World Bank and IMF prepare Tunisia loan programmes

5 April 2016

In late March the World Bank announced plans to lend Tunisia $5 billion over five years to finance infrastructure projects and the financial and education sectors, according to the Bank’s Tunisia country manager. The announcement comes on the heels of the IMF concluding a country-visit to Tunisia in early March to initiate negotiations for a four-year arrangement under the Fund’s Extended Fund Facility, which is expected to amount to $2.8 billion. The Bank and Fund programmes would be complemented by a €500 million medium-term EU loan, proposed by the European Commission in late February, and a $1.1 billion pledge in aid from France over five years. The IMF loan follows its 2013 $1.7 billion two-year Stand-by Arrangement, which was extended last year by seven months (see Observer Winter 2014). The IMF country team will finalise the details of the loan programme in coming weeks.

With Tunisia facing high unemployment and social unrest, a February IMF issues paper recommended that Tunisia’s economic reforms focus on developing financial markets, cutting public sector expenditures and enhancing labour market flexibility, while expanding female labour force participation rates. IMF Tunisia representative Robert Blotevogel commented to news agency AFP that Tunisia “should adjust its development model to … build ‘inclusive growth’”. Mohammed Mossallem, of the University of London, noted that “IMF recommendations continue to focus on short term stabilisation measures at the expense of expansionary policies that are required to address the growing rates of unemployment and increasing income inequality in Tunisia, which are both significant obstacles to achieving inclusive, long term growth.” He also stressed that “despite the change in rhetoric, IMF policies have been relatively unchanged in Tunisia and are doing very little to address the deep-seated economic and social issues that led to the uprising”. Mossallem published a December 2015 report The IMF in the Arab world: Lessons unlearnt which analysed IMF policies in four Middle East and North Africa countries before and after the Arab Spring.