Press Release No. 09/239

Press Release: Statement of the IMF Mission on the 2009 Article IV Consultation with Tunisia

June 29, 2009

An International Monetary Fund (IMF) staff mission issued the following statement on June 24, 2009 in Tunis:

“An IMF mission headed Mr. Joël Toujas-Bernaté has been in Tunis since June 10, 2009 to conduct the regular consultation under Article IV of the IMF Articles of Agreement, which requires an annual review of the economic policies of all IMF member countries. This review will conclude with the preparation of a report, which will be discussed by the Executive Board of the IMF in August 2009.

“The mission’s concluding statement and final report will be published on the IMF website: www.imf.org/external/country/TUN/index.htm. Reports for previous years and other IMF publications on Tunisia are also available on this site.

“The discussions focused on economic policies as well as the short- and medium-term economic outlook. The mission held wide-ranging discussions with H.E. Mr. T. Baccar, Governor of the Central Bank of Tunisia (BCT); as well as with H.E. Mr. R. Kechiche, Minister of Finance, H.E. Mr. N. Jouini, Minister of Development and International Cooperation, H.E. Mr. A. Chelbi, Minister of Industry, Energy and Small and Medium-sized Enterprises, H.E. Mr. A. Chaouch, Minister of Social Affairs, Solidarity and Tunisians Abroad, H.E. Mr. A. Mansour, Minister of Agriculture and Water Resources, H.E. Mr. K. Lajimi, Minister of Tourism, H.E. Mr. Bouden, State Secretary to the Minister of Finance responsible for Taxation, H.E. Mr. C. Mamoghli, State Secretary to the Minister of Commerce responsible for International Trade, and H.E. Mr. A. Triki, State Secretary to the Minister of Development and International Cooperation responsible for International Cooperation and Foreign Investment. The mission also met with other members of the government and the administration, members of the Economic and Financial Committee of the Chamber of Deputies, representatives of the banking sector and business community, representatives of academia, and the social partners. The IMF staff wish to express their deep appreciation to the Tunisian authorities for their excellent cooperation, the high quality of the discussions, their customary warm hospitality, and their full availability.

“Tunisia is relatively well positioned to withstand the international economic crisis owing to the reforms it has undertaken in recent years and its prudent macroeconomic policies, especially in the fiscal and monetary areas.

“After recording an annual increase in real gross domestic product (GDP) of 4.6 percent in 2008, Tunisia has experienced an economic slowdown since early 2009, in particular a significant decline in its exports, as the international economic environment has deteriorated. However, owing to the resilience of its tourism receipts, remittances of Tunisian workers abroad, and foreign direct investment (FDI) inflows, its external position remains solid, with comfortable reserve levels totaling some US$9 billion at end-May 2009. The current account deficit, which stood at 4.2 percent of GDP in 2008 as a result of rising imports of commodities and capital goods, continues to be largely financed by foreign investment inflows. Inflation declined from an average of 5 percent in 2008 to 3.3 percent in May 2009 thanks to lower global prices and an appropriate monetary policy. The fiscal position improved markedly in 2008 as the deficit fell to 1.2 percent of GDP, which brought the public debt ratio down to 47½ percent of GDP. At the same time, the external debt continued to decline, with a medium- and long-term external debt ratio of 42 percent at end-2008 compared with 54 percent in 2005.

“The Tunisian financial sector has not been directly affected by the international crisis. The authorities have continued their long-term strategy of reinforcing the banking sector, which has led to a decline in the ratio of non-performing loans to total loans from 17.6 percent in 2007 to 15.5 percent in 2008 and an increase in the provisioning ratio from 53.2 percent in 2007 to 56.8 percent in 2008. The authorities intend to continue this effort even after they reach their targets of 15 percent and 70 percent, respectively. The mission noted that a more forward-looking and comprehensive approach to the prudential indicators could be beneficial, particularly in the context of the implementation of Basel II.

“With the economies of its trading partners expected to shrink some 4 percent in 2009, Tunisia’s immediate challenge is to minimize the impact of the decline in external demand on growth by rapidly implementing an economic recovery program. At end 2008, the Tunisian authorities adopted a series of measures that will be broadened and extended under the 2009 Supplementary Budget, which also calls for additional fiscal expenditures aimed at supporting domestic demand. The resulting increase in the budget deficit to 3.8 percent should not undermine macroeconomic stability, particularly the external position, public debt ratio, and inflation. Moreover, the BCT has reacted to the economic slowdown by appropriately easing monetary policy. The mission supports the authorities' economic recovery program and notes that the fiscal stimulus should continue in 2010 until the global economic recovery strengthens. On this basis, the GDP growth target of 3 percent in 2009 could be achieved if recovery measures rapidly impact demand. However, the persistence of uncertainties about the global economy presents a downside risk for tourism receipts and remittances from emigrant workers.

“In the medium term, Tunisia's main objective remains reducing the unemployment rate, particularly among young university graduates. The policy of opening up Tunisia’s economy to the global economy, which continued despite the international economic and financial crisis, and sustained continued structural reforms, particularly in the financial sector, should enable the Tunisian economy to benefit fully from the global economic recovery and to increase its long-term growth potential.

“The mission supports the authorities’ intention to rapidly return to their medium-term policy of fiscal consolidation when economic growth is restored in their trading partners, which will allow the public debt ratio to return to a declining path. Moreover, with a vigilant monetary policy on the part of the BCT—aimed at preventing inflationary pressures from eventually intensifying—preservation of macroeconomic stability will continue to create a sound environment favoring private investment. Tunisia is also pursuing policies to improve its business environment, particularly by simplifying customs procedures and creating better logistical infrastructures in support of international trade.”