An International Monetary Fund (IMF) mission led by Mr. Björn Rother
visited Tunis from November 30 to December 13, 2017, to
complete the 2017 Article IV consultation and conduct the second review of
Tunisia’s economic program supported by the four-year IMF Extended Fund
Facility (EFF) approved in May 2016
(see Press Release No. 16/238).
At the conclusion of the mission, Mr. Rother issued the following
statement:
“Following frank and focused talks, the IMF team and the Tunisian
authorities reached a staff-level agreement on the policies needed to
complete the second review of Tunisia’s EFF. The main challenge for the
months ahead is to make-up for the significant delays in lifting
long-standing obstacles to growth and addressing large fiscal and external
deficits. Building on their ambitious budget law for 2018, the Tunisian
authorities have expressed their commitment to take decisive action before
the consideration of the Second Review by the IMF’s Executive Board and the
remainder of the program period. Completion of the review would make
available SDR 227.3 million (about US$320 million), bringing total
disbursements under the EFF to about US$1 billion.
“Two opposing trends characterize the Tunisian economy at the end of this
year. Growth has firmed up to reach about 2 percent due to the sustained
improvements in security. Tourism arrivals rose by 30 percent, phosphate
production rebounded strongly, and investment (foreign and domestic) shows
early signs of picking up. Yet on the other hand, macroeconomic
vulnerabilities have become more accentuated and require urgent action.
Public debt will reach 70 percent of GDP by the end of the year, the record
current account deficit will be in double digits, and the international
reserves of the Central Bank of Tunisia have fallen.
“The economic recovery opens a window of opportunity for taking decisive
action. The Tunisian authorities have already taken an important step in
adopting a bold budget law for 2018, which aims at reducing the fiscal
deficit to below 5 percent of GDP. Achieving this ambitious fiscal target
will require putting into effect the government’s tax strategy and
implementing the comprehensive civil service reform strategy. Reducing
energy subsidies, which disproportionately benefit the rich, and pressing
ahead with the reform of the social security system are additional steps
towards stabilizing public deficits and debt.
“Rising inflationary pressures require a strong response. Inflation moved
above 6 percent in November, driven by significant increases in food
prices. At this level, inflation negatively affects disposable income and
long-term investment. Continuing the Central Bank of Tunisia’s strategy to
tighten monetary policy, including by containing bank refinancing, will
help anchor inflation expectations and provide support for the dinar in the
foreign exchange market. Exchange rate flexibility will continue to
contribute to making the Tunisian economy more competitive.
“To allow the Tunisian economy to fulfill its promise to the Tunisian
people, accelerating longstanding reforms is indispensable. The overhaul of
the regulatory framework for the resolution of non-performing loans and of
the governance of public banks will help small and medium enterprises
(SMEs) to gain more access to bank finance. By making the overall banking
sector more efficient, public bank reform will directly ease one of the
most important constraints on growth and jobs in Tunisia. The imminent
appointment of the executive board of the High Anti-Corruption Agency will
be an important milestone in the government’s fight against corruption.
“The IMF supports the objective of the Tunisian government to be removed as
soon as possible from the EU’s list of non-cooperative tax jurisdictions.
In this context, the gradual convergence between the on- and off-shore tax
regimes and the ongoing modernization of tax administration with a view to
improve tax compliance are reform commitments supported by the EFF. Making
full use of the recently created Large Taxpayers Unit will help display the
authorities’ commitment to improving the fairness and transparency of the
Tunisian tax system. Tunisia’s ongoing participation in the G20 initiative Compact with Africa also attests to the country’s strong
commitment to international trade and seizing the opportunities from
foreign investment and economic integration.
“Staff met with the Head of Government Chahed, Minister of Finance
Chalghoum, Minister of Investment Laâdhari, Minister of Major Reforms
Rajhi, and Central Bank Governor Ayari. It also had discussions with
representatives of the private sector and civil society; and coordinated
closely with the World Bank and other external partners of Tunisia. The
mission would like to thank the authorities and all those with whom they
met for their warm welcome and constructive discussions.”
