IMF delays Tunisia loan after evaluation
The visiting International Monetary Fund (IMF) team to Tunisia has ended its tour of the country with dissatisfaction. The head of the mission Amine Mati said the current situation of the country has forced investors interested in the country to adopt a “wait and see” attitude as the political crisis lingers. IMF is urging Tunisian officials to reduce the budget deficit and generate growth. Tunisia is counting on loans to reduce its deficit but they have not been forthcoming. IMF has warned that the budget deficit could rise to almost 9% of the Gross Domestic Product.
Political parties are entangled in a power struggle and can’t decide on a Prime Minister who will head a caretaker government to oversee the necessary political reforms and organize new elections. Mr Mati said “immediate and urgent efforts are required to control budget and external deficits, reduce banking sector vulnerabilities, and generate more rapid and inclusive growth that can absorb unemployment”.
The possibility of executing such policies could be difficult because the government seems to be quasi functional. The IMF wants tougher monetary policies to be implemented and a more flexible currency. Mati affirmed that are “fully committed to supporting Tunisia” before insisting on the importance of the implementation of the government’s reform program to generate growth.
Tunisia’s sovereign ratings have been downgraded several times by major credit rating agencies. IMF has decided to slash its economic growth from 3% to 2,7% this year.
Officials need to find new measures to reduce the deficit after the IMF team declined to recommend a new disbursement of the IMF’s $1,74 billion loan program for the county. Tunisia was offered $150million from the amount in June and was expecting a similar amount in September.