Tunisia reaches an agreement with IMF on fifth review of loan

IMFThe International Monetary Fund (IMF) said on Wednesday it had reached a staff-level agreement with Tunisia on the fifth review of a loan.

The agreement will allow Tunisia to benefit from a disbursement of $247 million following the Executive Board’s review that is expected to take place by early June this year.

Tunisia struck a deal with the IMF in December 2016 for a loan program worth around $2.8 billion to overhaul its ailing economy. It included steps to cut chronic deficits and trim bloated public services.

“This will bring total disbursements … to about $1.6 billion and will help unlock additional financing from Tunisia’s other external partners”, the IMF said in statement.

Tunisia needs around $2.5 billion in external financing in 2019, officials said.

Sources told Reuters the negotiations with the IMF were “very difficult”, especially after the government this year raised the wages of 670,000 public employees, ending months of tension with the powerful UGTT union.

The IMF had wanted Tunisia to freeze public-sector wages – the bill for which doubled to about 16 billion dinars ($5.5 billion) in 2018 from 7.6 billion dinars in 2010.

In order to cut the energy deficit demanded by the IMF, the government last month raised fuel prices, the fifth hike in 12 months.

The parliament also approved this month a law to raise the retirement age for civil servants by two years and impose social security taxes on employees and employers, another key reform demanded by the country’s international lenders to stabilize its finances.

The North African country has been hailed as the Arab Spring’s only democratic success because protests toppled autocrat Zine El Abidine Ben Ali in 2011 without triggering violent upheaval, as happened in Syria and Libya.

But since 2011, nine cabinets have failed to resolve Tunisia’s economic problems, which include high inflation and unemployment, and impatience is rising among lenders such as the IMF.

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