The IMF Executive Board announced at the recent completion of the 2021 Article IV consultations with Tunisia that stabilizing the economy until the pandemic subsides is a priority.
The administrators of the international financial body recommended ensuring that the policy and the budgetary reforms will aim at reducing the deficit in particular through the revision of the wage bill and the downward energy subsidies while giving priority to the expenditure of health and investment, as well as protecting targeted social spending.
Directors noted that Tunisia’s public debt would become unsustainable unless a strong and credible reform program is adopted. They also called on the authorities to make taxation more equitable and favorable to growth and to clean up the debt situation of the social security system.
Directors underlined, from the same reform perspective, that it is necessary to make far-reaching changes in public enterprises in order to reduce possible liabilities.
Further recommendations were made regarding the gradual liberalization of the capital account, while closely monitoring the soundness of the financial sector.
However, despite the IMF’s insistence on the urgent need to reform public enterprises and the compensation fund, the government has just concluded, well before the negotiations scheduled for this month between the government and donors, a agreement with the UGTT to launch economic and social reforms in a “participatory” manner.
The trade union center had already expressed its refusal to reduce the wage bill and subsidies. The UGTT also constantly expresses its rejection of the privatization of public enterprises, even those which are almost bankrupt.
On another level and short of budget, the government has no room for maneuver and even less vision to boost investment. In view of several reports, Tunisia is squarely in the phase of local and foreign disinvestment.
The liberalization of the capital account is a very dangerous operation to implement due to the fragility of the local monetary system and the continuous rise in the current account deficit (6.8% of GDP).
What is interesting in the Tunisian “case” is that the authorities do not have the means to achieve their “ambitions”, but intend, however, to contract new loans without making any concessions to donors.
