Tunisia aims to cut fiscal deficit to 5.5% in 2023 amid economic reforms

Gross domestic product is forecast at 1.8 per cent next year, according to Ministry of Economy and Planning

Tunisia is seeking $4 billion in funding from the IMF, which could help it to steer the nation out of its worst economic and financial crisis. Reuters

Tunisia expects to reduce its fiscal deficit to 5.5 per cent in 2023, from a forecast 7.7 per cent this year, as the North African country continues to carry out austerity measures to boost growth.

Spending on subsidies and on financial operations next year is projected to drop 26.4 per cent and 56.5 per cent respectively, while tax revenue will rise by 12.5 per cent, state-owned news agency Tunis Afrique Presse reported on Friday citing a report by the Ministry of Economy and Planning.

Tunisia also plans to raise 24.1 billion dinars ($7.7 billion) in funding, 66.2 per cent of which will be through external borrowing, in addition to 14.2 billion dinars of “budget support credits” to cover the budget deficit, according to the news agency.

Tunisia’s economy was severely affected by the war in Ukraine, which widened its current account deficit, as well as the coronavirus-induced slowdown, high debt and deteriorating finances, all of which required that it introduce several reforms to secure funding from the International Monetary Fund.

The North African country had sought $4 billion in funding from the IMF, which could help it to steer the nation out of its worst economic and financial crisis that has been exacerbated by the rise in energy and commodity prices globally.

In October, Tunisia reached a staff-level agreement with the IMF for a new 48-month Extended Fund Facility (EFF) worth about $1.9 billion to support the government’s economic reform programme.

A final agreement on the deal is expected this month, the Washington-based lender said at the time.

The country’s economy, meanwhile, is projected to grow 1.8 per cent next year, compared to 2.5 per cent this year, the news agency said.

“The achievement of this rate remains dependent on the removal of obstacles facing economic activity and is based on prudent and realistic assumptions that take into account the domestic situation and the increase in implicit risks at the international level,” Tunis Afrique Presse said.

“It also hinges on the concretisation of sectoral reforms to improve the business climate and the mobilisation of human, technical and financial capacity to accelerate the implementation of work programmes and government measures for 2023.”

The IMF expects Tunisia’s economy to grow by 2.2 per cent this year and 1.6 per cent in 2023. The World Bank estimates gross domestic product growth of 3 per cent this year.

Earlier this month, the Tunisian government raised the price of drinking water by as much as 23 per cent as the country seeks to reduce subsidies to qualify for IMF assistance.