Press Release No. 14/177

Press Release: IMF Executive Board Completes Third Review Under the Stand-By Arrangement for Tunisia and Approves US$225 Million Disbursement

April 25, 2014

The Executive Board of the International Monetary Fund (IMF) today completed the third review of Tunisia’s economic performance under a 24-month program supported by a Stand-By Arrangement (SBA). The completion of the review enables an immediate disbursement of SDR 145.08 million (about US$225 million), bringing total disbursements to SDR 573 million (about US$888.4 million).

The two-year SBA in the amount of SDR 1.146 billion (about US$1.78 billion, or 400 percent of Tunisia’s quota at the IMF) was approved by the Executive Board on June 7, 2013 (See Press Release No. 13/202).

In completing the third review, the Executive Board approved the authorities’ request for modification of end-June 2014 performance criteria and granted waivers of applicability for the end-March 2014 performance criteria for which data are not yet available and for which there is no evidence they were not observed.

Following the Executive Board discussion on Tunisia, Mr. Min Zhu, Deputy Managing Director and Acting Chair, said:

“The authorities have made progress on their Fund-supported economic program. End-March quantitative performance criteria appear to have been met, but progress on structural reforms has been slowed by last year’s protracted political crisis.

“The adoption of a constitution and the formation of a new government led to greater confidence in political and economic prospects. Nonetheless, growth is moderate, unemployment remains high, and fiscal and external imbalances are elevated.

“Newly identified fiscal measures—coupled with those aimed at containing the high wage bill and reducing regressive energy subsidies— will help restrain the widening fiscal deficit in 2014. Revenue reforms, strengthened public financial management, and reform of public enterprises are necessary to improve the composition of fiscal consolidation. Improved procurement procedures and project execution are needed to reverse the under-execution in investment spending, which is important to promote inclusive growth. Social expenditures should continue to be preserved during fiscal consolidation.

“The current monetary policy stance is appropriate, but would need to be tightened if inflationary or exchange rate pressures arise. The removal of the lending rate cap is essential to strengthen monetary transmission channels and access to finance. Greater exchange rate flexibility would help rebuild external buffers, reduce liquidity injections, and improve competitiveness.

“Improved data reporting, strengthened supervision, and the new strategic vision for public banks are important steps taken to reduce banking sector fragilities. Priorities in the near term are to design bank restructuring plans, establish the asset management company for troubled tourism debt, address weak asset quality, and enhance resolution mechanisms.

“Accelerated implementation of structural reforms is crucial to ensure stronger and more inclusive growth. A well-targeted social safety net needs to accompany the energy subsidy reform so as to protect vulnerable households.”