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IMF calls on Tunisia to ‘lower wage bill’

March 1, 2021 at 9:52 am

Sign outside the headquarters of the International Monetary Fund (IMF) in Washington, DC, 15 April, 2020 [SAUL LOEB/AFP via Getty Images]

The International Monetary Fund (IMF) has said that Tunisia “need[s] to lower the wage bill and limit energy subsidies while prioritizing health and investment expenditure and protecting targeted social spending.”

According to a statement issued on Friday, the Executive Board of the IMF found that “Covid-19 pandemic hit Tunisia hard and led to an unprecedented economic downturn,” leading to a real GDP contraction by 8.2 per cent in 2020, “the largest economic downturn since the country’s independence.”

The IMF stated that “the unemployment rate jumped to 16.2 percent at end-September, disproportionally affecting low-skilled workers, women, and youth, and fueling social discontent.”

It added: “Inflation slowed because of the contraction in domestic demand and lower international fuel prices. The current account deficit narrowed to 6.8 percent of GDP, driven by lower import demand and resilient remittances, despite a strong hit on exports and collapsing tourism receipts.”

Meanwhile, the IMF said: “The fiscal deficit and public debt increased sharply in 2020. The fiscal deficit (excluding grants) is estimated to have reached 11.5 percent of GDP.”

It added: “Revenue dropped because of a lower tax intake. Additional hiring (about 40 percent of which was in the health sector, including to combat Covid-19) pushed the civil service salary bill to 17.6 percent of GDP, among the highest in the world.”

The IMF found that the result of the increase in the fiscal deficit and contraction in GDP was that “the debt of the central government is estimated to have increased to nearly 87 percent of GDP.”

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