The United States will grant Tunisia $500 million in aid to finance infrastructure and other projects and talks are also advanced on a loan guarantee, Tunisian finance minister Ali Kooli said on Monday.
“Our visit to Washington was important and fruitful with International Monetary Fund, World Bank and American officials” said Kooli, who was in Washington to start discussions about a new loan programme with the IMF.
Tunisia, which has seen its debt burden rise and economy shrink by 8.8% last year in real terms, has started talks with the IMF to seek a financial assistance package.
Kooli said the Millennium Challenge Corporation (MCC), a US government foreign assistance agency, will finance projects in the transport and water sectors and for the support rural women.
Kooli did not give further details. In January he said in interview that Tunisia was seeking a US loan guarantee worth $1 billion to issue bonds.
The news of the US assistance to Tunisia came a few days after Washington reaffirmed its “strong commitment” to the North African country.
During a phone call to Tunisian President Kais Saied last week, US Vice-President Kamala Harris “underscored the United States’ sustained commitment to supporting Tunisia’s democracy.”
The Tunisian presidency said in a statement the two sides discussed the economic, financial and social situation in Tunisia.
The US vice-president later tweeted “we stand with Tunisia as it makes the economic reforms necessary to recover from the challenges of the pandemic.”
Tunisia, which is facing one of the worst economic crises in its history, has been looking for support, particularly from Western countries and key economic organisations. President Saied arrived today in Paris ahead of Tuesday’s Summit on Financing African Economies, hosted by French President Emmanuel Macron.
Representatives from African states, multilateral organisations including the IMF and countries from the G7 and G20 are hoping to reach an agreement on a massive recovery plan for the African continent.
Meanwhile, Tunisia’s talks with the IMF will resume on Tuesday, with the new round of technical discussions viewed as an opportunity to allow the Tunisian delegation to better explain its economic reform programme and the country’s financing needs.
Tuesday’s talks, experts say, will help the IMF better understand the Tunisian government’s vision, action plan and expectations.
The Tunisian government delegation visited Washington earlier in May for talks with the IMF on a possible $4 billion loan and reforms to eliminate subsidies and reduce the massive public sector wage bill.
Tunisia has pledged to cut its public sector wage bill and replace subsidies with direct support for the needy, according to a government reform proposal written to support talks with the International Monetary Fund.
The proposal also envisages eliminating all general subsidies by 2024 and cutting the wage bill to 15% of GDP by 2022 from 17.4% last year, partly through early retirement and reductions in working hours.
The IMF has previously called on Tunisia to enact economic reforms to reduce chronic fiscal deficits and a large public sector debt, including by cutting its wage bill, subsidies and transfers to state-owned companies.
Spending cuts are highly sensitive in the young democracy, where growing frustration over the economy and poor public services fuelled protests in January and where powerful labour unions seek to protect workers’ pay.
The proposals to cut the wage bill specify encouraging voluntary redundancy on 25% pay, early retirement packages and offering staff part time work at 50% of full pay.
The plan says it is “essential to rethink the pay system in consultation with social partners,” a reference to the labour unions, particularly by establishing rules for salary increases and bonuses that reflect both inflation and performance.
Tunisia’s powerful General Labour Union (UGTT) has already expressed strong objections to many of the reforms, one of its most senior officials said.
The UGTT has more than a million members and has proven able to mobilise significant opposition to previous governments through strikes, sit-ins and pressure on political parties
“These are unilateral measures that we did not discuss with the government and we were surprised when we read about the details,” UGTT deputy secretary general Sami Tahri said last week.
Tunisia, which adopted democracy after its 2011 revolution, had suffered years of economic stagnation, declining public services and worsening living standards even before the pandemic, causing widespread anger and frustration. There were countrywide protests in January.
This article has been adapted from its original source.
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