São Paulo – The International Monetary Fund (IMF) has announced this Wednesday (16th) the completion of a mission to assess Tunisia’s economic performance. The IMF staff members reached an agreement with the local government to decide on the continuation of a stand-by arrangement worth US$ 1.74 billion, to be made available to Tunisia throughout 24 months, counting from June 2013.<\/p>\n
The review is the fourth of its kind and will be submitted to the Fund’s executive board in late August; if approved, it will make US$ 220 million available to Tunisia. Since the agreement was signed, the IMF has made US$ 888.4 million available to the country.<\/p>\n
According to an IMF press release, mission head Amine Mati has stated that “the announcement of a clear calendar for the legislative and presidential elections to be held before the end of 2014 is a key achievement in Tunisia’s transition to democracy. This increased clarity at the political level will bolster confidence in the Tunisian economy, and reduce investors’ wait-and-see attitude” he said.<\/p>\n
Mati noted, however, that the country’s economy remains fragile, since growth is not high enough to warrant a significant reduction in unemployment, especially among the youth. The lack of jobs and economic perspectives was among the causes that triggered the popular uprising in 2011, which overthrew government and ushered in the Arab Spring.<\/p>\n
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The growth forecast for this year is 2.8%, as against 2.3% in 2013, with “the good performance of the agricultural sector helping offset weaker than expected activity in the tourism sector.” Inflation rose from 5% in late March to 5.7% in late June, driven by food prices. The food price hike was another factor that fuelled the protests in 2011.<\/p>\n
“Tunisia’s external imbalances have been widening, putting pressures on gross foreign reserves and the exchange rate, which has been depreciating,” Mati said. Hence, the country needs external funding, hence the IMF agreement. <\/p>\n
The executive remarked, however, that the government reform program is on track, and fiscal targets have been met. “Fiscal performance was stronger than expected during the first five months of the year,” Mati said.<\/p>\n
He added that energy subsidy reduction is a welcome development, since it is necessary to lower energy consumption and “create fiscal space for priority spending on health and education.” The IMF has harshly criticized Arab countries’ subsidies to fuel and electricity prices. To the Fund, such actions place too high a burden on government finance, and fail to target people in need, seeing as the benefit applies to the entire population indiscriminately. The IMF advises for governments to invest in public services for the needier people and income transfer programs along the lines of Brazil’s Bolsa Família<\/em>.<\/p>\n Mati also said progress has been made in fighting tax evasion, congratulated the Central Bank on raising the policy rate to ward off inflationary pressure, and advised on further exchange rate flexibility in order to strengthen foreign exchange reserves. He also highlighted the minimum wage increase and the adoption of a unique social identification number that will improve public services to those who need them the most.<\/p>\n *Translated by Gabriel Pomerancblum<\/strong><\/p>\n