IMF says Tunisia’s economic vulnerabilities need urgent action

14 Décembre 2017

Tunis, Tunisia, December 14  (Infosplusgabon) - Two opposing trends characterise the Tunisian economy at the end of this year, according to a senior official of the International Monetary Fund (IMF) who on Wednesday completed a mission on the second review of the country’s economic programme supported by the four-year IMF Extended Fund Facility (EFF).

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, it said.

“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,” said Mr. Björn Rother who led the IMF mission to Tunis.

In a statement made available on Thursday, Mr. Rother noted that Tunisia’s rising inflationary pressures require a strong response, especially after 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,” he said, suggesting that 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.

Also, exchange rate flexibility would contribute to making the Tunisian economy more competitive, Mr. Rother said.

“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,” he said.

According to Mr. Rother , the IMF supports the objective of the Tunisian government to be removed as soon as possible from the European Union’s list of non-cooperative tax jurisdictions.

In this context, he explained, 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.

FIN/INFOSPLUSGABON/OIO/ GABON 2017

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