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Tunisia Overview

Tunisia’s political transition gained new momentum in early 2014, with the resolution of a political deadlock, the adoption of a new Constitution and the appointment of a new government. The national dialogue platform, brokered by key civil society organizations, played a crucial role in gathering all major political parties. This resulted in the adoption of a consensual roadmap leading to general elections, planned for the end of 2014. The strategic direction that the new government embarked upon focuses on restoring and maintaining security, while laying the ground for a stronger economic recovery which it sees as key to successfully completing the democratic transition.

After a short-lived rebound in 2012, the increasing political and social instability, as well as the difficult external environment, that characterized most of 2013, have led to a slowdown of economic growth. Rebounding from the contraction of 1.9% of GDP in 2011, the economy grew by 3.6% in 2012, somewhat above expectations. For 2013, growth is now estimated to have slowed down to 2.6%, as agricultural production and the oil and gas sector have declined markedly, while manufacturing stagnated.  Unemployment continued to decline to 15.3% at the end of 2013, from 16.7% one year earlier, but still well above the pre-revolution level of 13%.

Post-revolutionary Governments have pursued expansionary fiscal and monetary policies until 2013 to support the economy and employment. For 2013, the deficit has reached 6%. A tightening of monetary as well as more moderate commodity prices have allowed for a slowdown in consumer price inflation, which slowed down to 5.5% in February 2014, after having culminated at 6.3% one year earlier.

The external current account deficit remained large for most of 2013 and is estimated to have hovered at similar levels than in 2012 (8.2% of GDP). The trade balance deficit widened from 10.3% of GDP in 2011 to 13.4% in 2012. Following a rebound in 2012, Foreign Direct Investment (FD) declined in 2013, in the context of persistent political uncertainty, and foreign exchange reserves have gradually declined until end 2013. Net FDI flows are therefore estimated to have declined to US$1.0 billion, compared to the US$1.7 billion reached in 2012. Some limited foreign exchange interventions continued in 2013, as pressures on the currency mounted, a persistently wide current account imbalance and lower than expected capital inflows have led to a reduction of reserves to about US$6.8 billion by end-2013 (or just equivalent to 3 months of imports of goods and services). Supported by only limited interventions of the Central Bank, the exchange rate has depreciated by about 11% vis-à-vis the Euro in 2013. In early 2014, both reserves and the currency recovered somewhat, on account of increased confidence after the resolution of the political crisis.

Last Updated: Mar 24, 2014

An Interim Strategy Note (ISN) for Tunisia covering Fiscal Year (FY) 2013-14 was endorsed by the World Bank’s Board of Directors in early July 2012. The ISN outlines a World Bank Group program focused on contributing to the Constituent Assembly Government’s short and medium-term employment creation objective. The program aims at promoting private-sector led recovery and job creation, with a focus on openness, opportunity and accountability. The Bank Group’s support is framed around three areas of engagement: Laying the foundation for renewed sustainable growth and job creation; Promoting social and economic inclusion; and Strengthening governance: voice, transparency and accountability. The ISN was prepared jointly with the International Finance Corporation (IFC) to align the Bank’s strategy with Tunisia’s post-revolution priorities.

Key lending operations under the ISN include a series of Governance, Opportunity and Jobs Development Policy Loan (GOJ DPL). The first DPL for US$500 million was approved by the World Bank Board of Directors in November 2012. The second DPL for US$250 million is on track for approval in April 2014 with a follow-up US$500 million tranche proposed for approval before the end of calendar year 2014. These three single-tranche operations are intended to support the government in completing the transition, while stabilizing the macroeconomic and financial situation and carrying out selective reforms to accelerate economic recovery. The African Development Bank and the European Union are key Bank partners providing parallel budget support for the government’s reform program.

The ISN also includes multiple investment operations. A MSME Financing Facility (credit line) was approved in July 2011 and is now fully disbursed. Consequently, an additional financing of US$100 million is planned for approval in April 2014. Three investments will be presented for Board consideration in the coming months: a Competitiveness and Export Development Project, a US$300 million Urban Development and Local Governance Program for Results and a SONEDE (Water Treatment Facility) additional financing. The Program for Results is a flagship operation in the MENA region that will help local governments in deprived community impact citizens with better services in the near future.

The Bank’s ongoing portfolio includes 20 operations (10 IBRD loans and 10 grants) to support access to finance for MSMEs, infrastructure (energy, water and sanitation represent 52% of the portfolio) and social services (education), and Community Driven Development (CDD) operations. Net commitments are estimated at US$434.6 million, with an undisbursed balance of US$195.4 million as of March 12th, 2014. The grants include Global Environment Facility grants in infrastructure and social services, and rural development and natural resources management, three Japanese Social and Development Funds (JSDF), a State and Peace building Fund (SPF) and a Multi-Donor Trust Fund. Other ongoing operations are focused on supporting lagging regions, mainly through two CDD operations (the 4th Northwest Mountainous and Forested Areas Project and the 2nd Natural Resources Management Project), as well as higher education, energy efficiency, water and sanitation services and solid waste management. The Bank has also mobilized trust fund financing from JSDF (US$6 million) and SPF (US$5 million) to pilot support to youth employment, training and social services.

IFC’s approach in Tunisia emphasizes inclusion and focuses on job creation through increased private sector investments in key sectors. IFC will focus on improving the business environment to help send a strong signal to private investors that Tunisia is once again open for business. It will also expand access to finance to MSMEs – through integrated AS/IS support to banks, SME funds and microfinance, targeting women and youth entrepreneurs. Moreover, IFC will invest in labor intensive and high value added sectors (i.e. IT, off-shoring, agribusiness, electronics, electrical and mechanical industries) and improve infrastructure and social services especially in lagging regions.

The World Bank was able to respond quickly to changing circumstances, and provide key budgetary support to the interim governments following the January 14, 2011 revolution. This included strengthened dialogue with the Constituent Assembly and interim Governments to determine priorities and how the Bank can best support them. The strategic direction that the previous government had embarked upon worked toward a sustained economic recovery which would lead to increased employment creation. While the environment in Tunisia remains fluid, the World Bank has had some successes post-revolution:

The 2011 Governance and Opportunity (GO DPL) has led to increased public access to economic and social data, and on public finances: the Ministry of Finance now publishes monthly data on budget execution; the annual reports of the Supreme Audit Institution have been published online; the Statistical Office has introduced on-line access to key survey databases (Household Budget Survey 2005; Labor Force Survey 2010; a sample of the Population Census 2004).  

Under a Freedom of Association Law passed in 2011, non-governmental organizations, think-tanks and other groups can now easily assemble, and there has been a blossoming of such actors across the country.  The use of the internet has expanded, connecting Tunisians and opening up Tunisia to the world. As of September 2011 there was a 33% increase in the number of websites “.tn”, compared to end-2010. A new regulatory framework for the National Employment Fund (around 0.4% of GDP) has been put in place and the program is now under the management of the Ministry of Employment.  To promote citizens voices, the DPL reform program included developing a community scorecard mechanism to evaluate employment, health and education services. This mechanism enables regular monitoring and evaluation by third parties of selected social programs and public services that would allow citizens to rate performance.

The 2012 Governance, Opportunity and Jobs DPL (GOJ DPL), supported the government in: Launching a participatory review of business formalities to streamline procedures, increase transparency, and reduce arbitrary and discretionary behavior; Making landing stations of international telecommunications cables open to more operators in an effort to promote the competitiveness of the economy and liberalize the sector; Restructuring the financial sector and strengthening its stability and commissioning strategic and financial audits of three public banks.

Moreover, stricter prudential regulations for the banking sector, from micro-finance to large state-owned banks, were announced by the Central Bank. An autonomous auditing, evaluation and accreditation system for the quality of health services was established using international standards. In the education sector, the National Authority for the Evaluation, Quality Assurance and Accreditation of higher education was established.  

The Tunisian government issued a decision to publish key information on public finances, with citizens’ budget and an online open budget platform was created to further promote the transparency of public finances. A participatory regulatory simplification process in the Ministry of Finance was established which reduced red tape by simplifying procedures by 86 percent and eliminated 7% of customs & tax procedures. A broader regulatory simplification reform has been launched in 9 ministries.

The results of the community scorecards were published on a national scorecard (drawing on evaluations from 9,000 citizens). The government launched safety net reform to establish a new registry and means-tested targeting to better reach the most vulnerable populations.

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Tunisia : Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments

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