IMF Official Urges 'Deep Reforms' to Tunisian Economy

Business

January 16th, 6:44am

Asharq Al-Awsat

International Monetary Fund logo is seen outside the headquarters building during the IMF/World Bank spring meeting in Washington, US, April 20, 2018. REUTERS/Yuri Gripas

Tunisia's crisis-stricken economy needs "deep reforms" such as slashing its vast public wage bill, the International Monetary Fund's outgoing country chief has said as the government seeks a new bailout. Jerome Vacher, speaking in an interview at the end of his three-year term as the global lender's envoy to the North African country, said the coronavirus pandemic had helped create Tunisia's "worst recession since independence" in 1956. "The country had pre-existing problems, in particular budget deficits and public debt, which have worsened," AFP quoted him as saying. Tunisia's debts have soared to nearly 100 percent of Gross Domestic Product. Its GDP plunged by almost nine percent in 2020, the worst rate in North Africa, only modestly offset by a three percent bounceback last year. That is "quite weak and far from enough" to create jobs to counteract an unemployment rate of 18 percent, Vacher said. He said young graduates face particular challenges in finding work, despite the country being able to offer "a qualified workforce and a favorable geographic location". Since Zine El Abidine Ben Ali was toppled by mass protests in 2011, Tunisia's troubled democratic transition has failed to revive the economy. President Kais Saied sacked the government and suspended parliament on July 25 last year, and the government has since asked the IMF for a bailout package -- the fourth since the revolution. Tunisian authorities say they are optimistic about reaching a deal by the end of this quarter. Vacher said discussions are still at an early stage and that the IMF first wants "to understand what they're planning in terms of economic reforms". "It's an economy that needs very deep, structural reforms, especially to improve the business environment," the French economist said. But Vacher added that the government "understands the main challenges and problems, which is already a good basis", urging Tunisia to come up with a "solid and credible" reform plan. To do that, it must tackle its huge spending on public sector salaries. "The public wage bill is one of the highest in the world," Vacher said. In a country of 12 million people, more than half of public spending goes to paying the salaries of around 650,000 public servants -- a figure that does not include local authority wages. Nor does the figure include Tunisia's hefty public companies, which often hold monopolistic positions across sectors from telecoms to air transport and employ at least 150,000 people at the public expense. All this drains resources that the state could be investing in education, health and infrastructure, Vacher said. "There needs to be a big efficiency drive in the public sector (to meet) public expectations in terms of services," he said.

from Asharq AL-awsat https://english.aawsat.com/home/article/3417131/imf-official-urges-deep-reforms-tunisian-economy