Risks to Tunisia’s economic stability requires immediate action (IMF)

The Fund, central bank in agreement on tightening monetary conditions to reduce gap between interest rate and inflation

Tunisia must act decisively to address mounting risks to economic stability by reducing its budget deficit and taking measures to protect the poor, according to the International Monetary Fund, amid government deadlock on reform plans.

Tunisian authorities have vowed to act swiftly on urgent reforms to pave the way for a third review by the IMF’s executive board, scheduled for July, that would secure a $257 million loan, the fund said in a statement on Thursday.

“Risks to macroeconomic stability have become more pronounced,” the fund said.

The fund comments came after a visit to Tunisia on May 13 to May 30 to discuss the government’s policy plans for an economic reform programme supported by a four-year $2.8 billion IMF loan. Tunisia’s inflation climbed 7.7 per cent in April to a 27-year peak and its foreign reserves slumped to cover just 76 days of imports.

The government has struggled to cut costs for fear of sparking protests in a country that witnessed in 2010 the first signs of unrest that affected the region.

The IMF agrees with the central bank that more tightening of monetary conditions is needed to reduce the gap between interest rates and inflation. Earlier this week the central bank held the benchmark interest rate unchanged at 5.75 per cent.

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