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IMF cautions Tunisia on rising inflation, public and external debt

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Tunis, Tunisia, April 15 (Infosplusgabon) - Opposite trends continue to characterize the Tunisian economy in early 2018, according to a report by an International Monetary Fund (IMF) staff team that has found economic growth in the North African country picking up, led by a good agriculture season, increases in investment and an early recovery in exports.

 

“On the other hand, risks to macroeconomic stability have risen: inflation has risen rapidly to 7.6 percent in March, international reserves remain below 90 days of import cover, and public and external debt have reached 71 and 80 percent of GDP, respectively,” said the team after a weeklong working visit to the country.

 

In a statement made available to Infosplusgabon  on Sunday, IMF team leader Bjoern Rother said that addressing economic imbalances is critical to keep Tunisia’s recovery on-track and strengthen the foundations for fair and equitable economic growth in the future. “Containing debt today will help prevent increasing taxes tomorrow,” he underlined.

 

For the government to ensure that Tunisia’s budget deficit will decline in line with the objective of the 2018 Budget Law, the IMF team emphasized the necessity to reduce unfair energy subsidies through increases in domestic energy prices that follow international oil prices.

 

Tunisian authorities and the IMF team discussed the country’s recent economic developments and the authorities’ policy plans under Tunisia’s economic reform programme supported by a four-year IMF Extended Fund Facility (EFF) arrangement.

 

“The public-sector wage bill is very large and any further wage increase would be very difficult to sustain, unless growth surprises on the upside. Similarly, raising the retirement age and additional parametric reforms on pensions are crucial to contain the deficits in the social security system,” the team said in the statement.

 

“The IMF team also agrees with the [Tunisian] Central Bank that anchoring inflation expectations through additional increases in the policy interest rate will be crucial if inflation does not come down quickly. Lowering inflation will protect the poor, maintain the purchasing power of the Tunisian people, and stabilize the macroeconomic outlook.

 

“Regarding Tunisia’s external situation, a more flexible exchange rate will help rebuild international reserves and continue to encourage exports. The dinar’s remaining overvaluation can be corrected without an abrupt adjustment,” it added.

 

Rother noted that the Tunisian authorities and the IMF team agreed to continue discussions on the near-term economic reform priorities under the EFF in Washington during the Spring Meetings from April 20–22.

 

 

FIN/INFOSPLUSGABON/DSF/GABON 2018

 

 

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