IMF calls on Tunisia to take decisive action to strengthen public finances and address rising inflation and falling reserves

Executive Board members of the International Monetary Fund (IMF) urged the Tunisian authorities to strengthen “their commitment to the economic reform programme and take urgent and decisive action to put public finances on a more sustainable path, address rising inflation and falling reserves, and ensure macroeconomic stability.”

In a statement released by the Fund Tuesday, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with Tunisia and advised the authorities to press ahead with fiscal consolidation. “To increase investment and social expenditure, adjustment efforts should focus on increasing tax revenue and reigning in current spending.”

Directors, also, called for continued emphasis on strengthening tax collection, implementing the voluntary separations for civil servants, curtailing new wage increases unless growth surprises significantly, and enacting quarterly fuel price increases.

They supported the authorities’ efforts to maintain adequate social protection, including through equitable and sustainable pension reforms, highlighting the importance of targeted programmes for the most vulnerable.

Directors equally welcomed the recent increase in the policy interest rate. They underscored that further tightening of monetary policy will be necessary to reduce inflation.

“Reducing foreign exchange interventions and increasing exchange rate flexibility would help improve the current account and rebuild international reserves,” Directors stressed.

Directors saw need for further financial sector reforms. They encouraged accelerating steps such as the one-stop shop for investors and the legislation to facilitate the reduction of banks’ NPL portfolios. They noted that enhancements to the AML/CFT regime will help address Tunisia’s deficiencies in this area.

They also encouraged the authorities to accelerate efforts to complete the civil service reform, strengthen the selection and efficiency of public investment projects, and improve the management of SOEs.

They also emphasised that priority needs to be given to reforming the energy sector, including addressing subsidies and encouraged the authorities to build on the progress made in improving the business environment, especially streamlining the regulatory environment, and promoting good governance and transparency.

Reviewing the key economic indicators of Tunisia in 2018, the IMF Executive Board members noted that medium-term prospects for Tunisia’s economy remain favorable, with growth projected to reach 4 percent by 2022.

“This outlook hinges on sustained reforms aimed at improving governance and the business climate, broadening access to finance, and modernizing fiscal institutions to improve service delivery while making them more efficient,” the IMF further stressed.

“Recent progress with the establishment of the High Anti-Corruption Authority, the creation of the one-stop shop for investors, the performance contracts for public banks and state-owned enterprises, and the laws to facilitate banks’ NPL reduction is supporting this agenda,” the Fund also pointed out.

TunisiaMonitorOnline (IMF)

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