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Abu Dhabi, UAEWednesday 26 September 2018

Tunisia urged to trim wage bill and reform tax system

IMF says that public-private partnerships could improve infrastructure and free up spending

Demonstrators in Tunis hold placards during a march against a bill granting amnesty to officials accused of corruption. Tunisia must create jobs and reduce its government spending in order to get its economy back on track post-Arab Spring. Hassene Dridi / AP
Demonstrators in Tunis hold placards during a march against a bill granting amnesty to officials accused of corruption. Tunisia must create jobs and reduce its government spending in order to get its economy back on track post-Arab Spring. Hassene Dridi / AP

The IMF has urged Tunisia to take action on tax reform and its public sector wage bill to help bring the country's finances under control.

A team from the Washington-based lender met with Tunisian authorities to discuss the country’s recent economic developments under the reform programme supported by the four-year IMF extended fund facility (EFF).

“Better managing the public-sector wage bill, which is among the highest in the world and absorbs half of total expenditure, will be indispensable,” said Bjoern Rother, the leader of the IMF's team, who acknowledged the reform ambitions of the Tunisian government as set out in its 2018 budget bill.

“The budget bill would focus on reducing the deficit through comprehensive tax reform and rationalising inefficient expenditure. It would also dedicate more resources in support of SMEs,” he said.

The North African country committed to making economic reforms under the terms to obtain the IMF EFF last year, a US$2.9 billion concessional loan provided to help overcome structural weaknesses.

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Mr Rother said that public-private partnerships (PPPs), executed within "an adequate framework," could "improve the quality of infrastructure and help free up resources for other high priority spending on health and education.”

The World Bank expects the fiscal deficit to remain high at 5.9 per cent of GDP this year, but it projects Tunisia’s economy to grow 2.3 per cent with the recovery of certain sectors such as agriculture, phosphate and manufacturing. This will gradually inch up to 2.8 per cent next year and 3.2 per cent in 2019 as the business climate continues to improve.

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