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 1.472bn (equivalent to about $1.9bn), the fund announced on Saturday.
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.
The press statement indicated that 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.
It indicated that 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.
Furthermore, the IMF said that 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.
According to the agreement, Tunisian 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.
Tunisia will also 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).
Moreover, the statement indicated that the Tunisian authorities will
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.
They will also embark on a comprehensive agenda to reform state-owned enterprises, starting with the enactment of a new SOE law.
Nevertheless, Tunisia will step up structural reforms to enhance competition and create a transparent and level-playing field for investors by streamlining and simplifying investment incentives.
The IMF indicated that authorities agreed to strengthen governance and transparency in the public sector, including a comprehensive governance diagnostic to establish a roadmap for reforms.
They pledged to 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 its 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,” the statement concluded.
