Monday, May 10, 2021

Tunisia: IMF calls for deficit control even as protesters demand jobs | Business and economic news

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The international lender says the country must clearly stipulate measures to reduce its huge budget deficit.

The International Monetary Fund (IMF) has warned that Tunisia’s budget deficit could exceed 9% of gross domestic product (GDP) and urged the country to control energy subsidies, transfers to state-owned enterprises and wages, even as protesters demand jobs and economic development.

Violent protests have hit Tunisia at a time of unprecedented economic hardship in the North African country, which had a budget deficit of 11.5% of GDP in 2020, the highest in nearly 40 years.

The 2021 budget aims to reduce the budget deficit to 6.6% but the IMF, following a mission to Tunisia, issued a statement on Friday calling for specific measures to support this objective.

Government salaries more than doubled to around 20 billion dinars ($ 7.45 billion) in 2021, compared to 7.6 billion dinars ($ 2.82 billion) in 2010.

Tunisia expects GDP growth of 3.8% this year, against a record 8.2% contraction in 2020.

“Specific measures needed”

The Central Bank of Tunisia agreed in December to buy treasury bills worth 2.8 billion dinars ($ 1.04 billion) to finance the record budget deficit in the 2020 budget after weeks of disagreement with the government.

But the IMF has urged financial authorities to avoid future government monetary financing, as it risks reversing gains made in reducing inflation, saying it could weaken the exchange rate and international reserves.

According to its press release, “specific measures are necessary … and in their absence, the staff foresees a higher deficit of more than 9% of the GDP”.

Tunisia was hailed as the only democratic achievement of the Arab Spring because protests toppled autocrat Zine El Abidine Ben Ali in 2011 without triggering violent upheaval, as happened in Libya, Egypt and Syria.

But since then, not all cabinets have succeeded in resolving Tunisia’s economic problems, including high inflation and unemployment, and impatience with its slowness in reforming is growing among international lenders.



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