and efforts to help alleviate regional economic disparities. Overall, fiscal developments in 1991-95 reflected the responsiveness of the tax system to the reforms introduced in 1988-90, the revenue measures taken throughout the period, and continuous efforts to improve tax administration and collection, and contain the growth of expenditures. Following a widening of the budget deficit, excluding grants, from 4.6 percent in 1990 to 5.7 percent of GDP in 1991, largely related to the Middle East crisis and the decline in revenue from the petroleum sector, there was a substantial improvement in the fiscal position in 1992 when the deficit narrowed to 2.8 percent of GDP (Table 8). The outcome resulted from some recovery in revenue and a decline by more than two percentage points of GDP in expenditure and net lending, involving both current and capital expenditure, in line with the budget target. During 1993-95, the deficit remained close to 3 percent of GDP. This result fell somewhat short of the Government’s objectives set under the Eighth Plan, owing mainly to slower than envisaged economic growth in 1993-95. After recovering in 1993 to its 1990 level, the ratio of revenue to GDP remained virtually unchanged at 30.5 percent of GDP, while expenditure and net lending rose to 33.4 percent of GDP, mainly on account of increases in current expenditure.

Table 8.Tunisia: Consolidated Government Financial Operations, 1991–95 1/
(In millions of Tunisian dinars)
Total revenue and grants3,5364,1194,4914,9135,264
Total revenue3,5034,0654,4544,8665,249
Tax revenue2,88733123,6243,9514,315
Taxes on foreign trade9551,1121,1621,2111,321
Other taxes1,9322,2002,4622,7402,994
Nontax revenue617753830915934
Petroleum sector254296301349309
Other nontax revenue362457530566625
Total expenditure and net lending4,1914,4504,9175,3355,752
Total expenditure4,2144,3934,8525,2395,885
Current expenditure3,1883,5023,8364,2534,638
Wages and salaries1,17013141,4761,5991,788
Goods and services286289293312343
Interest payments416440512550667
External debt258246281321350
Domestic debt158195232230317
Transfers and subsidies 2/1,3161,4601,5551,7911,840
Of which: consumer subsidies280269260247243
social security benefits472531579735832
Capital expenditure1,0268911,0169871,247
Direct investment697561654648835
Capital transfers and equity329330362338412
Net lending–24576596–133
Overall deficit–655–332–427–423–488
of which: direct financing361230271228255
Banking system45–166–47–78– –
Nonbank 3/291417299284136
Memorandum items:
Overall deficit, excluding grants–687–386–463–470–503
Military expenditure257260279284305
(In percent of GDP)
Total revenue and grants29.430.130.731.030.6
Tax revenue24.024.224.824.925.1
Nontax revenue5.
Expenditure and net lending34.832.333.733.633.4
Current expenditure26.525.626.326.826.9
Capital expenditure8.
Overall deficit including grants–5.4–2.4–2.9–2.7–2.8
Overall deficit excluding grants–5.7–2.8–3.2–3.0–2.9
Sources: Ministry of Finance; and Fund staff estimates.

Including Special Funds, Fonds de Concours, extrabudgetary operations financed abroad, net treasury operations, and social security funds.

Comprises transfers related to health, education, and social security, as well as consumer subsidies.

Including payment float, errors, ans omissions.

Sources: Ministry of Finance; and Fund staff estimates.

Including Special Funds, Fonds de Concours, extrabudgetary operations financed abroad, net treasury operations, and social security funds.

Comprises transfers related to health, education, and social security, as well as consumer subsidies.

Including payment float, errors, ans omissions.

3. Revenue trends

a. Tax reform

The comprehensive tax reform that was enacted in 1987-90 aimed at establishing a modern and efficient tax system that would eliminate distortions, enhance elasticity, and improve tax equity. This was to be achieved by simplifying and rationalizing the tax and tariff structure, and strengthening the tax and customs administrations. Following the introduction in 1988 of the value added tax to replace three turnover taxes, a new tax code covering personal income and corporate profit taxes became effective in 1990. The schedular and general income taxes were replaced by a single global income tax, and the rates of the new corporate tax were reduced to two. Exemptions and deductions were reduced, and the system of tax withholding and advances was extended. The dual imposition of income from capital was eliminated by the exclusion of dividends from taxable income (Appendix II). With regard to tariff reform, the maximum import duty rate was reduced from 236 percent in 1986 to 43 percent in 1988 and tariff dispersion was narrowed substantially (see below).

Over the period 1991-95, steps were taken to streamline the VAT and enhance its role as the principal indirect tax. Its coverage was broadened and a large range of products was moved from the high rate of 29 percent to the “normal” rate of 17 percent. To avoid revenue losses, the excise tax rate was increased for some of the products; for others, the excise tax was abolished, including small passenger cars in 1995. With a view to facilitating tax administration, in 1993 small enterprises subject to the lump-sum system (forfait) for income taxes and the VAT were exempted from the latter, subject to settlement of their income tax liabilities. However, some changes ran counter to the key principles of neutrality and universality of the VAT system, most notably the increase in exemptions and the extension of suspensions (régimes suspensifs or ring system), which by breaking the link between various stages of production and distribution, disrupts the VAT deduction system. In the context of the government’s policy to support certain activities, exemptions from VAT were granted for certain products and sectors, including agricultural and fishing, local governments, transport and telecommunications, and energy saving products. The suspension of VAT, available to the export sector and some investments, was generalized under the new investment code enacted in 1993, to benefit nearly all purchases of equipment goods.

Provisions were introduced in 1991-95 aimed at reinforcing the global nature of the income tax through a greater harmonization of the taxation of different sources of income, including between personal income and corporate profits. All investment income, other than dividends, was made subject to the same taxation, including withholding. Distortions arising from differences in the fiscal treatment of bonds between primary and secondary market transactions were eliminated, while tax distortions affecting the establishment of open-end investment funds were removed. A minimum tax for beneficiaries of tax exemptions was introduced for the personal income tax, comparable to that in effect for the corporate tax. Also, tax withholdings at the source were extended to income from noncommercial activities. In addition, eligibility conditions for the lump-sum tax (forfait) were tightened and the various lump-sum tax regimes were further simplified and harmonized.

Changes in the import duty system in 1991-95 were largely related to the gradual removal of quantitative import restrictions, which increasingly affected locally produced goods. To provide domestic producers with temporary protection while import liberalization is undertaken, provisional compensatory duties, were introduced in 1991 and broadened in subsequent years. 1/ Set at 10, 20 or 30 percent, DCPs were to be eliminated over a period not exceeding three years. In addition, with a view to harmonizing levels of effective protection, the liberalization of new import categories has been accompanied by successive rationalizations of the tariff structure. Also in 1991, a temporary import duty surcharge equivalent to 5 percent of duties and taxes paid on imports was introduced to boost revenue in the wake of the Middle East crisis; in 1994 it was integrated in the regular import duty schedule, without affecting the minimum and maximum rates. Effective in 1994, the customs service fee on imports was raised from 1.5 percent to 2 percent of import taxes paid. A new code of registration and stamp duties, adopted in 1993, reduced rates and simplified the system of duties, so as to bring it in line with the newly reformed direct and indirect tax system.

The new unified investment code, enacted at the end of 1993, extended the benefits to all sectors, while providing specific incentives for certain sectors. Common incentives include a deduction from the taxable income of up to 35 percent of capital subscription or extension investments; a reduction in customs duty rates to 10 percent for the import of equipment goods; and a suspension of the VAT and excise taxes on the acquisition of imported or locally produced equipment goods.

Over the period, steady progress has been made in reinforcing tax administration and collection, including improvement in tax assessment and upgrading of tax auditing. Similarly, the customs administration has been strengthened, in particular by the reorganization of the Custom General Directorate introduced in September 1994.

b. Revenue developments

Since 1990, total revenue has remained stable at about 30.5 percent of GDP, with the exception of 1991-92, when the Middle East crisis, together with a severe drop in petroleum revenue, resulted in a revenue loss of 1.4 percentage points of GDP.

Over the period 1991-95 there was a steady albeit moderate increase in the ratio of tax revenue to GDP, which rose from 23.7 percent in 1990 to an estimated 25.1 percent in 1995. This increase, however, was fully offset by the decline of nontax revenue reflecting lower contributions from the petroleum sector. During the period there were also some shifts in the relative importance of various tax categories (Table 9 and Chart 4). The increase by more than 3 percentage points to 19 percent in the share of taxes on income and profits in total tax revenue was matched by a drop of 4 percentage points in the share of taxes on international trade and transactions to 31 percent.

Table 9.Tunisia: Consolidated Revenue of the Central Government, 1991–95
(In percent of GDP)
Tax revenue24.024.224.824.925.1
Taxes on income and profits4.
Social security contributions3.
Taxes on goods and services6.
Taxes on international trade and services7.
Of which: import duties4.
Other tax revenue1.
Nontax revenue5.
Petroleum sector2.
(In percent of total revenue)
Tax revenue82.481.581.481.282.2
Taxes on income and profits14.313.815.715.115.8
Social security contributions12.212.412.213.713.8
Taxes on goods and services22.822.221.722.822.6
Taxes on international trade and services27.227.326.124.925.2
Of which: import duties15.415.514.914.314.2
Other tax revenue5.
Nontax revenue17.418.418.618.717.7
Petroleum sector7.
(In percent of tax revenue)
Taxes on income and profits17.416.919.318.619.2
Social security contributions14.815.215.116.916.8
Taxes on goods and services27.727.326.628.127.5
Taxes on international trade and services33.133.632.130.630.6
Of which: import duties18.719.018.317.617.3
Other nontax revenue7.
Sources: Ministry of Finance; and Fund staff estimates.
Sources: Ministry of Finance; and Fund staff estimates.


Sources: Tunisian authorities; and staff estimates.

Revenue from income taxes increased sharply, accounting for about a quarter of the increase in total tax revenue in 1991-95. This performance resulted mainly from the introduction of the new tax code and improvements in tax administration and collection. Within this category, the steady growth in personal income tax receipts was particularly marked, as well as the rapid expansion in tax withholdings from investment income in 1994-95. In contrast, corporate tax receipts displayed an uneven trend related to the lagged response to changes in GDP growth, and the decline in tax revenue from the petroleum companies in 1994-95. In 1995, the estimated increase of social security contributions is attributable to an upward adjustment of contribution rates and the widening of its coverage.

Taxes on domestic goods and services rose from 6.3 percent of GDP in 1990 to 7 percent in 1994-95, reflecting the various revenue measures taken and the successful implementation of the VAT. The sharp increase in excise taxes resulted from the raising of tax rates on petroleum, tobacco and alcohol products in 1991 and 1994. The upward adjustment in excise tax rates for products which were moved from the high VAT rate to the normal VAT rate category led to a further acceleration in excise tax receipts in 1994. The rapid growth of VAT receipts in 1991-92 was due to the expansion of its coverage, but subsequently slowed down as products were moved from the high to the normal rate category, various exemptions were granted, including a broadening of suspensions in the context of the new investment code.

With the introduction of the import surcharge and the complementary import duties, the ratio of import duties to GDP rose slightly in 1991-92. Their subsequent decline to 4.3 percent of GDP in 1995, can be attributed to the granting of exemptions or rate reductions, including those under the investment code, and the increased share of imports by the offshore sector, which remained exempt from taxes on imports. The share of import duties in total revenue in 1995 amounted to 14.2 percent, down from 15.5 percent in 1992 (Table 9).

Following a sharp decline in 1991 resulting from a fall in both petroleum production and prices, nontax revenue from the petroleum sector remained at the equivalent of about 2 percent of GDP in subsequent years, reflecting steady transfers of profits and dividends by the publicly owned petroleum companies to the Treasury. The growth in nonpetroleum nontax revenue was on account of dividend payments by financial and nonfinancial public enterprises, investment income of the social security funds and revenue accruing to special Treasury funds. In 1995, nontax revenue was boosted by increases in fees as result of the start of operations of the second trans-Tunisia pipeline of Algerian natural gas to Italy (Gazoduc), as well as increased revenue from fines and administrative operations.

4. Expenditure trends

At 34.2 percent of GDP in 1995, total expenditure was about one percentage point below its 1990-91 level (Table 10). After declining by about one percentage point in 1992, current expenditure rose to close to 27 percent of GDP in 1994-95, while capital expenditure fell from the equivalent of more than 8 percent of GDP in 1990-91 to an average of less than 7 percent in subsequent years. Over the period 1991-95, the share in current expenditure of wages and salaries, and interest payments increased, while that of subsidies and transfers, and goods and services declined.

Table 10.Tunisia: Economic Classification of Consolidated Expenditure of the Central Government, 1991–95
(In percent of GDP)
Current expenditure26.525.626.326.826.9
Wages and salaries9.79.610.110.110.4
Goods and other services2.
Interest on public debt3.
Subsidies and transfers10.910.710.611.310.7
Capital expenditure8.
Direct investment5.
Capital transfers and equity2.
Total expenditure35.
(In percent of total expenditure)
Current expenditure75.779.779.181.278.8
Wages and salaries27.829.930.430.530.4
Goods and other services6.
Interest on public debt9.910.010.610.511.3
Subsidies and transfers31.
Capital expenditure24.320.320.918.821.2
Direct investment16.512.813.512.414.2
Capital transfers and equity7.
(In percent of current expenditure)
Wages and salaries36.737.538.537.638.6
Goods and services9.
Interest on public debt13.012.613.312.914.4
Subsidies and transfers41.341.740.542.139.7
Sources: Ministry of Finance; and Fund staff estimates.
Sources: Ministry of Finance; and Fund staff estimates.

Increasing at an annual average rate of 11.8 percent during the period, wages and salaries rose from the equivalent of 9.7 percent of GDP in 1991 to an estimated 10.4 percent in 1995. The growth of the government wage bill was driven by two main factors. Since 1990 general salary increases of some 5-6 percent per annum have been granted under two consecutive three-year wage agreements covering 1990-92 and 1993-95. 1/ In addition, the size of the civil service has been expanding about 2.5 percent per year, on average. The recruitment has consistently been concentrated in education, training, and health, which have accounted for more than two thirds of total recruitment.

Outlays for subsidies and transfers have remained at about 11 percent of GDP. A large share of these expenditures consists of transfers to a number of governmental agencies that undertake certain activities on behalf of the Central Government. Those agencies include more than 1,400 entities of an administrative nature (Etablissements publics à caractère administratif) operating in particular in the areas of education and training, and health, and some 40 entities with commercial or industrial activities (Etablissements à caractère industriel ou commercial). Transfers to those agencies have represented about 2.5 percent of GDP on average during the period 1991-95. Other components of subsidies and transfers are transfers to local governments; subsidies for food, housing, and transportation; support for cultural activities; and operating subsidies to public enterprises. Moreover social security payments to households, including pensions, disability payments, health care benefits, and family allowances are also included in this category as part of the consolidation of public finances. Benefits paid by the social security funds registered the fastest growth during the period, rising from the equivalent of 3.8 percent of GDP in 1990 to an estimated 4.8 percent in 1995, reflecting the broadening of coverage of the system. In contrast, consumer subsidies for food products declined by half to an estimated 1.4 percent of GDP over the same period. This decline resulted from regular increases of prices of subsidized commodities as well as from the removal of certain commodities from the subsidy program, including fertilizers, certain varieties of milk, sugar, and some cereal products.

Interest payments on the total public debt expanded rapidly in 1991-93 reflecting mainly the rising stock of domestic debt, and the Treasury’s increased reliance on Treasury bills at market related interest rates, instead of the low-yield equipment bonds. The virtual stagnation in 1994 of domestic interest payments resulted from a decline in interest rates in late 1993, a shift in the timing of interest payments on short term Treasury bills from issuance to maturity (introduced in November 1993) and the gradual change in the composition of domestic debt to more medium- and long-term maturities. Interest payments on foreign debt in 1991-92 stagnated, reflecting the favorable terms Tunisia obtained on its external borrowing, especially from bilateral sources, while the subsequent acceleration was due to increased recourse to financial markets and multilateral institutions.

Capital expenditure (which consists of direct investments by the government and capital transfers) averaged 7 percent of GDP during 1991-95, with year-to-year variations mainly due to movements in direct investment financed with external resources. Estimates for 1995 point to some acceleration of capital expenditure following delays in the implementation of some major projects, especially in the agricultural sector. Direct investment throughout the period was concentrated on projects in the agricultural sector, infrastructure, education, and health, which received about 75 percent of central government budget outlays in 1992-95. In the agriculture sector, the emphasis was on the mobilization and conservation of water resources, including the construction of dams, soil conservation and forest development. In infrastructure, the focus has been on transportation, the rehabilitation of fishing ports and the protection against floods. Capital transfers were granted to public entities operating especially in transport, agriculture and tourism, and the agency for the protection of the environment. Transfers were also made to local authorities to support regional development projects. In agriculture and tourism, a large part of the transfers has been used to support private sector investment at favorable conditions. Capital transfers in the transport sector were mainly to help finance the investment program of the public rail transportation companies. In addition to the financing of investment projects, transfers were also made for the amortization of debt of public enterprises, especially of the major chemical conglomerate.

5. Financing

During the period 1991-95, the financing of the fiscal deficit gradually shifted from domestic to external financing. Domestic financing fell as the Central Government steadily reduced its indebtedness to the domestic banking system. Nonbank domestic financing was fairly stable at around D 290 million in 1990-94, with the exception of 1992 when it more than offset the large swing in bank financing. In 1995, nonbank financing fell sharply to the equivalent of 28 percent of the deficit. By contrast, the share of foreign financing of the fiscal deficit rose steadily to reach 51 percent in 1994 and an estimated 72 percent in 1995, equivalent to 2 percent of GDP.

Financing of the budget deficit from domestic resources was limited to avoid crowding out the private sector, and increasingly took place at market conditions. The shift to foreign financing also reflected Tunisia’s easy access to foreign resources including international financial markets. The issuance of development bonds in the domestic market at below market interest rates was discontinued in 1992, followed in 1993 by the initiation of a program of accelerated amortization of such outstanding bonds. 1/ In parallel, the government relied increasingly on Treasury bills as the main instrument of domestic finance of the fiscal deficit. Therefore, outstanding Treasury bills rose from D 0.5 billion at the end of 1990 to D 2 billion at the end of 1994.

6. Public enterprises

The public enterprise sector represents an important segment of the Tunisian economy and consists of 217 units, of which 170 enterprises are engaged in the production of marketable goods or services, including financial institutions, and 47 entities that are mainly extensions of the Central Government. 1/ Data on sectoral distribution, excluding public banks and governmental entities, indicate that in 1993-94 the transport sector accounted for 40 percent of total value added, followed by energy with 19 percent, agro-industry and commerce each with 8 percent, and construction materials and the chemical sector each with about 6 percent.

In 1991-94 the public enterprise sector accounted for some 11 percent of total salaried employment, while its share of the total wage bill amounted to an estimated 19 percent. It contributed about 23 percent of total investment in 1992-93, mainly in the energy and transportation sectors. 2/ Public enterprises accounted for about 26 percent of total imports in 1991-92, while their share in total exports fell from 32 percent in 1991 to 20 percent in 1992 because of the decline in exports of olive oil and phosphates.

The value added of nonfinancial commercial public enterprises grew by 0.7 percent per annum on average and its share in GDP declined from 11.2 percent in 1990 to 9.7 percent in 1994. The wage bill rose significantly and its share in the value added of public enterprises rose from 52 percent in 1990 to 56 percent in 1994. Available information indicates that after moving to an overall profit position in 1988, losses re-emerged in 1990 and rose to D 155 million in 1993, equivalent to 10.6 percent of value added. 3/ In 1994, there was a strong improvement in the overall position of public enterprises as losses were reduced to D 28 million or 1.8 percent of value added, mainly due to a sharp reduction in operating losses in the chemical sector and, to a lesser extent, an improvement in the performance of enterprises in the mining and agroindustrial sectors.

In the context of the restructuring of public enterprises, several action plans (contrats programme) were signed, in particular with enterprises operating in the transportation, energy, mining and construction material sectors. In 1995, the action plans were generalized to all enterprises and government assistance was provided to strengthen management and internal audits and training. The restructuring of enterprises facing difficulties often implied partial or total liquidation, which covered about 100 cases since 1987. Restructuring efforts involved the reduction of costs, in particular through lay-offs, tariff or price adjustments, and financial or fiscal support.

In order to disengage the Government from directly productive activities, the privatization of public enterprises accelerated in 1994-1995. This acceleration had been accompanied by changes in the legal framework enacted in August 1994, which introduced new modalities for privatization. These provide for the possible attachment of certain privileges to the equity shares retained by the State, including representation in the board of directors, the power to block a merger or split, liquidation, or changes in activity; or the authority of approval of acquisition of shares by individual shareholders beyond certain limits. 1/ They also involve sales by tender of a majority block of equity to a core group of shareholders with the attachment of certain conditions (cahier des charges) involving in general commitments regarding investment or employment.

At end-September 1995, a total of 48 enterprises had been privatized, of which 28 were carried out through the sale of assets, and the remainder through the sale of a majority block of shares. In addition, nine enterprises have been partially privatized, of which seven with the sale of assets. The single largest partial privatization in 1995 was the sale on the stock market of 15 percent of the equity of the national airline (Tunisair). Recourse to partial privatization in cases where the enterprise had a monopoly position was intended to open the capital structure to private investors while maintaining government control. At the end of September 1995, cumulative proceeds of privatization, including partial operations, amounted to D 239 million, of which 33 percent was accounted for by enterprises in the tourism sector, 21 percent in the transportation sector, 17 percent in fishing and agro-industry, and 15 percent in the chemical and mechanical goods sectors.

IV. Monetary and Financial Sector Developments

1. Overview

In the context of the macroeconomic adjustment and structural reform program initiated in 1986, the objectives of monetary policy in Tunisia have sought to achieve financial stability, as a key prerequisite for sustainable growth. Over the period 1991-95, the monetary authorities continued to pursue a prudent policy which helped achieve a decline of inflation, notwithstanding the short-term price impact of the drought in 1994-95. In addition, a far-reaching program of monetary and financial reforms has been implemented since 1987. It included the replacement of bank-specific credit ceilings by more market-based instruments of credit control, the elimination of the requirement for prior authorization of bank loans, a substantial deregulation of interest rates and the simplification of their structure, a diversification of financial instruments, and a shift in the domestic financing of the government to instruments with market-related interest rates. A new banking law was adopted, prudential regulations and supervision of financial institutions were strengthened, and a new stock exchange legislation was introduced.

2. Financial system and policy instruments

The Tunisian banking system is composed of the central bank; twelve deposit money banks (of which five are government-owned); eight development banks (of which two are government-owned and six are joint ventures between Tunisia and other Arab States); six private leasing companies, and a savings bank (CENT). Other financial institutions include an investment bank, eight offshore banks, two factoring companies, five portfolio investment funds, one capital-risk company; 23 insurance companies, including one for foreign trade; a capital-risk company; 108 mutual funds; and the stock exchange and brokerage houses.

The main monetary policy instruments include the central bank’s refinancing mechanisms; the interest rate policy; the auction of Treasury bills; and the reserve requirements. There are three refinancing facilities: (i) a credit auction (appel d’offres) which allocates fixed amounts of seven-day funds through weekly bids--the required collateral being agricultural or related lending; 1/ (ii) an open repurchase facility (prises en pension) which provides banks with refinancing through seven-day repurchase agreements of eligible paper--which excludes Treasury bills--at slightly higher interest rate than that under the credit auction; 2/ and (iii) an interbank monetary market, including overnight and term lending between banks, the development of which has remained limited. 3/ In addition, the central bank has been refinancing at preferential interest rates certain credits to priority sectors (export-related activities, crop financing, investments in agriculture, and small- and medium-size enterprises’ investments). However, in order to keep control over bank liquidity, the amount of liquidity injected through the preferential refinancing windows has been withdrawn through the reprise de liquidité mechanism. 1/ Furthermore, the central bank has intervened occasionally to regulate banks’ liquidity through overnight repurchase agreements (ponctions de fin de journée).

Although most interest rates have been liberalized since 1987, some deposit and lending rates have remained regulated. Interest rates on term deposits with a maturity of three months to five years and foreign currency deposits are freely determined. However, interest rates on sight deposits must not exceed a ceiling of two percentage points, and those on special savings deposits, which accounted for about 40 percent of total deposits in the banking system in 1994, are set at two points below the money market rate. In 1994, the ceiling on lending rates of three percentage points above the money market rate was eliminated. However, the central bank continued to set preferential interest rates (taux d’intérê préférentiels) for priority sectors (agriculture, export, and small- and medium-size enterprises). The spread between preferential interest rates and the money market rate has substantially eroded since 1991, and the outstanding commercial banks’ credit to priority sectors declined from 15 percent of total credit in 1991 to 6 percent in 1994.

The Treasury bills, which were introduced essentially to finance the budget deficit, are issued in two forms according to their degree of liquidity. The transferable bills (bons du trésor cessibles), which were introduced in 1989, and have been sold to the public through the banks, are highly liquid instruments as banks are required to buy them back at face value (with only a small discount for operation costs). 2/ The negotiable treasury bills (bons du trésor négociables) were introduced in 1993 with a view to supplying a long-term financial instrument, fostering the development of a secondary market, and allowing for a market-determined yield. They are traded at the stock exchange, usually by commercial banks for their clients (central bank has not been involved in marketing this instrument). While outstanding negotiable Treasury bills amounted to D 216 million at end-September 1995, the secondary market has not developed enough to allow open market operations.

The current system of reserve requirements comprises a mandatory reserve ratio equivalent to 2 percent of the banks’ dinar-denominated deposits. 1/ In addition, banks are required to lend to the priority sectors (agriculture, export, and small- and medium-size enterprises) an amount equivalent to 10 percent of their total deposits in order to comply with the sectoral lending ratio (ratio des activités Prioritaires). Banks that fail to comply are required to deposit in a non-interest-bearing provisional account (réserve provisoire) the difference between the prescribed lending and the actual amount lent. The associated opportunity cost substantially increases the effective reserve requirement.

3. Developments in monetary aggregates and interest rates

a. Trends in monetary aggregates

During 1991-95, the increase in the broad monetary aggregate (M2) had been contained below that of nominal GDP, with the bulk of money expansion stemming from the rapid expansion of credit to the nonagricultural sectors. The annual growth rate of M2 averaged 7 percent, while that of nominal GDP reached about 10 percent. As a result, the income velocity of money increased from 2.1 in 1990 to an estimated 2.4 in 1995, consistent with the deepening of the nonbank financial system (see below). Net foreign assets of the banking system expanded moderately on average (1.4 percent of initial stock of broad money), although they picked up somewhat in 1994-95, reflecting the improvement in the overall balance of payments (Table 11). By contrast, the rate of growth of net domestic assets had been relatively high during the period, with an annual average increase of 10.2 percent, despite a consistent decline in net credit to the government during 1992-95 (Chart 5). 2/ Accordingly, credit to the economy grew by 11 percent of the initial stock of broad money during the period. Excluding credits for the olive and cereal crops, which declined during the drought years (1993-95), credit to the economy, in particular to manufacturing and tourism activities, expanded at about 12 percent per year. The increase in other items (net) reflected essentially the recapitalization of several Tunisian banks, in the context of the authorities’ efforts to gradually conform to international prudential regulations (see below).

Table 11.Tunisia: Monetary Survey, 1991–95
(In millions of dinars; end of period)
Foreign assets (net)5265475638851032
Foreign assets1,1931,3811,5001,9992,059
Foreign liabilities–667–834–937–1,114–1,027
Domestic credit6,7417,4788,0068,5688,724
Credit to the government (net)853687640562229
Central Bank–6847–6–104–150
Deposit money banks793537536544219
Counterpart of CCP deposits128104110122160
Credit to the economy5,8886,7917,3668,0078,495
Central Bank4139262016
Deposit money banks5,8476,7517,3407,9868,479
Money plus quasi–money (M2)5,5075,9036,3186,8116,694
Demand deposits1,5361,6251,7362,0181,981
Financial institutions1214101413
Nonfinancial enterprises and households1,5241,6111,7262,0041,968
Financial institutions1009714512393
Nonfinancial enterprises and households2,7673,0243,2573,4743,377
Long–term deposits351388405435475
Other items (net)1,4101,7341,8462,2072,588
Special resources806849903983845
Capital accounts7599421,1131,3151,725
(Change in percent of initial stock of broad money)
Foreign assets (net)–
Domestic credit11.513.
Credit to the government (net)0.9–3.0–0.8–1.2–4.9
Credit to the economy10.616.49.710.17.2
Money plus quasi–money (M2)–1.7
Demand deposits––0.5
Source: Central Bank of Tunisia.
Source: Central Bank of Tunisia.


(Change in percent of initial stock of money)

Source: Data provided by the Tunisian authorities.

With regard to money supply, currency in circulation grew at a moderate and decelerating pace during 1991-95 (0.7 percent of initial stock of broad money on average). By contrast, demand deposits in the banking system increased substantially, while the rapid expansion of time and savings deposits and other quasi-money components, such as the certificates of deposits, decelerated somewhat in recent years, reflecting the greater attractiveness of newly introduced financial instruments.

b. Monetary developments in 1994-95

The broad monetary aggregate M2 grew at 7.8 percent in 1994 and declined slightly during the first ten months of 1995. Following the pickup in crop and other medium-term credit to the agricultural sector during the last quarter of 1995, M2 is estimated to have increased by 7.6 percent for the year as a whole. Net foreign assets increased by 5.1 percent and 2.4 percent of the initial stock of broad money in 1994 and 1995, respectively, reflecting in particular the bond issues in the Japanese market in 1994-95 (see Section V). Net domestic assets grew by 7 percent in 1994 and by an estimated 6.7 percent in 1995, with most of the increase being devoted to the financing of the nongovernment sector, while the outstanding credit to the government continued to decline.

Regarding the sectoral distribution of credit (including from development banks and off-shore banks), 1/ the share of industry had remained stable at around 44 percent of total credit in 1993-95, while the share of services, in particular tourism, increased by 3 percentage point to 41 percent by mid-1995 and that of the agriculture and fishing sector declined to 15 percent. Reflecting the financial difficulties of the agricultural sector due to the drought, short-term agricultural credits were rescheduled in 1994 and in 1995 into three-year and five-year loans.

In 1994, banks’ liquidity improved as the increase in demand and time deposits slightly exceeded the increase in credit. Total refinancing at the central bank (including appel d’offres and net of the liquidity reabsorption, reprise de liquidités) declined from D 380 million to D 160 million. Repurchase at the central bank’s prises en pension declined from D 400 million at end-1993 to D 360 million at end-1994, while the amount of credit eligible for the appel d’offres window dropped from D 480 million in 1993 to D 240 million in 1994. However, part of the improvement in banks’ liquidity had been offset by the requirement imposed on banks to build reserves at the central bank on account of the mandatory sectoral lending ratio (ratio des activités prioritaires), leading to an increase of their total reserves by 82 percent in 1994. During the first half of 1995, the banks’ liquidity position tightened somewhat due to the stagnation of deposits and the requirement to increase further the provisional reserves at the central bank. Net refinancing from the central bank increased by about D 300 million. In response to the acceleration of inflation, the central bank revised its monetary program in mid year and reabsorbed during July-October 1995 the entire amount of liquidity injected during the first half of the year. As of end-October 1995, the outstanding refinancing from the Central Bank was unchanged compared to the end-1994 level, while total banks’ reserves at the Central Bank increased by about 11 percent.

c. Interest rate developments

The interest rates on the appel d’offres and prises en pension were reduced by 2.5 and 3 percentage points between 1991 and 1993, respectively (Table 12). As a result, the money market rate decreased from 11.8 percent to 8.8 percent. Since 1993, short-term interest rates have been unchanged despite rising inflation, but real interest rates remained positive. Nonetheless, the expansion of credit to the economy had decelerated in 1993-95 and the refinancing from the central bank, while increasing slightly in 1993, declined in 1994. This points to the fact that, in practice, the central bank has kept control over the volume of credit by only partially satisfying bids received at the appel d’offres and adjusting the amount of refinance credit granted to each bank. Similarly, access to the prises en pension has been occasionally regulated by moral suasion. In addition, the fact that the interbank market rate (money market rate) has remained stable since 1993 at 1/16 of one percentage point below the rate of prises en pension, indicates that competition among banks on the basis of interest rates has been weak. 1/ Tacit collusion among commercial banks (accords de place) contributed to the low variability of interest rates regardless of changing economic conditions. Following the liberalization of lending rates in 1994, the commercial banks’ spread on their lending operations (excluding priority sectors and lending on special resources) has remained stable, averaging 2.6 percentage points above the money market rate.

Table 12.Tunisia: Selected Interest Rates, 1991–95
(In percent; end of period)
Money market rate (TMM)11.8111.318.818.818.81
Central Bank
Auction of refinance credit 1/10.3810.387.887.887.88
Repurchase facility 2/11.8811.388.888.888.88
Rediscount of preferential credits
Export–related credit6.
Crop credit5.757.757.757.757.75
Agricultural investment6.508.508.508.508.50
PME investments 3/7.509.509.509.509.50
Commercial banks
Maximum lending/overdraft 4/14.8116.5014.4413.8113.81
Special savings deposit rate 5/9.639.637.386.886.88
Source: Central Bank of Tunisia.

Under the appel d’offres a fixed amount of seven–day liquidity is auctioned against assets held by the banks.

The prise en pension is an automatic repurchase window at the initiative of the banks.

PME, small– and medium–sized enterprises.

The maximum lending rate was set at the TMM plus 2.5 points in 1989 and at the TMM plus 3 points in 1990–91. From the beginning of 1992 the average lending rate for each bank was limited to the TMM plus 3 points and all restrictions were lifted in early June 1994.

The interest rate for special savings deposit has been set at the money market rate of the previous month minus two points since 1987. Rates on deposits with terms of at least three months are free. Maximum rate on deposits of shorter maturities was set at 2 percent in July 1990.

Source: Central Bank of Tunisia.

Under the appel d’offres a fixed amount of seven–day liquidity is auctioned against assets held by the banks.

The prise en pension is an automatic repurchase window at the initiative of the banks.

PME, small– and medium–sized enterprises.

The maximum lending rate was set at the TMM plus 2.5 points in 1989 and at the TMM plus 3 points in 1990–91. From the beginning of 1992 the average lending rate for each bank was limited to the TMM plus 3 points and all restrictions were lifted in early June 1994.

The interest rate for special savings deposit has been set at the money market rate of the previous month minus two points since 1987. Rates on deposits with terms of at least three months are free. Maximum rate on deposits of shorter maturities was set at 2 percent in July 1990.

While financial instruments have been diversified in recent years, their maturity structure and yield have not been harmonized. For example, at around 9.5 percent the interest rates on medium- to long-term negotiable treasury bills are almost identical to those on the transferable treasury bills (cessibles), which are quasi-liquid instruments with a shorter maturity (between 9 and 9.5 percent).

4. Recent financial sector reforms

As part of the four-year extended arrangement with the Fund (1988-92), Tunisia embarked on a wide-ranging financial sector liberalization. 2/ The domestic financial system was gradually deregulated and liberalized, competition was promoted among financial institutions, prudential regulation and supervision were strengthened, and the monetary policy framework was improved. Since 1993, the liberalization of the domestic financial system has continued and encompassed a further deepening of the financial sector, a strengthening of banking supervision and regulation, and the development of the stock market.

a. Deepening of the financial system

Since 1993, the deepening of the financial system has been enhanced with the adoption of new banking legislation, the establishment of new financial institutions, and the creation of new financial instruments.

To complete the reform of the financial sector begun in 1986, a new banking law was adopted in February 1994 aiming at fostering competition in the banking system through the introduction of universal banking, thus allowing commercial banks and development banks to engage in the same activities, and permitting the establishment of new financial institutions (investment banks), that provide financial services such as project finance, equity participation, and portfolio investment. 1/

New financial instruments such as negotiable treasury bills, open and closed end mutual funds, investment trusts, or equity rights have been introduced since 1991 to deepen further the financial system and facilitate the intermediation of short-term saving and long-term financing requirements. Among these instruments, the introduction of negotiable treasury bonds in the context of the liberalization and broadening of government debt instruments has contributed to the development of nonbank long-term financing, although the secondary market has not yet developed because of weaknesses in the settlement system and the lack of transferability and liquidity of the new bills. 2/

b. Banking supervision and regulation

To strengthen supervision and reinforce the financial situation of banks, audits of all commercial banks were completed during 1993-94 and restructuring plans were carried out in a number of them with a view to improving their capital base, absorbing bad loans, and meeting, within two years, prudential requirements along the lines of those established by the Basle Committee on Banking Supervision. 3/ Accordingly, a number of banks have increased their capital, both through the issuance of shares on the stock exchange and through the consolidation of reserves into capital. The latter had been facilitated by the tax deductibility of provisions, which was raised to 50 percent in 1994. As of end-1995, all of the development banks and all of the commercial banks--except two--have complied with the 5 percent capital asset ratio. In this context, the nonperforming loans--essentially to public enterprises--have been reduced in recent years. However, sizeable outstanding nonperforming loans remained on the balance sheet of a number of public banks.

The 1994 banking law strengthened the regulatory and supervision powers of the central bank and streamlined and codified the prudential regulations, in particular as regard minimum capital requirements, liquidity ratios, open position in foreign exchange, and loan concentration. The law also introduced provisions for controlling bank mergers and participation, and the opening and closing of branches. The supervisory role of the central bank was also strengthened to include on-site inspections; off-site reporting requirements; higher standards for banks’ external audits; and binding sanctions.

c. Stock exchange

The reform of the stock exchange has been an important building block in the recent financial sector reforms. New stock market legislation was adopted in November 1994 and its implementation completed in 1995. The law establishes three separate entities: a privately owned stock exchange (bourse des valeurs mobilières de Tunis); a clearing house (société de dépôts, de compensation et de règlement des titres); and an independent supervisory commission to regulate the activity of the market (conseil du marché financier). While prior to the reform, both individuals and corporations, banks and brokers, were authorized to intermediate in the stock market, the new law restricted these operations to stockbrokers, although banks can be shareholders in brokerage firms.

As a result of the reform, stock market activity increased sharply during the period 1994-95. Market capitalization, which reached the equivalent of 5 and 7 percent of GDP in 1991 and 1993, respectively, rose to 16 percent of GDP in 1994, and more than 20 percent of GDP in late 1995. This development also reflected a limited supply of equity in the face of a rising demand. Some 25 companies are presently listed on the market, most of which are banks. The volume of new annual issues on the primary market increased from D 556 million in 1991, to D 751 million in 1994 and D 738 million for the first 9 months in 1995, of which 40 percent were through public auction. In 1990, only 18 mutual funds were in operation, their number reached 108 funds in 1995 with combined assets of over one billion dinars. In 1994-95, bond issues by nonbanks, especially by private enterprises in the tourism and industrial sectors, also increased considerably. To ensure transparency and confidence, a bank guarantee for the bond issue has been requested in the case of first time issuers. The volume of transactions on the secondary market rose from D 91 million in 1991, to D 162 million in 1993, and to D 531 million in 1994. During the first 9 months of 1995, the volume of bond issues had reached D 620 million on the secondary market.

The reform of the stock exchange encouraged increased recourse by private companies to equity issues and bond financing, although the traditional family-owned capital structure of the Tunisian enterprises may have somewhat hindered the development of the equity market. The acceleration of the privatization program has also contributed to widening the range of stocks available at the exchange. The Tunisian authorities have encouraged large state enterprises, such as Tunisair, to offer shares at the stock market. In addition, the introduction of a new clearing system, with French technical assistance, is aimed at shortening the trading-clearing operations and provide the stock exchange with a modern electronic settlement system.

V. External Sector

1. Overview

In recent years, Tunisia has continued integrating its economy into world markets through trade and exchange liberalization, while fostering an economic and regulatory framework attractive to foreign investment. The reform of the domestic financial system was complemented by the introduction of an interbank foreign exchange market in 1994, further capital account liberalization, and a greater integration in world capital markets. The credibility of these reforms has been confirmed by Tunisia’s return to international capital markets on relatively favorable terms.

Export growth remained strong during 1991-95, even though the impetus provided by the real depreciation of the preceding years gave way to virtual stability of the real effective exchange rate. Reflecting the increasing openness of the economy, the share of both exports and imports in GDP rose steadily during 1991-95, pointing to strong growth in the tradable sector. After two years of sizeable external current account deficits, reflecting in the main the effects of large foreign-financed investments in the energy sector, the external current account deficit fell during 1994-95 to about 3-4 percent of GDP. As a relatively large part of the deficit was financed by foreign direct investment, Tunisia managed to stabilize the external debt to GDP ratio at about 54 percent, and exports throughout the period were growing faster than debt service. Gross official reserves rose to the equivalent of about three months of merchandise imports by 1995, a relatively comfortable cushion given that a sizable share of imports, notably inputs for the offshore textile sector and energy equipment, are financed directly from abroad.

2. Opening to the world: external sector reforms in 1991-95

a. Trade system reform

During 1991-95, Tunisia continued the gradual process of trade liberalization begun since 1985. While quantitative restrictions (QRs), in the form of import licensing requirements, had been largely eliminated on raw materials and capital goods imports by 1990, more than 70 percent of domestic production was still protected by licensing requirements, affecting mostly imports of consumer goods. Tariff protection also had been reduced, and the maximum rate brought down from 236 percent in the early 1980s to 43 percent by 1988. However, since the reduction in both tariff and non-tariff protection had mainly affected imported inputs and capital goods, effective protection rates had actually increased for many finished goods (exceeding 80 percent in certain manufacturing sectors according to a recent World Bank report 1/).

During 1991-95, the government embarked on a further gradual reduction of QRs, but introduced temporary compensatory duties (DCP) between 10-30 percent for some of the liberalized products, in order to allow domestic producers to adjust to the increased competition. These duties were to be gradually reduced to zero over 3 years after their introduction.

In three rounds of liberalization, protection with QRs was reduced, according to government estimates, to 40 percent of domestic production by end-1993. In 1994, a new Foreign Trade Law was adopted that established the principle that imports were not subject to licensing requirements unless explicitly included in a negative list. Two such lists of import items, which were to remain either permanently (list A) or temporarily (list B) were published in mid-1994, when the new law took effect. List A included certain subsidized food products (cereals and derivatives, olive oil), certain fruits and vegetables, and motor vehicles, as well as items restricted for reasons related to security, health, protection of species, and the protection of the cultural heritage. List B contained essentially garments and passenger vehicles. Adoption of these lists implied a further reduction of the share of domestic production protected by QRs to 17 percent at end-1994 according to government estimates. 2/ In late 1995, the authorities abolished another tranche of QRs covering 9 percent of domestic production, mainly textile products. Because of the maintenance of QRs on certain non-agricultural products for balance of payments reasons, Tunisia is consulting with the GATT balance of payments committee under Art. XVIII:B of the GATT; the last consultation was concluded in September 1994.

No major changes in the standard import tariff have been made since 1990. To cope with the fiscal implications of the Middle East crisis, Tunisia introduced in early 1991 a temporary import surcharge of 5 percent of the import duties and taxes; the surcharge was eliminated as such in 1994 and was partially incorporated into the standard tariff. As a result of the surcharge and the introduction of the DCP, the average tariff in mid-1994 was above the 1989-levels, with increases of about 11 percent for tariffs on agricultural imports and 5 percent for tariffs on nonagricultural imports, to average levels of 40 and 33 percent, respectively. Tariff rate dispersion also increased to the range of 0-73 percent. The textile and leather-producing sectors remained the most heavily protected, with tariff peaks of 73 percent, and variable levies on certain meat and diary products implied tariff equivalents of up to 200 percent ad valorem.

Progress in trade liberalization has allowed Tunisia to fully join the multilateral trading framework in recent years. The Protocol of Accession to the GATT became effective in mid-1990, and involved binding of tariffs levels for about 900 tariff lines; Tunisia’s concessions were subsequently modified in the context of a waiver for the introduction of the DCPs in early 1994. Tunisia participated actively in the Uruguay Round negotiations and became a founding member of the World Trade Organization (WTO). Its own commitments included binding of about 60 percent of all tariff lines, although the bound tariffs were usually well above applied levels; for textiles, Tunisia will reduce bound levels gradually to 60 percent by the year 2005. In agriculture, bindings cover all items, at tariff levels ranging between 25 and 200 percent. The government also committed to a reduction of subsidies and other support for a number of agricultural goods (such as wheat, milk, bovine meat, tomatoes, potatoes, citrus fruits, and sugar beet) and improved access for foreign providers of services. In the areas of anti-dumping, subsidies, and customs valuation, Tunisia may have to adapt domestic legislation to conform with the GATT agreement. 1/

Exports remained largely free from restrictions, with exports of a few items subject to licensing requirements, essentially to enforce export monopolies for certain state enterprises (petroleum, wine, and mineral products). The monopoly of the “Office National de l’Huile” for the export of olive oil was lifted in 1993, but exports to the EU under the tariff quota remain under the control of the Office. Long-standing export promotion policies include a vast array of incentives, especially for offshore firms (i.e., firms exporting more than 80 percent of production), and have contributed to the development of a sizable offshore sector (especially in textiles) with few linkages to the domestic economy. The new investment code of 1993 introduced relatively minor modifications to the incentives for exporting firms that had been in effect since 1972. Offshore firms enjoy full exemption of import taxes on all imported equipment and inputs, as well as a 10-year tax holiday on income taxes followed by an imposition at half the standard rate. However, sales of such firms on the domestic market are subject to complex restrictions depending on the use of domestic inputs and the existence of domestic competitors. Tax advantages for partially exporting firms (exporting less than 80 percent of production) are proportionally lower, and refunds of duties on imported equipment are allowed only if there are no domestic producers of similar equipment.

b. Exchange system reform

Access to foreign exchange for import payments has been largely unrestricted for many years, with trade regulations remaining the binding constraint on imports. Payments for invisibles, however, continued up to 1993, to require authorization from the central bank, although during 1986-92, standard allocations for travel and other invisibles payments were steadily increased. In January 1993, Tunisia accepted the obligations under Art. VIII, sections 2, 3, and 4 of the IMF’s Articles of Agreement, thereby establishing convertibility for current account transactions (a decree and various circulars established the modalities for current account transactions). Allocations for tourism remained limited to D 500 per adult and D 250 per child annually; bona fide requests above this margin were granted, provided they were documented. Similar modalities applied to the transfer of salaries by foreign workers in Tunisia, and payments for business travel.

Regarding capital movements, by end-1995 portfolio investment was liberalized, but some exchange restrictions remained in effect on inward foreign investment in government and corporate bonds. Moreover, certain investments need approval by the Commission Supérieure d’Investissement (see below). Foreign investors can freely repatriate profits or liquidation proceeds from authorized direct or portfolio investments. Since January 1993, resident banks and enterprises are allowed to borrow abroad up to D 10 and D 3 million per year, respectively, without prior authorization from the Central Bank. Outward foreign investments were somewhat liberalized in 1994, by allowing domestic enterprises that have export activities and possess foreign exchange to freely invest in representational offices, branches, or partnerships abroad, up to specified limits. However, portfolio investments abroad by residents remained fully restricted. Export credits must not exceed a maturity of 180 days and require a bank guarantee. In September 1993, there was some relaxation of surrender requirements for exporters, as the share of export receipts that could be retained in foreign exchange accounts was raised from 20 to 40 percent. However, a general repatriation requirement has remained in force.

c. Foreign investment regulations

The new investment code further liberalized the regulatory framework for foreign direct investment. Whereas under the previous regulations foreign investment was virtually excluded from agricultural activities, the new code allows foreign companies or individuals to invest in agriculture, but land must be rented since foreign ownership of agricultural land remains strictly prohibited (the purchase of land for nonagricultural use requires an authorization). In most other areas, foreign direct investment is accorded national treatment and does not require any special authorization, except for investment in a number of service areas (such as transportation, telecommunications, travel agencies, real estate development, consulting and auditing, and computer services) where foreign majority participation requires prior approval by the Commission Supérieure d’Investissement. In June 1995, a decree on foreign portfolio investment further liberalized foreign equity investments. It permits total foreign participation in Tunisian companies, without prior authorization, up to 10 percent of equity for companies that are quoted on the stock exchange and up to 30 percent for other companies.

3. Exchange rate policy

The Central Bank of Tunisia has traditionally maintained tight control over the setting of the exchange rate. Following the sharp depreciation in 1986, Tunisia adopted in the late 1980s a flexible exchange rate policy, broadly targeting the real effective exchange rate on the basis of a basket of the currencies of key partner countries. This required frequent but modest adjustments in nominal exchange rates to compensate for the positive inflation differential with industrial partner countries, the currencies of which constituted the Tunisian basket. Supported by prudent monetary policies that prevented the development of excessive inflationary expectations, this policy has succeeded in maintaining the dinar broadly stable in real effective terms since 1990.

Since early 1994, the Central Bank pursued its exchange rate policy in the context of an interbank foreign exchange market, setting a central rate and intervening as appropriate to keep the interbank rate within a one percent band around the central rate. The spread between the buying and selling rates quoted by banks in the market must not exceed 0.25 percent. Prudential regulations include limits on the banks’ total open foreign exchange position (20 percent of capital), and on the position in any single foreign currency (5 percent); banks have to liquidate positions whenever foreign exchange losses incurred on an open position exceeded 3 percent. Transactions in the interbank market have developed rapidly, and it is estimated that about 80 percent of all foreign exchange transactions in 1995 were conducted in the interbank market. The remaining transactions that went through the Central Bank mainly involved operations in the currencies of the Arab Maghreb Union countries, or in small monies for which there is usually little demand in the interbank market; the operations of development banks involving a foreign exchange guarantee provided by the Central Bank are also carried out by the central bank. Furthermore, participation has rapidly spread from the offshore banks--initially dominant, given their experience in foreign exchange dealing--to the domestic commercial banks, which during 1995, accounted for about two-thirds of the interbank transactions. The U.S. dollar and the French franc were the dominant currencies traded, accounting in 1995 for about one-third and one-quarter of total transactions, respectively.

4. External sector developments

a. The external environment

After some decline during the 1980s, the terms of trade broadly stabilized during 1990-95 (Table 13). However, export market growth, as measured by the growth of real imports of a group of partner countries accounting for more than 95 percent of Tunisian’s exports, slowed sharply from an average of 7.3 percent during 1986-90 to only 3.9 percent during 1991-95, reflecting in particular the economic slowdown in Europe. Agricultural exports to the EU remained constrained by the high variable levies and reference prices imposed by the EU on agricultural products covered by the common agricultural policy; however, limited and often seasonal tariff quotas for some of these products were granted in the context of the existing trade and cooperation agreement.

Table 13.Tunisia: Indicators of External Sector Developments, 1982–95
External environment
Real GDP growth3.
Terms of trade–3.8–2.2–0.7–3.3––0.4
Market growth 1/–
(Percentage change)
Expert performance
Real non–energy exports2.913.
of which:
Agricultural goods3.27.538.7–24.418.428.2–32.25.8
Phosphate and chemicals5.15.6–3.29.5–9.417.64.63.8
Real energy exports–6.32.3–4.710.2––0.1
Market share for non–energy exports98.4111.8124.6119.8126.8142.5135.2129.8
(Percentage change)
Import performance
Real non–energy imports–1.87.8–7.412.
of which:
Raw materials0.68.0–8.915.3–7.3–0.910.21.7
Consumption goods2.311.9–
Energy imports–8.210.6–
(In percent of GDP)
Non–energy imports33.834.536.838.639.538.940.738.9
of which:
Raw materials11.813.012.513.412.512.012.812.6
Consumption goods7.09.611.712.213.314.414.813.3
Energy imports4.
Exports of goods and nonfactor services34.738.839.338.539.744.143.941.1
Imports of goods and nonfactor services45.642.443.345.046.346.047.845.7
External current account, excluding grants–10.3–3.3–4.4–7.0–7.7–2.9–4.5–5.3
Trade balance–13.5–10.9–9.1–13.3–14.1–10.0–11.5–11.6
of which: energy5.– ––0.2–0.30.3
Services balance3.
Of which: Tourism6.
Workers’ remittances4.
Capital account, excluding grants7.
Foreign direct investment3.
of which: excluding Gazoduc and Miskar3.
Net medium– and long–term borrowing3.
External debt76.959.055.151.955.
Ratio of export to import volume104.7156.6182.6162.3164.5195.1184.3177.8
Real effective exchange rate 2/97.771.867.268.667.868.067.9
Terms of trade91.975.375.272.772.
Sources: Data provided by the Tunisian authorities; and staff estimates.

As measured by the weighted average of real non–oil import growth in trading partner countries, accounting for more than 95 percent of Tunisia’s exports.

Information notice system.

Sources: Data provided by the Tunisian authorities; and staff estimates.

As measured by the weighted average of real non–oil import growth in trading partner countries, accounting for more than 95 percent of Tunisia’s exports.

Information notice system.

b. Developments in the current account

The opening of the Tunisian economy through trade and exchange liberalization was reflected in a growing integration into the world economy. The average share of exports of goods and nonfactor services in GDP during 1991-95 gained about 2.3 percentage points compared to 1986-90, and the average share of imports increased by 3.3 percentage points. During 1990-95, movements in the external current account deficit, as a share of GDP, largely mirrored changes in investment, as national savings remained virtually stable during that period. A sharp rise in the investment ratio and a corresponding deterioration in the current account deficit during 1992-93 was mainly related to the construction of a new gas pipeline to Italy (Gazoduc) and development of a new offshore gas field (Miskar), as well as a substantial accumulation of olive oil stocks in 1993. In 1994, the current account deficit fell sharply as the accumulated olive oil stocks were exported and much of the work on the energy projects completed. Preliminary data indicate that the deficit rose again in 1995 to 4.5 percent of GDP, as private investment outside the energy sector recovered. The underlying swings in the trade balance were even larger, but their impact on the overall current account was dampened by a steady improvement of the service balance since 1991, reflecting essentially a recovery of tourism from the effects of the Middle East crisis.

A more detailed analysis of the external account developments (Chart 6) points to a strong underlying non-energy export growth, while the net energy balance weakened. Reflecting the gradual depletion of Tunisia’s oil fields, energy exports in real terms were flat during 1991-95, while imports grew by about 6 percent. As a result, Tunisia became a net importer of energy in 1993. Average non-energy export growth during 1991-95, especially in the textile and light manufacturing sectors, slowed considerably compared to 1986-90, as external market growth weakened, but remained well in excess of partner countries’ demand, resulting in continued gains in market share. Growth in the textile sector was driven partly by increased processing of intermediate goods imported by the off-shore sector. Nonetheless, non-energy export growth on average continued to outpace non-energy import growth during 1991-95, pointing to an increase in the value added embodied in exports, although less than during 1986-90, when export growth was boosted by the strong real depreciation of the dinar. Additional evidence is provided by the evolution of the structure of imports: while highly volatile from year to year, reflecting the impact of droughts on food imports and of a few large investment projects on imports of equipment goods, the average share of imports of raw materials in GDP declined during 1991-95 compared to 1986-90, and the same holds for food imports, indicating a lesser dependence of the economy on imports of raw materials and food. By contrast, the share of imports of consumer and equipment goods in GDP rose between the two periods, reflecting in part the increased openness of the economy. The evolution of imports during 1991-95 was also heavily influenced by the Gazoduc and Miskar projects, which during 1992-95, accounted for more than 3 percent of total equipment good imports and more than 5 percent of raw material imports.


(1981 = 100)

Source: Tunisian authorities; staff estimates; and International Monetary Fund, Information Notice System.

1/ Real exports as a share of imports of Tunisia’s main trading partners.

c. Services and transfers

On average, the overall services balance during 1991-95 deteriorated compared to the period 1986-90, reflecting the impact of the 1991 Middle East crisis on tourism, some weakening of workers’ remittances, and a pickup in payments for foreign workers and services related to the Gazoduc and Miskar projects during 1992-95. The evolution of the balance of nonfactor services, as a share of GDP, largely mirrors developments in tourism receipts, which dropped in 1991 by about 2.5 percentage points of GDP from around 8 percent of GDP in the late 1980s. After gradually recovering during 1992-93, tourism receipts, as a share of GDP, reached pre-crisis levels during 1993-95, growing roughly at the pace of nominal GDP. Workers’ remittances fell from around 5 percent of GDP during 1989-90 to 3.7 percent in 1992, after which they recovered gradually to 4.5 percent of GDP in 1995. In the main, these swings reflected the economic slowdown and subsequent recovery in Europe, as well as slowing emigration toward Europe, and possibly, a weakening of ties of emigrant workers to their home country. Interest payments on the foreign debt hovered around 3 percent of GDP, or nearly one percentage point of GDP lower than during 1986-90, reflecting the trend decline in the debt/GDP ratio. However, this effect was broadly offset by higher services payments related to the Gazoduc and Miskar projects during 1992-95. These payments peaked at 1.1 percent of GDP in 1993 before falling rapidly to virtually nil in 1995 with the completion of the projects.

Finally, official grants remained broadly stable as a percent of GDP during 1991-95, most of which was provided by the EU in the context of the fifth financial protocol covering 1992-96.

d. Developments in the capital account and debt management

To finance the larger current account deficits and the strengthening of official reserves during 1991-95, net capital inflows increased substantially, compared to the late 1980s, averaging 5.2 percent of GDP during the period. Medium- and long-term borrowing accounted for the largest share of gross inflows and remained broadly stable at about SDR 0.9 billion per year. The composition of gross borrowing by origin also remained broadly stable between 1988-93, with multilateral creditors (mainly the IBRD, AfDB, and EIB) accounting for about one-half of the total and official and private bilateral sources accounting for about one-fourth each. In an effort to diversify the sources of its external borrowing, in 1994-95 Tunisia floated four bond issues in the Japanese market, for a total of yen 85 billion. With investment grade credit ratings by European, Japanese, and U.S. rating agencies, Tunisia placed the bonds at favorable conditions. 1/ The first issue of yen 30 billion in February 1994 had a maturity of ten years and carried a coupon of 5.85 percent, implying a yield spread of 170 basis points over the yen-LIBOR. Two subsequent issues in early 1995 raised yen 40 billion, with bullet repayments after five years and a yield about 140 points above the yen-LIBOR. The most recent issue, in September 1995, raised yen 15 billion with a maturity of ten years and a spread of 162 points over yen-LIBOR. To limit the exchange risk, the authorities swapped about half of the yen exposure into U.S. dollars and French francs.

The sharp increase of foreign direct investment during 1992-93 was mostly related to the Gazoduc and Miskar projects. Subsequently, foreign direct investment fell gradually to 2.5 percent of GDP in 1994 and 1.6 percent in 1995, as the two energy projects were near completion. Foreign direct investment outside the Gazoduc and Miskar projects remained modest during 1991-95, although it nearly doubled in 1995 from the 1994 level, to about 1.1 percent of GDP. Based on partial data compiled by the central bank, during 1991-94 the energy sector absorbed about 80 percent of all FDI flows; the remainder went into the industrial and tourism sectors. Portfolio investments remained marginal, in part reflecting official restrictions (see above), the slow pace of privatization, and the relatively less developed capital market.

With amortization of the external debt broadly stable at around SDR 0.6 billion per year, and recorded short-term borrowing remaining small, Tunisia’s external debt increased by about SDR 0.3 billion per year during the period 1991-95, broadly stabilizing the external debt ratio to GDP at around 54 percent. The composition of the debt by main creditor groups changed during 1991-95 (Table 14 and Chart 7). Reflecting the importance of disbursements from multilateral sources, the share of multilateral lenders rose from 30 percent in 1990 to 40 percent by 1994. By contrast, the debt owed to bilateral creditors declined from 66 percent in 1990 to 56 percent in 1994, reflecting the “graduation” of Tunisia from concessional lending. Outstanding borrowing from international financial markets continued its decline since the mid-1980s through 1993, reflecting Tunisia’s absence from these markets during that period and repayment of past borrowings. However, after the first issue on the Japanese bond market in 1994, the share of debt owed to private sources rose again to 4 percent, close to the level of 1990, and further to an estimated 9 percent in 1995. Reflecting the strong export growth, as well as somewhat lower interest rates on its foreign debt, Tunisia’s debt service ratio continued to decline during 1991-95, reaching an estimated 18.7 percent in 1995.

Table 14.Tunisia: Composition of External Debt by Creditor, 1990–94
(In millions of dinars; end of period)
Multilateral organizations1,6102,0182,3373,0523,130
Of which: World Bank1,1201,2231,3091,5611,506
African Development Bank3955107291,0341,140
OECD countries3,3633,4303,6703,8904,121
Of which: France8419631,0491,1201,242
United States426550610628592
Arab countries and organizations467533571616608
Of which: Saudi Fund133139134124113
Kuwaiti Fund145151136127164
Arab Fund for Economic and Social Development100136180234220
Other countries100296797539
Financial markets270123169122368
Total medium– and long–term debt5,8106,4006,8267,7558,266
Arab Monetary Fund314124
International Monetary Fund147223276298300
Total external debt5,9606,6237,1168,0658,570
(as percent of GDP)
Sources: Central Bank of Tunisia; and staff estimates.
Sources: Central Bank of Tunisia; and staff estimates.


(In percent of total)

Source: Tunisian authorities; and staff estimates.

e. The geographical pattern of foreign trade and investment

The geographical structure of Tunisia’s trade remained broadly unchanged during 1991-95. The European Union continued to account for about 80 percent of Tunisia’s total exports, while members of the Arab Maghreb Union (AMU) accounted for a stable 7-8 percent of exports. Europe remained also the dominant supplier of imports, accounting for around 70 percent of Tunisia’s imports. The United States and Canada, while of marginal importance for Tunisia’s exports, accounted for around 6 percent of its imports, mainly capital goods and food products; imports from AMU-member countries averaged 4 percent.

A similar pattern can be observed for foreign direct investment. Based on partial data for 1990-93, virtually all foreign direct investment came from EU countries, with Italy by far the most important supplier of FDI before France and the United Kingdom. The main non-European source of investment was the United States, accounting for an average of 13 percent of total FDI during 1990-93, similar to the share of France and the United Kingdom.

Table 15.Tunisia: Supply and Use of Resources, 1991–95
(In millions of dinars at current prices)
Private sector 1/8,0429,0529,66510,50111,474
Central government1,4561,6021,7691,9112,131
Gross fixed capital formation2,8923,6954,2074,1514,367
Private sector 1/2,1953,1353,5543,5033,532
Central government697560653648835
Changes in stocks235294–5–378–65
Domestic demand12,62514,64315,63616,18617,908
Net exports of goods and nonfactor services-596-937-1,029-319-693
Exports of goods and nonfactor services4,8565,4195,9907,1657,720
Imports of goods and nonfactor services5,4526,3567,0197,4848,413
GDP at market prices12,02913,70614,60615,86717,215
Net income from abroad–30–75–162–169–105
Net current transfers from abroad11272104104120
Gross national disposable income12,11213,70314,54815,80217,230
Source: Ministry of Economic Development.

Includes all economic agents except the central government

Source: Ministry of Economic Development.

Includes all economic agents except the central government

Table 16.Tunisia: Sectoral Distribution of GDP, 1991–95
(In millions of dinars at current prices)
Agriculture and fishing2,011.32,209.72,154.52,070.42,020.7
Hydrocarbons, electricity, and water889.1936.9864.4885.9961.5
Agriculture and fishing2,038.72,265.72,456.82,775.83,064.8
Food processing418.8453.0446.9506.4517.2
Construction materials and glass235.0264.02893308.4333.1
Mechanical and electrical industries299.2321.2346.3383.1423.3
Chemical and rubber industries195.7188.0198.2232.6272.4
Textiles, clothing, and leather629.7733.4826.5948.91,071.3
Woodwork, paper, and other260.3306.1349.6396.4447.5
Construction and public works459.0591.4583.8647.8724.9
Transport and telecommunications808.4979.41,127.31,267.21,437.1
Commerce and other services2,094.52,296.72,623.12,941.23,296.9
Government wages and salaries1,619.21,797.41,978.92,165.02,333.8
Indirect taxes minus susbsidies1,501.31,828.81,942.22,105.52,284.5
GDP (at market prices)12,028.813,705.914,606.915,866.617,214.5
(as a percentage change)
Source: Ministry of Economic Development.
Source: Ministry of Economic Development.
Table 17.Tunisia: Supply and Use of Cereals, 1991–95 1/(In thousands of tons)
Hard wheat
Commercialization 2/484772862786333
(in percent of previous year)86546569– –
Imports128– –– –– –681
Producer price (D/t) 3/245260260260275
Real producer price index 4/120121115110– –
Soft wheat
Commercialization 2/13222822420151
(in percent of previous year)75302030– –
Producer price (D/t) 3/209225225225240
Real producer price index 4/114117110105– –
Commercialization 2/1432921888770
(in percent of previous year)15303418– –
Imports– –– –– –402605
Producer price (D/t) 3/150150150150150
Real producer price index 4/1071019692– –
Source: Ministry of Agriculture.

By crop year (July/June).

Commercialization of the previous year’s crop.

Dinars per ton.

Index 1980 = 100. Nominal producer prices deflated by the consumer price index.

Source: Ministry of Agriculture.

By crop year (July/June).

Commercialization of the previous year’s crop.

Dinars per ton.

Index 1980 = 100. Nominal producer prices deflated by the consumer price index.

Table 18.Tunisia: Producer Prices of Principal Agricultural Commodities, 1991–95 1/
(In dinars per ton)
Hard wheat245260260260275
Soft wheat209225225225240
Sugar beets3235353838
Olives for oil
High grade1,7501,7501,7501,3151,315
Low grade1,3901,3901,3901,0551,055
Source: Ministry of Agriculture.

By crop year (July/June).

Source: Ministry of Agriculture.

By crop year (July/June).

Table 19.Tunisia: Consumer Price Index by Price Regime, 1991–95
19911992199319941995 2/
(Change, December–December)
Fixed prices 1/7.1
Controlled freedom 1/9.7
Free prices7.
Sources: Central Bank of Tunisia; and National Statistics Institute.

Regimes of fixed prices and controlled freedom were abolished at the beginning of 1992.

Average change during the first nine months in 1995 compared to the same period in 1994.

Sources: Central Bank of Tunisia; and National Statistics Institute.

Regimes of fixed prices and controlled freedom were abolished at the beginning of 1992.

Average change during the first nine months in 1995 compared to the same period in 1994.

Table 20.Tunisia: Producer Price Index, 1991–95

(in percent)
19911992199319941995 1/
(Annual average: 1983 = 100)
Food processing10.7169.5181.3194.4202.5215.1
Construction materials and glass7.8157.2166.0169.3174.2173.0
Mechanical and electrical products9.6184.7185.8188.7190.7206.5
Chemicals and rubber3.8177.1185.1197.8204.5214.5
Textiles, clothing and leather12.3174.1180.8185.3187.8211.0
Other manufacturing6.9190.5191.8195.2201.2251.8
Electricity and water7.3134.1136.3140.2146.8155.7
General index100.0175.8178.9182.4185.5195.7
Percent change2. 2/
Source: Central Bank of Tunisia.

As of end–July 1995.

Average change during the first seven months compared to the same period in 1994.

Source: Central Bank of Tunisia.

As of end–July 1995.

Average change during the first seven months compared to the same period in 1994.

Table 21.Tunisia: Wage and Employment Indicators, 1990–95
Total wage bill (in millions of dinars)3,3303,7364,139
Percent change8.312.210.8
Number of wage earners (in thousands)1,2681,2941,330
Average annual wage (in dinars)2,6262,8873,112
Percent change5.69.97.8
Real average annual wage (percent change) 1/–
SMAG (in dinars per day) 2/3.6613,7614,0614,3614,4614,661
SMIG (in dinars per hour) 3/0.5770.6010.6490.6970.7070.741
Consumer price index (percent change)
Source: Ministry of Economic Development.

Deflated by the average annual increase in the consumer price index.

Minimum wage in the agricultural sector.

Minimum wage in the nonagricultural sector for full–time employees.

Source: Ministry of Economic Development.

Deflated by the average annual increase in the consumer price index.

Minimum wage in the agricultural sector.

Minimum wage in the nonagricultural sector for full–time employees.

Table 22.Tunisia: Consolidated Revenue and Grants of the Central Government, 1991–95
(In millions of Tunisian dinars)
Tax revenue2,886.63,311.63,62353,950.44,315.0
Taxes on income and profits501.2560.7698.0733.6828.3
of which: petroleum sector82.274.768.539.727.0
Social security contributions426.3502.3545.5669.0725.0
Taxes on payroll45.951.056.758.055.0
Property taxes69.077.987.265.173.0
Taxes on goods and services800.0902.9965.01,10851,186.1
Taxes on international trade and transactions954.51,111.51,162.11,210.61,321.0
Import taxes935.31,094.01,144.41,191.91,300.0
Of which: import duties539.9629.1664.6696.1745.0
Export taxes11.
Other tax revenue89.7105.3109.0105.6126.6
Nontax revenue609.6747.4827.9911.4931.3
Petroleum sector254.4296.3300.6348.9309.0
Other nontax revenue355.2451.1527.3562.5622.3
Capital revenue7.
Total revenue and grants3,535.94,118.94,490.54,912.55,264.3
Source: Ministry of Finance.
Source: Ministry of Finance.
Table 23.Tunisia: Revenue from the Petroleum Sector, 1991–95
(In millions of dinars)
Nontax revenue254.4296.3300.6348.9309.0
Profits from petroleum exploitation, ETAP177.3240.6217.6230.4210.0
Dividends, SITEP – TRAPSA19.83.43.425.613.0
Transfer of excess funds of public companies, ETAP–STI– –20.037.360.954.0
Surtax of petroleum companies57.432.442.332.032.0
Direct taxation of petroleum companies82.274.768.539.727.0
Sources: Ministry of Finance; and Fund staff estimates.
Sources: Ministry of Finance; and Fund staff estimates.
Table 24.Tunisia: Economic Classification of Consolidated Expenditure of the Central Government, 1991–95 1/
(In millions of Tunisian dinars)
Current expenditure3,188.13,502.23,836.44,252.54,637.5
Wages and salaries1,170.11,313.71,475.91,599.21,788.0
Goods and other services285.7288.5292.8312.3343.0
Interest on public debt416.1440.3512.3550.4667.0
Foreign debt258.0245.6280.7320.7350.0
Domestic debt158.1194.7231.6229.7317.0
Subsidies and current transfers1,316.21,459.71,555.41,790.61,839.5
Of which: 2/
Social security benefits472.1531.4578.9735.0832.0
Food subsidies296.3269.0260.0247.0243.0
Transfers to government entities280.0330.5349.5387.5446.0
Transfers to local government87.096.0100.0100.3109.0
Capital expenditure1,026.0891.21,016.0986.51,247.4
Direct investment697.0561.2653.8648.2835.0
Capital transfers and equity329.0330.0362.2338.3412.4
Total expenditure4,214.14,393.44,852.45,239.05,884.9
Source: Ministry of Finance.

Includes all expenditure in the treasury accounts, extrabudgetary operations financed by external assistance, and expenditure of the social security schemes.

Partly estimated.

Source: Ministry of Finance.

Includes all expenditure in the treasury accounts, extrabudgetary operations financed by external assistance, and expenditure of the social security schemes.

Partly estimated.

Table 25.Tunisia: Operations of the Subsidy Fund, 1991–95
(In millions of dinars)
Subsidies and other expenditures 1/285274260258243
Fertilizer1251– –
Vegetable oil43403540
Reimbursement of treasury loans55– –– –
Miscellaneous expenditures31212225
Total resources287276265258243
Earmarked taxes 2/– –– –– –– –
Current budget transfers272255245230215
Borrowing from Treasury and transfers from treasury funds– –– –– –– –
Grants– –– –– –– –
Revaluation profits on stocks11111
Overall surplus or deficit (–)225– –– –
Source: Ministry of Finance.

On an accrual basis, including the expenditures directly financed through treasury advances.

Includes net position of Subsidy Fund with importers, producers, and intermediaries involved in transactions of subsidized commodities.

Source: Ministry of Finance.

On an accrual basis, including the expenditures directly financed through treasury advances.

Includes net position of Subsidy Fund with importers, producers, and intermediaries involved in transactions of subsidized commodities.

Table 26.Tunisia: Assets and Liabilities of the Central Bank, 1991–95
(In millions of dinars; end of period)
Foreign assets6798779441,4821,638
Claims on Government951171229365
Claims on development banks8984952016
Claims on deposit money banks1,0379861,068799768
Assets = Liabilities1,9002,0642,2292,3952,487
Reserve money1,2641,3551,4211,5231,647
Currency outside banks1,1041,1561,1791,1961,243
Currency with banks4340515771
Banks’ deposits89134157227294
Claims of development banks and other financial institutions2724324238
Deposits of nonfinancial entities22222
Foreign liabilities243301323334217
Government deposits and currency holdings16471128198215
Counterpart funds7064784941
Allocation of SDRs4345495048
Capital accounts4954596979
Other items (net)68174171172240
Source: Central Bank of Tunisia.
Source: Central Bank of Tunisia.
Table 27.Tunisia: Assets and Liabilities of Deposit Money Banks, 1991–95
(In millions of dinars; end of period)
At Central Bank8897130237253
Foreign assets514504556517421
Claims on Government793537536544219
Equipment bonds66832422014483
Treasury bills119159281368120
Claims on the economy5,8476,7517,3407,9868,479
Credit financed by ordinary resources4,9505,7116,2096,7897,362
Credit financed by special resources698784845892800
Equity portfolio199256286305317
Assets = Liabilities7,2857,9298,6139,3419,443
Demand deposits1,4011,5161,6231,8931,818
Development banks71081312
Nonfinancial enterprises and households1,3941,5061,6151,8801,806
Quasi–money liabilities2,8453,1013,3723,5563,433
Development banks78771158257
Nonfinancial enterprises and households2,7673,0243,2573,4743,377
Term deposits601664645624618
Certificates of deposits9054796576
Special savings deposits1,7662,0412,2752,3872,282
Other savings deposits4430324343
Deposits in foreign exchange or convertible dinars1– –– –63
Long–term monetary liabilities351388405435474
Foreign liabilities425533614780810
Special resources736785824934805
Credit from Central Bank1,0219721,068796767
Capital accounts7108881,0531,2451,645
Other items net–204–254–348–299–310
Source: Central Bank of Tunisia.
Source: Central Bank of Tunisia.
Table 28.Tunisia: Balance of Payments, 1991–95
(In millions of SDRs)
Current account–421–774–799–316–537
Trade balance–866–1,466–1,473–1,094–1,370
Exports, f.o.b.2,7112,8502,6883,2433,545
Imports, f.o.b.–3,577–4,316–4,161–4,337–4,915
Total services445693673779833
Nonfactor services (net)469753789895906
Of which: tourism500759795910938
Factor services and transfers (net)–24–60–115–117–73
Of which:
Workers’ remittances417410428480535
Interest on external debt–294–313–334–360–420
Capital account366861794674679
Direct foreign investment (net)121346450262184
Medium– and long–term loans189203211350409
Short–term capital and other 1/–3325459–113
Overall surplus or deficit (–)–5487–5358142
Change in net official reserves (increase –)54–875–358–142
Of which use of IMF resources5631–4– ––10
(In units indicated)
Memorandum items:
Current account balance (in percent of GDP)–4.4–7.0–7.7–2.9–4.5
Gross official reserves (in months of imports of goods)
Debt–service ratio 2/23.820.220.618.518.7
Sources: Tunisian authorities, and Fund staff estimates.

Includes changes in net foreign assets of commercial banks, and errors and omissions.

As a percent of exports of goods and services; including IMF charges.

Sources: Tunisian authorities, and Fund staff estimates.

Includes changes in net foreign assets of commercial banks, and errors and omissions.

As a percent of exports of goods and services; including IMF charges.

Table 29.Tunisia: Foreign Trade Indicators, 1991–95
(Changes in percent)
Exports 1/
Value (in dinars)
Price (in dinars)
Value (in SDRs)4.65.1–5.720.69.3
Price (in SDRs)0.23.1–
Imports, c.i.f. 1/
Value (in dinars)–1.318.89.46.812.6
Price (in dinars)
Value (in SDRs)–7.020.6–2.73.313.3
Price (in SDRs)0.96.6–
Terms of trade–0.7–3.3–
Source: Ministry of Economic Development.

Current price data are based on customs trade statistics.

Source: Ministry of Economic Development.

Current price data are based on customs trade statistics.

Table 30.Tunisia: Value of Foreign Trade by Commodity Class, 1991–95 1/
(In millions of SDRs)
Exports, f.o.b.2,7112,8502,6883,2433,545
Energy products387432325305301
Phosphates and derivatives389395336412469
Agricultural (including agro–processing)412296313421351
Textiles and leather1,0501,2311,2681,5431,785
Mechanical and electrical industry320341315430488
Other goods154156131130151
Imports, c.i.f.3,7864,5674,4424,5905,199
Energy products289319326326334
Raw materials and semi–finished goods1,1851,4771,3051,3111,530
Nonfood consumer goods1,1131,3451,3591,5771,764
Memorandum item:
Net energy exports98113–1–21–34
Source: Ministry of Economic Development.

Based on customs statistics.

Source: Ministry of Economic Development.

Based on customs statistics.

Table 31.Tunisia: Volume of Foreign Trade by Commodity Class, 1991–95 1/
(Growth rates in percent)
Exports, f.o.b.
Energy products–4.710.2–
Phosphates and derivatives–3.29.5–9.417.64.6
Agriculture (including agro–processing)38.7–24.418.428.232.2
Textiles and leather4.48.46.818.88.4
Mechanical and electrical industry5.9–1.6–
Other goods–15.2–6.4–9.6–5.39.9
Imports, c.i.f.–7.913.
Energy products–
Raw materials and semi–finished goods–8.915.3–7.3–0.910.2
Nonfood consumer goods–
Source: Ministry of Economic Development.

Based on customs statistics.

Source: Ministry of Economic Development.

Based on customs statistics.

Table 32.Tunisia: Trade Balance in Hydrocarbons, 1991–95
(In thousands of tons of oil equivalent)
Crude oil
Refined products
Exports– –– –– –– –700
(In millions of dinars)
Source: Ministry of Economic Development.
Source: Ministry of Economic Development.
Table 33.Tunisia: Exports of Phosphate Rock and Phosphate Derivatives, 1991–95
19911992199319941995 1/
(Volume in thousands of tons, value in millions of dinars)
Phosphate rock42611926281,122321,2963394723
Phosphoric acid5431611,0261448951211,142170868145
Other phosphates derivatives 2/600106743107762105743131644125
Source: Direction généale des mines.

Estimates for the first nine months.

Includes: ammonium phosphate, bicalcium phosphate and hyperphosphate.

Source: Direction généale des mines.

Estimates for the first nine months.

Includes: ammonium phosphate, bicalcium phosphate and hyperphosphate.

Table 34.Tunisia: Exports and Imports of Primary Products by Major Categories, 1991–95
19911992199319941995 1/
(Volume in thousands of tons, value in millions of dinars)
Olive oil1582679713912317719330589211
Almonds121214– –1– –1
Wine 2/111791191315211413
Soft wheat5594859672656868039064697
Hard wheat11816578295401249094
Soybean oil562110640117541549212981
Meat 3/13181421152991648
Sources: Central Bank of Tunisia; and National Statistics Institute.

Estimates for the first nine months.

Includes other alcoholic beverages.

Including live animals for slaughter.

Sources: Central Bank of Tunisia; and National Statistics Institute.

Estimates for the first nine months.

Includes other alcoholic beverages.

Including live animals for slaughter.

Table 35.Tunisia: Direction of Trade, 1991–95(In percent)
19911992199319941995 1/
Exports, f.o.b.
EC countries 2/76.678.478.380.179.2
Of which: France25.227.229.327.227.7
United Kingdom1.
Arab Maghreb Union8.
Of which: Libya5.
Mauritania0.1– –– –– –– –
Other countries15.013.714.013.513.9
Of which: United States0.
FSU1.– –
Imports, c.i.f.
EC countries 2/71.771.172.369.569.3
Of which: France26.025.527.227.425.8
United Kingdom1.
Arab Maghreb Union3.
Of which: Libya0.
Mauritania– –– –– –– –– –
Other countries24.624.524.526.026.3
Of which: United States4.
Former Yugoslavia0.
China, People’s Rep.
Saudi Arabia0.
Sources: Central Bank of Tunisia; National Statistics Institute of Tunisia.

Estimates for the first nine months.

Outside Austria, Finland, and Sweden.

Sources: Central Bank of Tunisia; National Statistics Institute of Tunisia.

Estimates for the first nine months.

Outside Austria, Finland, and Sweden.

Table 36.Tunisia: External Debt and Debt Service Payments, 1991–95
(In millions of SDRs)
Long–term capital542482558494486
Medium–term capital263350273494589
Debt service payments
Medium– and long–term8959279419851,074
Repurchases99214– –10
Total debt service1,0089639589981,097
Debt outstanding5,3565,4445,6095,9226,318
Medium– and long–term5,1765,2225,3945,7126,121
Arab Monetary Fund– –1183– –
Fund credit180211207207197
(In percent of current receipts)
Total debt service 1/23.820.220.618.518.7
Excluding IMF21.219.520.218.218.3
(In percent of GDP)
Debt outstanding55.151.955.254.051.1
Total debt service10.
Sources: Ministry of Economic Development; Central Bank of Tunisia; and IMF Treasurer’s Department.

Includes IMF charges and repurchases.

Sources: Ministry of Economic Development; Central Bank of Tunisia; and IMF Treasurer’s Department.

Includes IMF charges and repurchases.

Table 37.Tunisia: Selected Exchange Rate Indices, 1990–95 1/
Effective exchange rate 2/




(Period averages: 1980 = 100)
Sources: IMF Data Fund, and Information Notice System.

Foreign currency units per Tunisian dinar.

Weighted by non–oil trade and tourism flows of 16 partner and competitor countries.

Sources: IMF Data Fund, and Information Notice System.

Foreign currency units per Tunisian dinar.

Weighted by non–oil trade and tourism flows of 16 partner and competitor countries.

Table 38.Tunisia: Structure of Imports by Regime, 1991–95 1/
(In millions of dinars)
Regime with restrictions 2/1,074534490283300
Import license 3/954446421283300
Annual import authorization 4/1208869– –– –
Regime without restrictions2,6503,1903,0684,5204,777
Import certificate 5/2,3112,8512,7294,2324,473
Import of equipment goods166166166– –– –
Temporary admission173173173288304
Total 1/3,7243,7243,5584,8035,077
Source: Central Bank of Tunisia.

Total imports are less than those recorded in the balance of payments, primarily because imports without payments are not covered by the above regimes.

Quantitative restrictions.

Import licenses, which are issued for six months, authorize the importation of certain consumer goods, incl durable goods.

Under an annual import authorization, certain staples or industrial products can be imported by specific industrial enterprises, agencies, or merchants up to a global annual limit, expressed in dinars.

Document required for the import of liberalized goods can be obtained upon presentation of a commercia contract, domiciled with an authorized intermediary.

Source: Central Bank of Tunisia.

Total imports are less than those recorded in the balance of payments, primarily because imports without payments are not covered by the above regimes.

Quantitative restrictions.

Import licenses, which are issued for six months, authorize the importation of certain consumer goods, incl durable goods.

Under an annual import authorization, certain staples or industrial products can be imported by specific industrial enterprises, agencies, or merchants up to a global annual limit, expressed in dinars.

Document required for the import of liberalized goods can be obtained upon presentation of a commercia contract, domiciled with an authorized intermediary.

APPENDIX II Tunisia: Summary of the Tax System as of October 15, 1995
(All amounts in Tunisian dinars)
TaxNature of TaxExemptions and DeductionsRates
1. Taxes on net income and profits

1.1 Corporations

Code de l’impôt sur le revenu des personnes physiques et de l’impôt sur les sociétés (CIRPPIS), December 30, 1989. 1/
Levied on all resident corporations, cooperatives, and autonomous public entities engaged in industrial or commercial activity, as well on Tunisian-source profits of nonresident companies.

Losses can be carried forward as a deduction against profits of the following three years.
Exemptions: nonprofit professional associations with revenue from tax or quasi-tax sources; mutual funds; savings and assistance funds managed by nonpaid officials; nonprofit public entities; service cooperatives in agricultural and fishing activities; employee-owned production cooperatives.Normal rate: 35 percent.

Reduced rate: 10 percent. The latter is applicable to profits of the following companies: enterprises in handicraft, agricultural, and fishing activities; service and consumption cooperatives; profits from youth employment programs or promotion funds for handicrafts and small traders. Exemptions cannot reduce tax liability below 10 percent.
Provisional advance payments are required on current year’s profits, in three installments, each being equal to 30 percent of the previous year’s income tax in the 6th, 9th, and 12th months of their taxable year. Adjustment is made upon submission of the tax return for the taxable year.Deductions: linear or degressive depreciations are allowed for business fixed assets; provisions for bad debts up to 10 percent of taxable profits, with rates of 50 percent or 100 percent for banks; deduction of up to 35 percent of net profits for purchase of newly issued equity instruments in enterprises benefiting from the incentives under the Investment Incentive Law (Law No. 93-120 of December 1993); deductions in various degrees of income from activities encouraged by the Investment Incentive Law; deduction allowed for charitable donations up to 2 per thousand of the turnover and for representation expenses up to 1 percent of the turnover with a maximum of D 20,000; 50 percent of the construction cost of housing built for employees is deductible the first year and the remainder over a period of ten years.Minimum tax: 0.5 percent of the turnover of the taxable year, with a ceiling of D 500 for companies subject to 10 percent rate and D 1,000 for companies subject to 35 percent rate. Tax withholding at source is applied to wages, salaries, interest, commissions, brokerage fees, royalties, and rents.
1.2 Individuals

Levied on individuals domiciled in Tunisia on their worldwide income.

Types of income include wages and salaries; professional income; business profits; profit shares; capital income; income from land; and royalty income.

Nonresidents are also subject to this tax on their Tunisian-source income. Tax collected through withholding on wages and salaries, interest payments, dividends, director fees, payments to nonresidents.

Advance payment is also required for business and professional income as in the case of corporations (see 1.1 above).

Lump-sum tax liability (forfait) is established for enterprises with annual turnovers not exceeding the amounts specified in the tax code.
Exemptions: remunerations of foreign diplomats (exempted on a reciprocal basis); life annuities paid to work-related accident victims; indemnities paid to victims of physical attacks by virtue of a court verdict; social security and welfare payments; special allowances to cover work-related expenses; dividends paid by entities subject to the corporate tax; interest income from savings deposits linked to financing for housing; interest from bank deposits in foreign currency or convertible dinars; interest income from special savings accounts with banks and the National Savings Fund of Tunisia, and bonds up to D 1,500, with a limit of D 1,000 for interest from special savings accounts.

Deductions: same as in the case of corporate profits (see 1.1 above).

First 1,500

Next 3,500

“ 5,000

“ 10,000

“ 30,000

Over 50,000
(In percent)






Minimum tax: 0.5 percent of the turnover of the taxable year with a ceiling of D 500. Deductions and exemptions cannot lower tax liability below 30 percent of tax due in the absence of deductions and exemptions.
2. Social security contributionsAll private sector employers must join the National Social Security Fund (Caisse nationale de Sécurité sociale, CNSS). The CNSS pays pensions, family allowances, and other social security benefits.Exemptions: none.

Deductions: none.
Social security

Employers: 15 percent.

Employees: 6 percent.


Employers: 2.5 percent.

Employees: 1.25 percent.
3. Taxes on payroll and work force

3.1 Vocational training tax

(Taxe de formation professionnelle)

Levied on wages and salaries.


Normal rate: 2 percent

Reduced rate:1 percent

(for industrial manufacturing jobs).
3.2 Contribution to the “Housing Promotion Fund for Wage Earners” (FoProlos)Levied on wages and salaries.None.1 percent.
4. Taxes on property

4.3 Transfer duties on property transfers

(Droits d’enregistrement sur les mutations/sur les actes d’échanges)
Levied on transfer of property through sale, exchange, gift, or inheritance.For inheritance, there is an allowance of D 2,000 for spouse, child, and other dependent descendants with a total ceiling of D 12,000 per estate.

Exemption for principal residence of deceased.
Gifts and inheritance: rates vary between 5 percent and 35 percent depending on relationship.

Sales are subject to a rate of 5 percent

Exchanges are subject to a rate of 2.5 percent.
5. Taxes on goods and services

5.1 Value-added tax

(Code de la taxe sur la valeur ajoutée), June 2, 1988. 2/
Levied on services; imports and wholesale trade; and industrial and handicraft production activities. Credit is given for the tax paid in previous stages for the same good. Lump-sum tax liability (forfeit) is applied for enterprises with annual turnovers not exceeding the amounts specified in the tax code.Exemptions: exports as well as selected domestic and import goods such as books, newspapers, periodicals, milk, olive oil production, etc.Normal rate: 17 percent

Reduced rate: 6 percent for noncommercial services, gas, electricity,. fertilizers, handicrafts, etc.

High rate: 29 percent on luxury goods.

Rate of 10 percent: for TV sets, computers and data processing.
5.2 Consumption duties

(Droits de consommation, Law 88-62 of June 2, 1988 and revised by budget law for 1994).
Levied on selected goods.None.Ad valorem rates vary from 25 percent to 683 percent (some alcoholic beverages)

Specific rates (petroleum products, alcohol and wines).
5.3 Tax on insurance contractsLevied on premiums collected for insurance contracts.Reinsurance.

Accident insurance for maids and similar employees working for private services.

Risk insurance for export goods and export credit insurance.
Life insurance: 3 percent

Sea and air transport insurance: 5 percent

Fire insurance:
  • Agriculture: 8 percent

  • Business, industry and tourism: 12 percent

  • Other risks: 24 percent

  • Other insurance premiums: 10 percent.

5.4 Motor vehicle taxAnnual levy on motorcycle and cars.Vehicles registered abroad during first three months.Motorcycles: from D 30 to D 450 depending on the engine size;

Cars: from D 45 to D 1,500 depending on their fiscal horsepower.

Rates are doubled for legal persons.
6. Taxes on international trade

6.1 Taxes on imports

6.1.1 Customs duty

(Droits de douane à l’importation)
A three-column tariff system based on the CCC nomenclature with minimum, preferential, and general rates. Preferential treatment is given to goods from 15 countries of North Africa and the Middle East, provided they satisfy origin criteria. General treatment is given to goods fromExemptions or reductions in rates apply to certain categories of importers or imports such as:
  • equipment for investment under the Investment Incentive Law;

  • goods used in manufacture under special customs regimes (e.g., temporary admission, industrial warehousing).

Rates: from 10 percent to 43 percent.

All duties are assessed ad valorem on c.i.f. value.
countries that do not have special commercial relationships with Tunisia, or do not apply the most-favored nation clause.
  • goods used by particular institutions and bodies; military forces, diplomatic personnel, and international organizations, airlines, etc.;

  • goods used for educational, cultural, social and health purposes;

  • household effects and travel goods within specified limits.

Exemptions or deductions may also be applied to certain categories of foodstuffs imported under special temporary tax relief (régimes fiscaux privilégiés conioncturels).
6.1.3 Complementary duty on imports

(Droit complémentaire à l’importation)
Additional temporary import duty levied on limited range of finished and semifinished goods produced locally for which imports are liberalized.Rates: from 10 percent to 30 percent. To be eliminated gradually over three years from the date of introduction.
6.1.3 Service fee on imports

(Redevance sur prestations douanières à l’importation).
Flat fiscal duty on imports, regardless of origin.Exemptions: numerous.2 percent of the total of import duties, including VAT, excises, and compensatory duty, with a minimum of D 5 per declared item.
6.2 Export duties

6.2.1 Service fee on exports

(Redevances sur prestations douanières à l’exportation).
Flat fiscal duty on selected exports.Exemptions: numerous.1.5 percent of the export value (f.o.b.). Budget Law of 1988 provides a list of taxable exports.
Other taxes

7.3.2 Stamp duties

(Droits de timbre).
Specific duties on a wide range of civil, administrative, and judicial procedures.Exemptions: numerous.Various rates between D 0.2 and D 100.
Sources: Code de l’impôt sur le revenu des personnes physiques et de l’impôt sur les sociétés; Code de la taxe sur la valeur aioutée: Code de la douane; Law 88-62 of June 2, 1988 on Refonte de la réglementation relative aux droits de consommation; and Code des droits d’enregistrement et de timbre.

Applicable to 1990 income and profits.

Effective July 1, 1988.

Sources: Code de l’impôt sur le revenu des personnes physiques et de l’impôt sur les sociétés; Code de la taxe sur la valeur aioutée: Code de la douane; Law 88-62 of June 2, 1988 on Refonte de la réglementation relative aux droits de consommation; and Code des droits d’enregistrement et de timbre.

Applicable to 1990 income and profits.

Effective July 1, 1988.

A gas pipeline to Italy (Gazoduc) and an offshore gas field (Miskar) (see below).

The economic performance during the two periods of drought, 1988-89 and 1994-95 provides some evidence in this regard. Whereas in 1988-89 real growth dropped to 1.8 percent and inflation reached 7.5 percent, the corresponding figures in 1994-95 are 3.5 percent and 5.5 percent, respectively.

Irrigated agriculture covers 6 percent of arable land, accounts for about 30 percent of agricultural GDP and uses, on average, 60 percent of mobilized water resources.

Land tenure is characterized by fragmentation of lots, absenteeism, and lack of clear and secure property rights, which point to the need for a cadastral system.

Subsidies have been eliminated or reduced for fertilizers, animal feed, pesticides and herbicides, seed, irrigation, and mechanized services.

Including the fees in kind from the use of the trans-Tunisia pipeline carrying gas from Algeria to Italy.

This field which used to account for about two thirds of total crude oil production in the late 1960s, represented less than 40 percent of total crude oil production in 1994.

Ashtart offshore field in the Gulf of Gabes started in 1974, and has been the second largest field in Tunisia accounting for one fifth of total crude oil production.

The Miskar gas field has proven reserves of 23-30 billion cubic meters of natural gas. It is the single largest hydrocarbon production in Tunisia with a life expectancy of 20 years. The field, which is located offshore in the Gulf of Gabès, is wholly owned and operated by British Gas. The production started ahead of schedule in May 1995. It is expected to allow Tunisia to become self-sufficient in natural gas supply.

According to the World Bank, average potable water prices were about 30 percent below the long-run marginal cost of production in the early 1990s, while irrigation water benefitted from even higher subsidies (see IBRD “Republic of Tunisia, Towards the 21st Century,” Country Economic Memorandum, October 1995, Report No. 14375).

The offshore textile industry has a relatively low value added.

Exports of textiles and leather goods, and electrical and mechanical products accounted alone for 60 percent of total merchandise exports in 1994.

Other specialized agencies include the Agence de Promotion des investissements agricoles (APIA), the fonds de développement de la compétitivité dans les secteurs de l’ agriculture, de la pêche et des industries agro-alimentaires, and the Centre de promotion des exportations in charge of promoting agricultural investments, agro- and fishing industries, and exports, respectively.

A typical restructuring program entails an independent audit of the enterprise with a view to identifying the main deficiencies and defining a restructuring strategy.

The transport system in Tunisia is relatively well-developed. It includes 20,000 kilometers of well-maintained roads; six international airports accommodating 5 million passengers, and 30,000 tons of freight; and eight deep water ports handling 500,000 passengers and 5 million tons of freight per year.

However, the liberalization of certain transport activities, such as cargo handling and maritime transport, has remained limited.

Up to 1992 five regimes were in effect: (i) a fixed price regime covering basic food staples and commodities and public utilities; (ii) a price certification regime (homologation), under which the enterprise submitted accounting information to the Price Regulatory Department which then calculated appropriate prices; (iii) a regime of self-certification (auto-homologation), which permitted enterprises to calculate their own prices according to a predetermined formula; (iv) a “restricted” free price regime (liberté contrôlée), under government supervision; and (v) an unrestricted free price regime (liberté totale).

In particular, to protect the most vulnerable groups (basic commodities) and in cases of excessive market concentration due to oligopolistic or monopolistic situations.

This compares with retail price control and producer price control of 50 percent and 82 percent in 1991, respectively.

Forty-six sectoral agreements were concluded during 1993-96; the wage agreement is binding for all firms with four workers or more, except those that face difficult financial situations.

However, according to recent World Bank estimates, based on international methodology, the unemployment rate would be in the range of 11-12 percent.

In 1994, the provisional compensatory duties were renamed complementary duties (droits complémentaires provisoires, (DCP).

Those agreements were adopted in the context of three-year wage contracts negotiated in 1990 and 1993 between the Employers’ Association (UTICA) and the Labor Union (UGTT) covering various economic sectors, providing for general annual wage adjustments of up to 6 percent.

As a result, the stock of such bonds held outside public entities fell from D 0.9 billion at the end of 1990 to D 0.4 billion at the end of 1994.

While since 1989 only enterprises with direct and indirect government equity participation of more than 50 percent qualified as public enterprises, in 1994, the threshold was lowered to 34 percent for banks and insurance companies.

The share rose to 26 percent in 1994 as a result of stagnating private sector and Central Government investment.

A consolidated financial situation of the public enterprises is not available.

This provision has not been used in past privatizations.

The auction is conducted in such a way as to allow the central bank to control both the volume and the costs of refinance credits.

Since 1992, the interest rate on the prises en pension has been maintained one percentage point higher than that on the appel d’offres, unrelated to the amount of liquidity that is demanded. Central bank’s moral suasion has been a factor regulating its use.

The interest rate on the money market is slightly lower than on the prises en pension (1/16 of one percentage point).

Under this mechanism, banks are required to simultaneously place deposits at the central bank in the amount of the refinance credit they obtain. As these deposits are remunerated at the money market rate (which is higher than the rate charged by the Central Bank), the refinancing operation amounts to an interest rate subsidy.

These Treasury bills have been sold to the public at interest rates below -the rate at which they are issued, ensuring a profit margin for the banks. The maturity structure of the Treasury bills has been diversified and gradually lengthened from 13 weeks in 1989 to ten years in 1993.

The basis for calculation excludes several saving deposits such as the saving-housing accounts, saving-project accounts and saving-investment accounts. Required reserves are not remunerated and are calculated on monthly averages. Banks’ cash in vault does not count toward satisfying the reserve requirement.

The end-year outstanding government liability to the banking system decreased by 34 percent between 1991 and 1995 as a result of the fiscal consolidation and the increased reliance on non-bank domestic resources and external borrowing to finance the overall fiscal deficit.

Long-term credit is largely concentrated with development banks, which refinance themselves internationally. Commercial banks have been active mainly on the short-term market with a large share of their credits corresponding to overdraft facilities or loans with less than two years maturity.

This had also the effect of hindering the development of the interbank monetary market.

See Nsouli, Saleh M., Sena Eken, Paul Duran, Gerwin Bell, and Zühtü Yücelik, “The Path to Convertibility and Growth: The Tunisian Experience,” IMF Occasional Paper No. 109, 1993.

The first investment bank was created in 1995.

See SM/94/309.

Tunisian banks are required to meet a 5 percent capital to risk weighted assets ratio. While this minimum is below the Cooke ratio (8 percent), strict standards for loan classification, loan loss provisioning and for calculating the banks’ net exposure imply that, as a whole, the minimum capital adequacy and provisioning standards are more stringent than the Basle Committee recommendation.

IBRD, Republic of Tunisia, Towards the 21st Century, 1995, Report No. 14375-TUN, Annex II.

The aforementioned World Bank report estimates that, in 1994, a much higher share of domestic production (24 percent) was still protected by QRs and through import monopolies in the energy sector.

GATT, Trade Policy Review Mechanism: Tunisia, Report by the Secretariat (Report C/RM/S/47), May 1994.

Moody’s, IBCA, and the Japan Bond Research Institute.

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