Washington, DC — The Executive Board of the International Monetary Fund (IMF) today approved a disbursement in the amount of SDR 545.2 million (US$745 million or 100 percent of quota) for Tunisia under the Rapid Financing Instrument (RFI). These resources will help address urgent fiscal and balance of payments needs stemming from the outbreak of the COVID-19 pandemic.
Tunisia's economy is expected to contract by 4.3 percent in 2020 under the weight of COVID-19. It would be the deepest recession since its independence in 1956. The IMF financing will help the authorities cover large fiscal and balance of payments needs, estimated at 2.6 and 4.7 percent of GDP, respectively.
The IMF financing will support the authorities' emergency measures to contain the spread of the virus and mitigate its human, social, and economic toll amid unprecedented uncertainty. These measures involve raising health spending, strengthening social safety nets, and supporting small- and medium-sized firms hit by the crisis. The IMF financing will also ensure an adequate level of international reserves and catalyze additional donor financing.
The 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.
Following the Executive Board discussion. Mr. Mitsuhiro Furusawa, Deputy Managing Director and Chair, made the following statement:
"The COVID-19 pandemic has hit Tunisia hard. The pandemic will worsen Tunisia's already elevated macroeconomic imbalances and will also create urgent fiscal and balance of payment needs. The economy is expected to contract by 4.3 percent in 2020.
"The authorities are taking emergency measures with a focus on the health sector, the social safety net, and firms that come under stress.
"The authorities have also taken steps to limit fiscal pressures, including a mechanism for automatic fuel price adjustment, emergency savings in the civil service wage bill, and a rescheduling of lower-priority public investment.
"In support of the authorities' efforts, the RFI purchase will provide most of the financing to implement the fiscal crisis-response measures and ensure an adequate level of international reserves.
"Macroeconomic stability and debt sustainability hinge on strong policy and reform implementation. The authorities are committed to resuming fiscal consolidation once the crisis abates. These efforts will include a reduction of the civil service wage bill as a share of GDP and further energy subsidy reforms, taking into account the social implications.
"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.
"Additional concessional and grant financing from external partners is critical to help Tunisia respond to the COVID-19 crisis. It will also help preserve the sustainability of its debt."