Tunisia- The International Monetary Fund: The Tunisian government is required to support social protection

An International Monetary Fund (IMF) staff team headed by Björn Rother visited Tunis to properly address Tunisia’s recent economic developments, risk and reformation plans. The IMF urged Tunisia to support Social Welfare for deprived individuals and fight inflation rates. Moreover, the IMF justly urged the local government to retain the operational flexibility of the Tunisian dinar.

Hereinafter is Mr Björn Rother statement:

“Following up on the recent conclusions for the 5th Review, we had fruitful discussions with the authorities on recent economic developments and the outlook for Tunisia. Strong monetary and fiscal policy implementation during the first half of 2019 have helped reduce inflation to 6.8 percent in June from a peak of 7.7 percent a year earlier, lower refinancing as of end-June and laid the foundation for a second year of fiscal deficit reduction.

“At the same time, risks to the economic outlook for 2019 have increased since the Fifth Review. Growth will likely be limited to at most 2 percent, reflecting notably the disappointing performance of industry in recent months. Moreover, the recent appreciation of the dinar, the increase in oil prices, and slower growth in Tunisia’s main trading partners are likely to weigh on the fiscal and external current accounts, despite the more favorable than expected performance of the tourism sector. These trends make it even more critical to stay the course on policy implementation.

“Meeting the budget deficit target of 3.9 percent of GDP for 2019 is critical to slow down the accumulation of public debt that reached 77 percent of GDP at the end of 2018. This will require continued strong performance on tax and tax arrears collection as well as additional measures to contain current expenditures, including through continued moderation of the wage bill and energy subsidies, in an environment of higher international oil prices. Staff also supports the authorities’ ongoing efforts to strengthen social safety nets especially for low-income households. Monetary policy should remain geared towards reducing inflation that erodes the purchasing power of Tunisians, while exchange rate flexibility can support an improvement in the current account and international reserves.

“The IMF team met with Minister of Finance Ridha Chalghoum, Minister of Development, Investment and International Cooperation Zied Laâdhari, Minister of Major Reforms Taoufik Rajhi, and Central Bank Governor Marouane El Abassi, as well as their staff. It also held discussions with representatives of the labor and employers’ unions, the private sector, civil society, and the diplomatic community. The mission would like to thank the authorities and all those with whom it met for their warm welcome and constructive discussions.”