Tunisia needs to accelerate reforms, reach consensus on reducing wage bill (IMF Representative) | Tunisia News Gazette

Tunisia needs to accelerate reforms, reach consensus on reducing wage bill (IMF Representative)

Interview by Ghada Sboui) – Tunisia has made good progress in the major projects already under way, namely the reform of the civil service, the social funds and taxation. The outlook for the coming months looks better than before, but the challenges are still there, said Robert Blotevogel, the Resident Representative of the International Monetary Fund (IMF) for Tunisia.

In an interview with TAP, on the sidelines of the fund’s mission that visited Tunis from July 26 to August 3, the official highlighted the expected benefits of the ongoing reform of the administration Tunisia and the civil service.

In his view, the consensus between the social partners, the government and the entire Tunisian society is “critical in the reduction of the wage bill. He also spoke of the delay in the reform of state-owned enterprises, withholding any discussion about their privatisation.

TAP1: What is your assessment of the recent staff mission and what are its main results?

Robert Blotevogel (RB): There are very important advances in terms of implementation of the reforms, the business environment seems to be improving, growth is resuming and the government has entered a dynamic of reforms taking courageous steps. Discussions focused on ways to accelerate this momentum in the coming months.

On the one hand there are structural reforms and on the other, economic policies (monetary, exchange rate and budgetary policies) where important and courageous decisions have been taken.

The outlook for the coming months has been discussed together; it looks better than before despite the challenges that remain.

For very short-term priorities, there is the acceleration of the reforms that are already underway. In this respect, major projects are being initiated, such as the reform of the social security funds, the civil service and taxation.

The authorities have made progress and the priority now is to accelerate implementation. Secondly, efforts will focus on controlling the budget deficit.

The conduct of the second review of the programme is expected before the end of the year, and the staff mission to conduct the review would be in Tunisia, after the annual IMF meetings in Washington, in October or November.

TAP2-Are you considering a change in the date of disbursement?

RB: I would like to confirm that the second installment was disbursed, following the adoption of the first review by the IMF’s Board of Directors. The disbursement schedule is the one agreed at the start of the programme, namely eight disbursements in total, so there are six disbursements remaining. These disbursements will be made every six months, at regular intervals as reforms progress and economic performance improves.

TAP3- Will there be a change in the disbursement dates in the event of delays in reforms?

RB: The decision remains with the IMF’s Board of Directors. The technical department prepares an evaluation report to be discussed by the board of directors.

It is still an overall assessment of several aspects, including performance criteria (have foreign exchange reserves reached the agreed levels, has the budget deficit been mastered?). These are quantitative criteria to which should be added the reforms component.

In this regard, there is no single decisive reform for the conclusion of a review. Some reforms are progressing well, others are progressing more slowly, but what matters is the overall assessment.

TAP4- How critical is the economic situation in Tunisia?

RB: Initially, there are encouraging signs, growth is resuming, although external and budget deficits are at high levels. According to the figures we have examined, we are on the right path to realize the projections that we, the Tunisian authorities and the IMF team, did together a few months ago.

Currently, the budget deficit control is for the country the guarantor of macroeconomic stability which is the prerequisite for growth and job creation.

Our goal is to achieve accelerated economic growth and create more jobs for young people, especially as social tensions persist, showing that the economic performance, so far , have not lived up to the expectations of the Tunisian population.

TAP5 – Regarding the reforms advocated, what are, according to the IMF, the objectives missed and those that were respected by the Tunisian authorities?

Priorities include reform of the civil service, social funds, public enterprises and tax reform. Why these reforms? They aim to make the State more efficient and to mobilise more resources for investment.

At present, given the budgetary situation and the debt ratio, it is costly for the State to borrow money to invest. Through these reforms, the state will generate more resources and realise savings that will be used to invest and improve public services in priority areas such as health and education.

The reform of the civil service must make the administration more rapid and efficient while better mastering the wage bill, which remains the most important heading in the state’s expenditure.

Hence the need for a permanent reorientation of wage expenditure to increase the resources available for investment.

Due to the sharp rise in the number of civil servants and the significant salary increases made since the Revolution (December 17, 2010-January 14, 2011), Tunisia now has one of the highest wage bill in the world. While to reduce the wage burden to a level comparable to other emerging countries, it will be necessary to try to better control the wage bill in a socially acceptable way.

With respect to downsizing in the public service, the government is considering two programmes, namely early retirement and negotiated redundancy. The technical aspects on this subject are progressing well, but these programmes must be accepted by all the social partners.

As for tax reform, it has started well and the country is starting this year to collect its fruits. Tax revenues are doing well and tax recovery is advancing, which gives the public an important signal that all sectors of society are contributing to this economic recovery effort.

In addition, a delay was recorded last year in the reform of public enterprises, with the failure to meet certain deadlines, in particular, for the performance contracts that should have been signed in September 2016 and that was made only during the first half of 2017.

The deadlines have been overtaken, four contracts have been signed, the performance contract remains with TUNISAIR, a company undergoing restructuring.

An interim performance contract should be signed by September in order to allow the company to comply with the best management practices drawn up for other public enterprises.

Concerning the privatisation of these companies mentioned by some media, this issue has not been dealt with in our discussions with the Tunisian authorities.

The point is only to enable the government to better manage these public enterprises in order to improve their financial situation and service delivery and thus reduce the risks they may entail for the State budget.

TAP6- Is there a risk for Tunisia to see the debt ratio reach 100% over the next two years? How to avoid this disaster scenario?

If the reforms are implemented as planned, public debt will remain sustainable at around 70% in the years to come. This projection is based on the implementation of major reforms that will not fail to boost growth and replenish out the state coffers, which will have a positive impact on the debt ratio of Tunisia.

TAP 7- If the government is faced with social protests over its commitment to reducing the wage bill, what will be the alternative according to the IMF? Did you raise this issue with the UGTT?

We have regular meetings with the UGTT, an organisation with whom we have very good relations. Indeed, everyone shares the same diagnosis and agrees that the wage bill is the most important expenditure item in the country.

It is at an atypical level compared to other emerging economies, whereas if we want to stimulate the economy, invest and improve service delivery, additional resources must be made available and this work must be done through better control of the payroll.

Within the IMF, it is recognised that the country is experiencing strong social tensions and that it is absolutely necessary that recovery efforts be made by everyone.

The effort to consolidate public finance must be supported by everyone, hence the importance of the tax component in our view (recovery, fight against tax evasion and broadening of the tax base).

In our view, we must move forward on all these projects, at the same time, because the challenge is significant and it will not be prudent to focus on one aspect at the expense of others.

We are in favor of a balanced approach that covers both payroll and taxation.

Thus, for the reduction of the wage bill to be sustainable, consensus is paramount between the social partners, the government and all Tunisian society.

The IMF is trying to support efforts to reach this consensus but ultimately it is a decision that falls on Tunisia.

The fund has always been flexible in these discussions with the government taking into account the very difficult social situation. We give a technical appraisal but it is up to the Tunisian government to decide.

Source: TAP News Agency

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