Press Release No. 14/573

Press Release: IMF Executive Board Completes Fifth Review Under Stand-By Arrangement for Tunisia; Approves US$104.8 Million Disbursement

December 12, 2014

The Executive Board of the International Monetary Fund (IMF) today completed the fifth review of Tunisia’s performance under an economic program supported by a Stand-By Arrangement (SBA). The completion of the fifth review enables the disbursement of SDR 71.6 million (about US$104.8 million), bringing total disbursements under the arrangement to SDR 787.87 million (about US$1.15 billion). The two-year SBA in the amount of SDR 1.1 billion (about US$1.68 billion, 400 percent of Tunisia’s quota) was approved by the Executive Board on June 7, 2013 (see Press Release No. 13/202).

In completing the fifth review, the Executive Board approved the authorities’ requests to re-phase purchases under the arrangement, and to modify end-December 2014 quantitative performance criteria on net international reserves, net domestic assets and the primary fiscal deficit.

Following the Executive Board’s discussion on Tunisia, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair issued the following statement:

“Tunisia is completing a successful political transition while navigating a challenging domestic and external environment. Tunisia’s economy has been resilient, although large external and fiscal imbalances, high unemployment and rising banking fragilities call for forcefully pushing ahead with reform implementation.

“Performance under the Fund-supported program has been good with the successful attainment of all quantitative performance criteria. However, structural reforms have been progressing slowly, with considerable delays in recapitalizing and restructuring public banks.

“Fiscal consolidation remains essential to reduce vulnerabilities. The 2015 budget appropriately aims at anchoring macroeconomic stabilization while preserving priority social and capital expenditures. Further reduction in energy subsidies and strict control of the public wage bill is welcome, as is the authorities’ intention to save any gains from lower international oil prices. Growth-enhancing reforms, including of public enterprises and pensions, public financial management, and tax administration would help improve absorptive capacity, equity, efficiency, and risk management.

“A tighter monetary stance would help keep inflationary pressures in check, reduce exchange rate pressures, and eventually bring about positive real interest rates. Greater exchange rate flexibility—including through continuing to limit foreign exchange interventions to smoothing large fluctuations—will contribute to strengthening reserve buffers and correcting large external imbalances.

“Efforts to reduce financial sector vulnerabilities should be stepped up. Recapitalizing and restructuring public banks in line with good international practices is urgent, in view of increased financial sector vulnerabilities and the need to support growth. Modernization of the banking resolution framework, operationalization of the Asset Management Company, and an upgrade of the supervisory and regulatory framework would enhance financial stability and reduce moral hazard.

“Accelerated implementation of structural reforms is urgently needed to improve the investment climate and generate stronger and more inclusive growth. Legislative approval of the bankruptcy, competition, and public private partnerships laws are key priorities.”