Press Release No. 15/448

Press Release: IMF Executive Board Completes Sixth Review under Stand-By Arrangement for Tunisia

September 30, 2015

The Executive Board of the International Monetary Fund (IMF) today completed the sixth review of Tunisia’s economic performance under a 24-month program supported by a Stand-By Arrangement (SBA). The completion of the sixth review enables the immediate disbursement of SDR 214.875 million (about US$301.6 million), bringing total disbursements under the arrangement to SDR 1 billion (about US$ 1.41 billion).

The two-year SBA in the amount of SDR 1.146 billion (about US$1.61 billion, 400 percent of Tunisia’s quota) was approved by the Executive Board on June 7, 2013 (See Press Release No. 13/202). On May 11, 2015, the Executive Board approved a 7-month extension of the SBA to December 31, 2015 to provide time for the Tunisian authorities to implement the policy measures needed to deliver forward-looking commitments – notably on the banking and fiscal reforms- which will help reduce vulnerabilities and spur higher and inclusive growth.

In completing the sixth review, the Executive Board approved the authorities’ requests to re-phase purchases under the arrangement.

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

“Tunisia’s economy has been resilient in a context marked by a prolonged political transition and a difficult international economic environment. All quantitative performance criteria under the Fund-supported program have been met. However, progress on structural reforms, including in the banking and fiscal areas, has been challenging. The successful completion of the political transition represents a good opportunity to press ahead with reform implementation and complete the unfinished agenda within the program timeline.

“The 2015 fiscal stance is appropriate to mitigate the economic fallout from the recent terrorist attacks, but a resumption of fiscal consolidation from 2016 remains essential to reduce vulnerabilities. Better budget composition—including through wage bill containment, energy subsidy reform, and a tax policy aimed at promoting greater equity and efficiency—is needed to create space for priority investment spending. Growth-friendly reforms, including of public enterprises, public financial management, and tax administration will improve absorptive capacity, equity, and risk management.

“A prudent monetary policy would continue to contain inflationary pressures, preserve positive real interest rates and reduce exchange rate pressures. Greater exchange rate flexibility—including through limiting foreign exchange interventions to smoothing large fluctuations—would help strengthen reserve buffers and correct external imbalances.

“In order to strengthen the banking system and facilitate financial sector intermediation, it is important to recapitalize all three public banks and to update underlying business plans so as to ensure regulatory compliance throughout the restructuring period. A modernized banking resolution and supervisory framework and an effective bankruptcy framework are also key.

“Boosting growth and creating jobs requires an improved business environment. Faster implementation of the structural reform agenda, particularly to strengthen the investment climate and labor markets is encouraged.”