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IMF Country Report No. 21/44
TUNISIA
2021 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR TUNISIA
February 2021
In the context of the Staff Report for the 2021 Article IV Consultation, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its February 17, 2021 consideration of the Staff Report on issues related to the Article IV Consultation with Tunisia.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on February 17, 2021, following discussions that ended on January 13, 2021 with the officials of Tunisia on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on February 2, 2021.
An Informational Annex prepared by the IMF staff.
A Statement by the Executive Director for Tunisia.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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TUNISIA
STAFF REPORT FOR THE 2021 ARTICLE IV CONSULTATION
February 2, 2021
Key Issues
Covid-19 impact. The pandemic aggravated Tunisia’s long-standing vulnerabilities stemming from persistent fiscal and external imbalances, rising debt, and contingent liabilities from inefficient state-owned enterprises. The crisis is expected to induce the largest contraction in real GDP since independence. The authorities’ targeted response together with higher outlays on wages widened the fiscal deficit. A second Covid-19 wave is underway. The authorities are securing 500,000 doses to start a first campaign of vaccinations in February and are aiming to secure more doses to vaccinate half of the population starting in April–May. Staff expects GDP growth to rebound modestly in 2021, but it could take years before activity returns to pre-crisis levels, especially if large imbalances were not addressed and key reforms delayed. Downside risks dominate and recent protests highlight the level of social tensions, aggravated by Covid-19 restrictions, and particularly among the youth.
Policy challenges. The immediate priority is to save lives and livelihoods, which, given the lack of fiscal policy space, will require strict prioritization of spending. The authorities also face a dual challenge in 2021 and over the medium term. On one side, they need to support the recovery, alleviate social inequalities, and promote private-led, job-rich, and inclusive growth. On the other side, they need to reduce Tunisia’s large imbalances and restore fiscal and external sustainability. In this context, efforts are needed to strengthen the social safety net, reform state-owned enterprises (SOEs), improve governance and fight corruption, and promote competition. Staff assesses that debt would become unsustainable unless the authorities adopted a strong and credible reform program that strikes a balance between what is feasible in Tunisia’s fragile socio-political context and the efforts needed to restore macroeconomic balances. Such a program should aim at reducing the fiscal deficit while reorienting spending towards social protection and growth- enhancing investment, and tackling the SOE sector, to bring the debt ratio towards sustainable levels over the medium term. Even so, risks would abound, and vulnerabilities persist into the medium term.
National dialogue on reforms. The authorities’ reform agenda should focus on mitigating the economic and financial impact of the pandemic and on addressing longstanding vulnerabilities. Priorities include: (i) bringing public finances back towards a sustainable path while reorienting spending toward social assistance, protecting the poor, and investment (especially health, education, and infrastructure); (ii) clearing SOE arrears, reforming SOEs, and reducing fiscal risks; (iii) strengthening the monetary policy framework and financial sector resilience; and (iv) promoting private sector-led growth, and (v) improving governance and transparency. To ensure success, the authorities need to undertake a national dialogue with main stakeholders on the design and implementation of a credible home-grown reform program that could garner the support of external partners. Given large financing needs over the foreseeable future, the size and pace of adjustment will also depend on the availability of financing from the international community.
Approved By
Taline Koranchelian and Gavin Gray
Discussions took place during December 9–18, 2020 and January 4– 13, 2021 via video conference. The mission team comprised C. Geiregat (head); A. Baum, A. Kireyev, and B. Radzewicz-Bak (all MCD); A. Belgacem (local economist), P. Guérin (MCM); D. Rozhkov (FAD); R. Turk (SPR); J. Vacher (Resident Representative); and B. Wiest (METAC). S. Belhaj (OED) participated in discussions. Staff held discussions with Minister of Economy, Finance, and Investment Promotion Kooli; Central Bank Governor El-Abassi; Minister of Tourism Ammar; and other senior officials and representatives from the diplomatic and donor community and civil society. J. Ferrer and L. Calaycay provided excellent research and production assistance.
Contents
Abbreviations
ECONOMY HARD HIT IN 2020 AMID INITIAL RAPID RESPONSE
OUTLOOK—MODEST RECOVERY AND SIGNIFICANT RISKS TO ECONOMIC STABILITY
POLICY DISCUSSIONS—FROM STABILIZATION TO RECOVERY AND SUSTAINABILITY
A. Immediate Priorities: Saving Lives and Stabilizing the Economy
B. Restoring Fiscal and External Sustainability and Reorienting the Budget to Support Inclusive Growth and Job Creation
C. Reforming the SOEs and Reducing Fiscal Risks
D. Strengthening the Monetary Policy Framework and Financial Stablity
E. Promoting Private Sector Activity
F. Strengthening Governance
STAFF APPRAISAL
BOXES
1. Policy Measures in Response to Covid-19
2. Summary of the Reform Scenario
FIGURES
1. Real Sector Developments, 2010–20
2. External Sector Developments, 2010–20
3. Fiscal Sector Developments, 2010–20
4. Monetary Sector Developments, 2010–20
TABLES
1. Selected Economic and Financial Indicators, 2017–25
2. Real Sector, 2017–25
3. Balance of Payments, 2017–25
4. Central Government Fiscal Operations, 2018–26 (In millions of dinars)
5. Central Government Fiscal Operations, 2018–26 (In percent of GDP)
6. Monetary Survey, 2017–25
7. Central Bank Survey, 2017–25
8. External Financing Needs, 2017–25
9. Financial Soundness Indicators of the Banking Sector, 2010–20
10. Reform Scenario: Selected Economic Indicators, 2017–25
11. Reform Scenario: External Financing Needs, 2017–25
ANNEXES
I. Risk Assessment Matrix
II. Integrated Capacity Building Priorities
III. Trends in the Civil Service Wage Bill
IV. SOE Reform
APPENDICES
I. External Sector Assessment
II. Debt Sustainability Analysis
Abbreviations
| AFD |
Agence Française de Développement |
| AML/CFT |
Anti-Money Laundering and Combating the Financing of Terrorism |
| ARA |
Assessment of Reserve Adequacy |
| AREAER |
Annual Report on Exchange Arrangements and Exchange Restrictions |
| ARP |
Assembly of the People’s Representatives |
| bps. |
basis points |
| CBT |
Central Bank of Tunisia |
| CDC |
Caisse des Dépôts et Consignations |
| CIT |
Corporate Income Tax |
| CNAM |
Caisse Nationale de l’Assurance Maladie |
| CNRPS |
Caisse Nationale de Retraite et de Prévoyance Sociale |
| CNSS |
Caisse Nationale de Sécurité Sociale |
| DGE |
Direction des Grandes Entreprises |
| DGP |
Direction Générale des Participations |
| DSA |
Debt Sustainability Analysis |
| EFF |
Extended Fund Facility |
| FATF |
Financial Action Task Force |
| HACGGA |
High Anti-Corruption and Good Governance Authority |
| INS |
Institut National de la Statistique |
| LTU |
Large Taxpayer Unit |
| MOF |
Ministry of Economy, Finance, and Investment Promotion |
| MPCC |
Monetary Policy Consultation Clause |
| NEER |
Nominal Effective Exchange Rate |
| PCT |
Pharmacie Centrale de Tunisie |
| NIR |
Net International Reserves |
| NPL |
Non-Performing Loan |
| PIMA |
Public Investment Management Assessment |
| PPP |
Public-Private Partnership |
| pps. |
Percentage points |
| SME |
Small- and Medium-Sized Enterprise |
| SOB |
State-Owned Bank |
| SOE |
State-Owned Enterprise |
| STD |
Short-Term Debt |
| STEG |
Société Tunisienne de L’Electricité et du Gaz |
| STIR |
Société Tunisienne des Industries de Raffinage |
| TA |
Technical Assistance |
| TD |
Tunisian Dinar |
| TSA |
Treasury Single Account |
| UGTT |
Union Générale Tunisienne du Travail |
| UTICA |
Union Tunisienne de l’Industrie, du Commerce et de l’Artisanat |
Front Matter Page
TUNISIA
STAFF REPORT FOR THE 2021 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
February 2, 2021
Prepared By
The Middle East and Central Department (In Consultation with Other Departments)
Contents
RELATIONS WITH THE FUND
RELATIONS WITH THE WORLD BANK GROUP
RELATIONS WITH THE AFRICAN DEVELOPMENT BANK
RELATIONS WITH THE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT
STATISTICAL ISSUES
