Press Release No. 22/353

IMF Staff Reaches Staff-Level Agreement on an Extended Fund Facility with Tunisia

October 15, 2022

• IMF staff and the Tunisian authorities have reached a staff-level agreement to support Tunisia's economic policies with a 48-month arrangement under the Extended Fund Facility (EFF) of about US$1.9 billion.
• Tunisia’s new IMF-supported home-grown program aims to restore macroeconomic stability, strengthen social safety nets and tax equity, and step up reforms that support an enabling environment for inclusive growth and sustainable job creation.
• The international community can greatly contribute to the success of the authorities’ program through the rapid release of additional financing.

Washington, DC: An International Monetary Fund (IMF) team, led by Chris Geiregat and Brett Rayner, met with the Tunisian authorities in Washington, DC from October 10–15 to continue discussions on IMF support for Tunisia and the authorities’ comprehensive economic reform program. At the end of the discussions, Messrs. Geiregat and Rayner made the following statement:

“The Tunisian authorities and the IMF team have reached a staff-level agreement on the economic policies and reforms to be supported by a new 48-month Extended Fund Facility (EFF) with requested access of SDR 1.472 billion (equivalent to about US$1.9 billion). As is always the case, the final agreement on the arrangement is subject to approval of the IMF's Executive Board, which is scheduled to discuss Tunisia’s program request in December.

“The worsening global environment and high international commodity prices are weighing heavily on the Tunisian economy, adding to underlying structural weaknesses amid challenging socio-economic conditions. Growth will likely decelerate in the near term, while higher international commodity prices will put pressure on inflation as well as on external and fiscal balances. The new EFF arrangement will support the authorities’ economic reform program to restore Tunisia’s external and fiscal stability, enhance social protection, and promote higher, greener, and inclusive growth and private sector-led job creation. Specifically, the authorities’ reform program will:

· Improve tax equity by taking steps to bring the informal sector into the tax net and broadening the tax base to ensure equitable contributions from all professions.

· Contain expenditures and create fiscal space for social support. The authorities have already taken steps to contain the civil service wage bill and started to gradually phase out generalized wasteful price subsidies through regular price adjustments that link domestic prices to international prices, while providing adequate targeted protection to vulnerable segments (including through social transfers).

· Strengthen the social safety net by increasing cash transfers and expanding the coverage of social safety nets to compensate vulnerable households for the impact of higher prices.

· Embark on a comprehensive agenda to reform state-owned enterprises, starting with the enactment of a new SOE law.

· Step up structural reforms to enhance competition and create a transparent and level-playing field for investors by streamlining and simplifying investment incentives.

· Strengthen governance and transparency in the public sector, including with a comprehensive governance diagnostic to establish a roadmap for reforms.

· Adapt and build resilience to climate change by promoting investments in renewable energy as well as land and (waste) water management, and measures to preserve Tunisia’s coast lines, agriculture, health, and tourism.

· Protect the purchasing power of Tunisians in the face of high and accelerating inflation. To reinforce macroeconomic stability, the Central Bank of Tunisia has started to tighten monetary policy.

“ The international community has an important role to play in facilitating the authorities’ program through the rapid release of financing to ensure the success of the authorities’ policy and reform efforts.

“The IMF team would like to thank the Tunisian authorities for the candid and constructive discussions and looks forward to continuing our engagement to support Tunisia and its people.”