Tunisia secures $745m IMF loan to fight Covid-19 as economy set to contract

The North African country's economy is forecast to shrink 4.3% this year, its deepest recession since 1956

A general view shows closed shops in the village of Sidi Bou Said, some 20 kilometres northeast of Tunis, on April 4, 2020, during the general confinement imposed by the authorities in order to stem the spread of the novel cononavirus.  / AFP / FETHI BELAID
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The International Monetary Fund approved a $745 million (Dh2.7bn) emergency loan to Tunisia to help the North African country mitigate the impact of the Covid-19 pandemic.

Tunisia's economy is projected to shrink 4.3 per cent in 2020, its deepest recession since it gained independence in 1956, according to the Washington-based lender.

"The Covid-19 pandemic has hit Tunisia hard," Mitsuhiro Furusawa, the IMF's deputy managing director, said on Saturday. "The pandemic will worsen Tunisia's already elevated macroeconomic imbalances and will also create urgent fiscal and balance of payment needs."
Tunisia has 671 confirmed cases of the deadly virus and 25 deaths, according to the Johns Hopkins University's coronavirus tracker. The infection is hitting its crucial tourism sector which represents about 10 per cent of the country's gross domestic product.

The Covid-19 pandemic has crippled the world economy, which is now in recession, as factories stand idle, people stay at home and countries close their borders or implement lockdowns.

The IMF funding will help Tunisia cover large fiscal and balance of payments needs, estimated at 2.6 and 4.7 per cent of GDP, respectively, the fund said.

The financing will help Tunisian authorities take measures against the spread of the virus including raising health spending, strengthening social safety nets and supporting small and medium enterprises hit by the crisis.

It will also ensure an adequate level of international reserves and catalyse additional donor financing, the IMF said.

Authorities are committed to maintaining prudent economic policies and resuming fiscal consolidation once the crisis abates to ensure macroeconomic stability and the sustainability of Tunisia’s debt.

“The Central Bank of Tunisia is committed to tighten monetary policy in case of exchange rate or inflation pressures and refrain from large-scale FX interventions to protect international reserves," Mr Furusawa said.

Additional concessional and grant financing from external partners is critical to help Tunisia respond to the coronavirus crisis and help preserve the sustainability of Tunisia's debt, he said.

In a speech on Thursday, IMF chief Kristalina Georgieva said the global economy is facing “a crisis like no other”, with great uncertainty about the extent and duration of the predicament caused by the Covid-19 pandemic.

The lender, which proposed a four-point recovery plan, is forecasting an "exceptionally difficult" year for the global economy in 2020, with growth likely to be more severely hit than during the 2008 global financial crisis.

The coronavirus crisis is hitting the most vulnerable countries hardest, with outflows from emerging markets reaching $100 billion over the past two months – “more than three times larger than for the same period of the global financial crisis,” IMF managing director Kristalina Georgieva said on Thursday.

The IMF has made $1 trillion in lending capacity available to countries and has doubled access to emergency facilities to $100bn.

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