Tunisia: Staff Report for the 2021 Article IV Consultation—Informational Annex
Author:
International Monetary Fund. Middle East and Central Asia Dept.
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Publication Date:
26 Feb 2021
eISBN:
9781513570600
ISBN:
9781513570600
Language:
English
Keywords:
Tunisia sanitation PPP support Project; EBRD operation; Tunisia energy sector improvement Project; government Finance Statistics Manual; green economy transition; Anti-money laundering and combating the financing of terrorism (AML/CFT); Treasury Single Account; Government cash management; financial asset
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(As of December 2020)

Abstract

(As of December 2020)

Relations with the Fund

(As of December 2020)

Membership Status:

Date of membership: April 14, 1958 Article VIII

Membership Status

Date of menbership: April 14, 1958 Status: Article VIII

General Resources Account

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SDR Department

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Outstanding Purchases and Loans

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Emergency Assistance may include ENDA, EPCA, and RFI.

Latest Financial Commitments

(SRD million)

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Projected Payments to Fund 1/

(SRD million; based on existing use of resources and present holdings of SDRs)

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When a member has overdue financial obligations outstanding for more that three months, the amount of such arrears will be shown in this section.

Safeguards Assessment

The 2020 safeguards assessment found that the CBT has made progress to address safeguards concerns. A plan has been approved to transition to International Financial Reporting Standards (IFRS), and steps are being taken to address emerging risks in cybersecurity. However, further work is needed to increase capacity of the internal audit function and establish a risk management function. The institutional and personal autonomy provisions have scope for strengthening at the time of the next revision of the central bank law.

Exchange Rate Arrangement

Tunisia accepted the obligations of Article VIII Sections 2(a), 3, and 4 effective January 6, 1993. It maintains an exchange system free of multiple currency practices and restrictions on payments and transfer for current international transactions.1

The de jure exchange rate arrangement is floating, and the de facto exchange rate arrangement is classified as crawl-like.

In April 2012, the CBT replaced its currency composite by a fixing (i.e. the average of market participants’ quotes) as the reference exchange rate. Since then, the CBT has been intervening in the foreign exchange (FX) market through bilateral transactions when market quotes deviated substantially from the fixing rate of the day. The rates quoted by the CBT had been based on the currency composite and updated continuously to reflect the exchange rates prevailing in the international FX market.

Article IV Consultation

The last Article IV consultation was concluded by the Executive Board on March 23, 2018.

FSAP Participation and ROSCS

The last Financial Sector Assessment Program (FSAP) was conducted in 2002, and subsequently updated in 2006 and 2012.

AML/CFT Assessment

Tunisia continues improving the effectiveness of its AML/CFT regime. The 2016 Mutual Evaluation Report by the Middle East and North Africa Financial Action Task Force (MENAFATF), the FATF-style regional body, rated Tunisia’s AML/CFT regime low or moderate in all eleven criteria for effectiveness (immediate outcomes). Owing to the lack of sufficient progress in improving its AML/CFT regime, Tunisia was included in the FATF’s list of jurisdictions with serious AML/CFT deficiencies in November 2017. The authorities worked to implement its action plan and successfully exited the FATF list in October 2019. LEG is supporting the Tunisian authorities in strengthening their CFT regime, as part of a regional capacity development project.

Capacity Development

IMF capacity development activities have continued to grow since 2011, both from the IMF and the Middle East Regional Technical Assistance Center (METAC).2 Tunisia has been receiving IMF technical assistance (TA, see list below) and sent officials to participate in courses (at the IMF Headquarters in Washington, D.C., USA, and METAC in Beirut, Lebanon) in several areas of macroeconomic analysis and management.

Resident Representative

The representative office was opened in Tunis in January 2014. Mr. Jérôme Vacher was appointed the IMF Resident Representative in Tunisia in January 2019.

Tunisia: Technical Assistance, January 1996-December 2020

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Relations with the World Bank Group

(As of January 2021)

Country Strategy

The current World Bank Group’s (WBG) Country Partnership Framework (CPF) for Tunisia is coming to an end and a new CPF will be adopted in FY22. Jointly prepared by the International Bank for Reconstruction and Development (IBRD), International Finance Cooperation (IFC), and Multilateral Investment Guarantee Agency (MIGA), the current CPF covers FY16 through FY20. It anchors on the Tunisian government’s “Note d’Orientation Stratégique” from September 2015 and the WBG’s Strategy for the Middle East and North Africa Region from October 2015. WBG analytics underpin the CPF, including the Systematic Country Diagnostic (SCD) from June 2015. It outlines Tunisia’s post-revolution development challenges and identifies the deep-rooted causes of social unrest that are threatening stability and cohesion. The CPF focuses on three areas: (i) jobs, to restore a business environment conducive to sustainable economic growth and private-sector-led job creation; (ii) lagging regions, to reduce regional disparities; and (iii) vulnerability, to increase social inclusion. In addition, governance and gender equity issues will be integral parts of all WBG initiatives under the CPF.

The mid-term review of the CPF, completed in June 2018, led to an extension of the CPF for an additional year. A Risk and Resilience Assessment (RRA) conducted in parallel with the mid-term review identified the following constraints: (i) a fundamental lack of trust in public institutions and toward the state because of the delay of the renewal of the social contract; (ii) a weak performance of the state and overall weak reform implementation; (iii) a serious level of political exclusion with difficult access to politicians/political activity and the administration, which contrasts with easy access to social and religious activity; (iv) serious problems related to the access to economic activity/employment, constraints of the private sector, limited development of the value chain and connectivity, difficult access to financing and administrative process; (v) continuous significant regional disparities, with issues of social exclusion and stigmatization; and (vi) the persistence of regional security threats.

A new SCD is currently being prepared and will be completed in FY21, prior to the preparation of the new CPF for FY22–FY26.

Recent Lending Activity

Following a rapid increase in lending support in FY18, when the WBG committed US$930 million in lending in 12 months, volumes slowed in subsequent years to US$325 million in FY19 and US$195 million in FY20. The change in trajectory had two main reasons. First, the large budget support program commitments in FY16–18 brought Tunisia closer to its borrowing limits with the World Bank, hence lending volumes had to be reduced in the years after. Second, concerns over the impact of budget support programs, highlighted in a review of budget support programs between 2012 and 2017, generated a dialogue around more effective ways of managing budget support programs, culminating in the creation of a multi-partner platform, which took two years to put in place.

Current portfolio commitments stand at US$1,609 million for 15 active IBRD projects, of which US$649 million remains undisbursed. There are 13 IPFs (US$1.03b), 1 PforR (US$430m), 1 DPF (US$175m) and 3 Grants (US$15.6m).

Pipeline: The lending volume for FY21 will potentially cover 4 investment lending projects with commitments of up to US$400 million, including financing for the COVID-19 vaccine purchase and roll out. No budget support operation is programmed for the WBG FY 21. Programming for FY22 and beyond will be defined by the new CPF that is expected to be finalized in early FY22.

Tunisia: WBG—Active Portfolio

(In US dollars)

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Source: World Bank.

Tunisia: WBG—Project Pipeline for FY2018–19

(In US dollars)

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Source: World Bank

Relations with the African Development Bank

(As of January 2021)

Country Strategy

The African Development Bank (AfDB) approved a new Country Strategy Paper (CSP) in June 2017. Covering 2017–21, it builds on lessons learned from interim CSPs since 2011 and aligns with the Tunisian government’s Five-Year Development Plan 2016–20. In view of the strategic directions of the AfDB’s 2013–22 long-term strategy and its High Five priorities (High 5s), the goal of the CSP is to support Tunisia in implementing its Sustainability Development Plan 2016–20 through two pillars: (i) industrialization and value chains development; and (ii) improvement of the quality of life for people in lagging regions. A CSP mid-term review was conducted in 2020 confirming the maintaining of the two pillars. Pending the sustainability of the macroeconomic environment, the AfDB plans to invest between US$700 million and US$1.5 billion in support of this strategy.

Recent Lending Activity

Net loan commitments currently reach UAC 1,702 million.3 Since 2017, the AfDB approved new 16 operations worth UAC 909 million. All these operations are merely loans with a maturity period of five years.

Current Portfolio

The performance of the Tunisia’s global portfolio is overall satisfactory. It totals UAC 1.71 billion, mainly in loans (99.5 percent) and an average age of 4.5 years. Operations mainly focus on the public sector (97 percent) and the areas of transport (44.2 percent), water and sanitation (13.7 percent), energy (11 percent), finance (9.9 percent), multisectoral operations (7.1 percent), agriculture (6.3 percent),industrial and digital (4.3 percent) and social issues (3.5 percent). The global disbursement rate of 58.4 percent. Besides, technical assistance grants represent 0.5 percent of grants and 99.5 percent of loans in the global portfolio. Mainly financed out if the Trust Fund for Countries in Transition (TFCT) and Trust Fund for Countries in Transition (TFT), and middle-income countries fund, their disbursement rate stands at 34.4 percent.

Tunisia: AfDB—Active Portfolio

(In Unit of Account)

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Tunisia: AfDB—Total Grant Projects for Technical Assistance

(In Unit of Account)

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Relations with the European Bank for Reconstruction and Development

(As of December 2020)

Country Strategy

The European Bank for Reconstruction and Development (EBRD) was operating in Tunisia under the country assessment operational priorities approved in August 2013 and since December 2018 under its first country strategy for the country. These 2019–24 country strategies have four priorities:

  • Support Tunisia’s Competitiveness by Opening Markets, Strengthening Governance, and Levelling the Playing Field;

  • Promote Economic Inclusion for Women, Young People and Populations Living in Remote Areas Through Private Sector Engagement;

  • Strengthen Resilience of the Financial Sector and Broaden Access to Finance; and

  • Supporting Tunisia’s Green Economy Transition.

Recent Lending Activity

The EBRD is accelerating its engagement in Tunisia. In 2020, it approved Euro 225 million— second highest yearly investment since the beginning of its operations—across eight projects. Those included seven projects in the private sector and one public project.

Current Portfolio

EBRD operations support three key areas:

  • Restructuring and strengthening of the financial sector. In 2020, the EBRD provided three micro, small and medium enterprise (MSME) credit lines and trade finance facilities to local microfinance and leasing institutions, for a total of Euro 15 million. It is also supporting the Central Bank of Tunisia in its role of regulator in the implementation of IFRS by banks and leasing companies, intending to align the local financial sector with international standards. In coordination with the IMF, a dialog has been recently engaged with the Central Bank of Tunisia to explore options for the modernization of its monetary policy framework and easing of foreign exchange controls. The EBRD is also working in close cooperation with the Ministry of Finance and other relevant stakeholders for a recast of the legal and regulatory framework for capital markets. The objective is to bridge gaps and bring the local market in line with international standards in terms of instruments and practices. It is also providing technical cooperation targeting the modernization of domestic capital market infrastructures through the improvement of clearing and settlement system operated by Tunisia Clearing.

  • Development of the corporate and SME sector. The EBRD provided a Euro 11 million senior loan to an agribusiness company to finance the expansion of its operations in Tunisia and its new plant in Morocco. It is supporting the Tunisian Automotive Association (TAA) on strengthening value chain and identification of key players in the automotive sector. It is providing assistance, together with the UNWTO, to the Ministry of tourism to support the sector’s recovery post Covid, including corporates and SMEs active in tourism. It also supported over 190 SMEs through business advisory, and trained 104 women entrepreneurs. As part of EBRD global response to the Covid crisis, EBRD’s Advice for Small Business (ASB) has put in place a package aiming at addressing SMEs strategy issues, improving treasury management and assessing financing needs. More than 67 percent of its technical assistance projects were carried out outside the capital Tunis.

  • Infrastructure and energy. On the renewables program, the EBRD has continued to provide advisory to the Ministry of Energy on the legal framework for its small- and large-scale renewable energy programs. In 2020, the EBRD provided a EUR 300m stabilization and restructuring facility to power utility STEG. The proceeds of the Bank’s loan will be used to (i) provide liquidity support to STEG as an immediate response to the current COVID-19 crisis, and to (ii) refinance existing short-term debt to lengthen the tenors and provide terms more consistent with STEG’s operations. The general objective is the reform and restructuring of STEG and the Tunisian energy sector to achieve long-term sustainability. The Project includes a comprehensive corporate reform roadmap, including measures to improve the Company’s corporate and climate governance, financial management, strategy & risk, environmental and social standards, and inclusion of women and youth into the energy sector job market. EBRD has also continued the implementation of its investment projects in the water sanitation, railway and urban transport sectors.

Tunisia: EBRD—Active Portfolio

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Statistical Issues

(As of January 2021)

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Tunisia: Table of Common Indicators Required for Surveillance

(As of January 2021)

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Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (NA) and not available (NA).

The general government consists of the central government (i.e. budgetary funds, extra-budgetary funds, and social security funds) and state and local governments.

Includes foreign, domestic bank, and domestic nonbank financing.

Includes currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency, but settled by other meansas well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency, but settled by other means.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

1

Tunisia previously maintained a multiple currency practice which resulted from honoring exchange rate guarantees extended prior to August 1988 to cover external loans contracted by development banks (total loans covered by these guarantees amount to about US$20 million). The authorities recently confirmed that all of these loans have been fully repaid, and therefore Tunisia is no longer found to maintain this multiple currency practice.

2

Tunisia joined METAC in May 2016.

3

The AfDB’s Unit of Account (UAC) is equivalent to one IMF Special Drawing Right (SDR).

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Cover IMF Staff Country Reports
Tunisia: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Tunisia
Author:
International Monetary Fund. Middle East and Central Asia Dept.
Volume/Issue:
Volume 2021: Issue 044
Publisher:
International Monetary Fund
ISBN:
9781513570600
ISSN:
1934-7685
Pages:
97
DOI:
https://doi.org/10.5089/9781513570600.002