Arab Monetary Fund extends $74m loan to Tunisia to boost its fiscal position

Package will help the implementation of reforms and encourage more support from other financial institutions

A customer shops at a bakery in Tunis. Tunisia's economic troubles were exacerbated by the rise in global energy and commodity prices, plunging it into its worst economic crisis. Reuters
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The Arab Monetary Fund has extended a $74 million loan to Tunisia to help the North African nation's fiscal position and boost its gradually recovering economy.

The loan package will support the country, which is still reeling from an economic crisis, in implementing reforms to promote recovery, as well as encourage more support from other regional and international financial institutions, the Abu Dhabi-based AMF said in a statement on Saturday.

The agreement, which was forged on Friday, was signed by Abdulrahman Al Hamidy, director general and chairman of the AMF's board of executive directors, and Marouane El Abassi, governor and chairman of the Central Bank of Tunisia's executive board.

"The AMF supports the efforts of its member countries to implement economic, financial, monetary and structural reforms, in face of various challenges, through a number of means, including financing the needs of the balance of payments and public budgets, and financing trade," the AMF said in the statement.

Tunisia’s economy was severely affected by Russia's military offensive in Ukraine, causing its current account deficit to widen. A Covid-19-induced slowdown, high debt and deteriorating finances exacerbated by the rise in global energy and commodity prices plunged it into its worst economic crisis.

Government debt rose to almost 80 per cent of gross domestic product in 2021, according to official state estimates, which was lower than the 85.6 per cent initially forecast in its 2021 budget.

This forced Tunis to introduce economic reforms to secure funding from the International Monetary Fund. In June, Tunisia sought $4 billion to help steer the nation from its economic troubles, and the IMF said at the time that it was ready to hold discussions.

Last month, Tunisia and the Washington-based IMF reached a staff-level agreement for a new 48-month extended fund facility worth about $1.9bn, which will support Tunisia's economic reform programme.

The IMF projects Tunisia’s economy to expand 2.2 per cent in 2022, with inflation pegged to rise to 7.7 per cent. The World Bank sees GDP growth of 3 per cent this year.

Despite the challenges, the Tunisian economy was still able to post "positive developments" in its economy during 2022, recording actual growth rates of about 2.4 per cent and 2.8 per cent for the first and second quarters of the year, respectively, the AMF said.

These were driven by the recovery of the agricultural sector, the growth of manufacturing, higher phosphate production and a rebound in tourism revenues and remittances of the expatriates in the country, it said.

"The AMF follows closely the developments of the Tunisian economy and the challenges it faces due to the current global circumstances and works through a fruitful partnership with the Tunisian government to help the country address the different challenges in the most effective way," it said.

The fund said it will continue to provide financial and technical support to its member countries during this period of economic uncertainty, especially considering recent and current geopolitical events.

"The AMF assistance comes as a support to reform efforts and the measures they are taking to stimulate the economy and provide liquidity in order to contain different effects," it said.

Arab economies are expected to grow 5 per cent in 2022, driven by higher oil prices and production, as well as due to an extension of government support that was provided to help economies recover from the coronavirus pandemic, the AMF said in April.

Updated: November 05, 2022, 2:09 PM