The International Monetary Fund (IMF) Executive Board’s approval of the agreement reached with Tunisia shall be done in December 2022, given the Board’s busy schedule, said Director of the Middle East and Central Asia Department at the IMF Jihad Azour.
In an interview given to TAP on the occasion of the publication on October 31 of the IMF report “Regional Economic Outlook for the Middle East and Central Asia: Mounting Challenges, Decisive Times,” he underlined that the agreement under the Extended Fund Facility between the IMF and Tunisia will be published as soon as it is approved by the Fund’s Executive Board.
TAP- The approval by the IMF executive board of the final agreement on the programme between Tunisia and the Fund is due in December 2022, why this date? Will the content of this agreement be published once approved?
Jihad Azour: The IMF staff and the Tunisian authorities have reached an agreement at the staff level to support Tunisia’s economic policies, but the final agreement on the programme will be subject to approval by the IMF Executive Board, which is expected to consider Tunisia’s request in December 2022, given its busy schedule.
The Fund’s programmes have always been concluded with the utmost transparency and as soon as this programme is approved it will be published on the IMF website with the schedule of periodic reviews.
TAP – What is the agenda for the implementation of reforms? And what are the priority reforms?
Jihad Azour: The programme between the IMF and Tunisia will come into force as soon as it is approved by the Fund’s board in December. It is a programme based on a partnership between Tunisia and the IMF and includes a set of measures and reforms that will be implemented gradually, according to the development of the Tunisian economy.
Negotiations had taken enough time to reach an agreement on a programme to boost growth, mitigate financial risks, reduce the deficit, solve the debt problem, but also to improve social welfare through better targeted social policies.
TAP- Under the new subsidy policy, this programme provides for social transfers for vulnerable categories, but no measure is mentioned for the benefit of the middle class in view of the expected lifting of subsidies for basic commodities and hydrocarbons. What do you think?
Jihad Azour: The Tunisian government has set up a comprehensive programme to get the country out of the acute crisis it is going through.
The IMF staff and the Tunisian authorities had reached a staff-level agreement on October 15, 2022, to support Tunisia’s economic policies through a 48-month Extended Fund Facility (EFF) arrangement worth about $1.9 billion.
Through this agreement, the IMF will support the Tunisian government in the implementation of its programme, which had been devised with the participation of officials from the Central Bank of Tunisia (BCT) and after consultation with the social partners, in a bid to build confidence and foster external support for Tunisia in this delicate phase.
This programme aims to preserve the country’s stability through the reduction of the deficit and a better targeted subsidy policy to alleviate the burden of price hikes on the most vulnerable categories, for better social justice.
The programme between Tunisia and the IMF also seeks to develop fiscal policy to improve tax justice and to reform public enterprises that are going through financial difficulties and are finding it difficult to innovate in order to increase their contribution to the revival of the economic machine.
The programme also intends to support the private sector in order to encourage job creation, which is one of Tunisia’s priorities in light of the rising unemployment rates due to the COVID-19 pandemic.
TAP- Would you give us more details on the public enterprises privatisation process proposed by the Tunisian government as part of the agreement with the IMF and also on the handling of the debt issue?
Jihad Azour: Some public companies suffer from financial problems that are heavily borne by taxpayers. These companies must be reformed to improve their financial situation and reduce their burden on the State budget, as public companies should be real engines of the country’s economy and contribute to enhancing competition and improving the business climate.
The Tunisian government has accordingly set up a reform programme aimed at treating its companies on a case-by-case basis according to their financial situation and their levels of performance and profitability.
This reform programme will take into consideration the priorities and strategies of these companies and will focus on improving their performance by boosting their governance, notably as part of a public-private partnership.
The goal is to bolster the economy’s productivity, improve the State’s financial capacity and give the private sector the chance to be a driving force in the economy.
At another level, it is necessary to alleviate the risks of the debt on the economy through a gradual financial reform that takes into account the different variables and the social impact of the reforms.
In this regard, it is necessary to implement a range of fiscal reforms in order to strengthen fiscal justice and promote social solidarity. It will also be necessary to establish a better targeted subsidy policy and to relaunch the engines of growth to alleviate the burden of debt on the economy.
TAP- What are the main insights of the new IMF Regional Economic Outlook for the Middle East and North Africa and which countries have fared better than others in overcoming the impact of the pandemic and the Russian-Ukrainian conflict?
Jihad Azour: The year 2022 has been shaped by major economic transformations and external shocks that have impacted the region’s economies due to the food crisis and the rise in food and energy prices caused by the Russian-Ukrainian conflict, which occurred at a time when countries have already been dealing with the impact of the pandemic.
Disparities have been seen between oil importing and exporting countries. Oil exporters have taken advantage of rising international energy prices to improve their financial position and strengthen their reserves.
For importing countries, real GDP growth in emerging and middle-income countries (E&MICs) is expected to reach 4.9% in 2022, which is an acceptable level compared to the growth of the global economy.
For low-income countries (LICs), growth is expected to remain sluggish, with GDP growing by only 0.8% in 2022 (0.3 percentage points lower than forecast in April), due to domestic fragilities and the impact of high commodity prices.
Headline inflation in the MENA region (excluding Sudan) is expected to be in double digits in 2023 for the third consecutive year, which has led to high living costs in the countries affected by these inflationary pressures.
The year 2022 has arguably been economically acceptable overall, but there are economic challenges ahead, particularly in relation to inflation, which has a heavy impact on low-income people.
Countries with high levels of debt also need to adopt financial policies to preserve their financial stability by speeding up the pace of reforms to counteract the effects of the health crisis and the global economic crisis.
TAP – Has the IMF planned new financial support for the countries most affected by the successive crises?
Jihad Azour: Since the beginning of the pandemic in 2020, the IMF has sought to support the most affected countries. MENA countries have received some $20 billion in support, in addition to the $45 billion in Special Drawing Rights allocated to the region last year.
The Fund is also endeavouring to support climate change adaptation and food security programmes in the region and will remain a key partner in the countries’ economic reform strategies through technical assistance and policy support programmes.
An interview conducted by Wided Medfai and translated by Nejiba Ben D’haou.
Source: Tap News Agency