IMF Urges Tunisia to Cut Fuel Subsidies

The International Monetary Fund (IMF) urged Tunisia to cut fuel subsidies and trim its public-sector payroll in a bid to lower budget deficit.

“It is necessary to reduce unfair energy subsidies through increases in domestic energy prices that follow international oil prices,” the IMF said in a statement.

“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,” it added.

The North African country has embarked on an IMF-backed plan to cut its budget deficit and boost growth. It is currently under pressure to deliver on reforms linked to its $2.9 billion IMF loan.

The government has set a target to raise economic growth to 5% by 2020 versus an expected rate of 2.5% this year. It intends to halve the budget deficit to 3% of GDP by that year from 6 per cent in 2017.

The IMF warned that Tunisia is facing rising risks to macroeconomic stability as inflation rose rapidly to 7.6 per cent in March.

Tunisia’s trade deficit hit a low 15.5 billion dinars by the end of 2017, at a time the central bank expects the reserves to slightly rise as a result of growing agricultural exports and slowly improving tourist market after the 2015 Sousse terrorist attacks that caused a steep fall in tourists’ arrivals.