RESTRICTED
WORLD TRADE WT/BOP/R/31
30July1997
ORGANIZATION(97-3218)
Committee onBalance-of-Payments Restrictions
REPORT ONTHE CONSULTATIONS WITH TUNISIA
1. TheWTO Committee onBalance-of-Payments Restrictions meton23and24Junetoresume
itsconsultations withtheGovernment ofTunisia. Theconsultation washeldunder theChairmanship
ofMr.P.R.Jenkins(UnitedKingdom),inaccordancewiththeCommittee'stermsofreference,pursuant
toArticle XVIII:B, paragraph 12(b) ofGATT 1994andtheUnderstanding ontheBalance-of-Payments
ProvisionsofGATT1994.TheInternationalMonetaryFundwasinvitedtoparticipateintheconsultation
inaccordance withArticle XV:2 ofGATT 1994.
2. TheCommittee hadbefore itthefollowing documents:
WT/BOP/R/14 Report onthe1996 Consultation withTunisia
WT/BOP/G/2 Basic Document Supplied byTunisia
WT/BOP/S/2 Background Paper bytheSecretariat
IMF: Tunisia, Selected Issues, 9May1997
Opening Statement bytheRepresentative ofTunisia
3. Theopening statement bytherepresentative ofTunisia isattached asAnnex I.
Statement bytherepresentative oftheInternational Monetary Fund
4. Thestatement bytherepresentative oftheInternational Monetary Fundisattached asAnnex II.
Discussion intheCommittee
(i) Balance-of-payments problems andprospects; alternative measures torestore equilibrium
5. Members noted theimprovement ineconomic performance aswellasintheexternal situation
andthatreserves were nowonanupward trend. Confidence wasexpressed inTunisia 'sprudent
macroeconomic policies andstructural reforms which would continue toimprove thecurrent account
deficit. OneMember believed thattheassessment ofthebalance-of-payments prospects might be
questionable onthebasisofthecomposition ofreserves. Some Members urged Tunisia tocease recourse
toArticle XVIII:B.
(ii) System, method andeffects ofrestrictions
6. TheCommitteewelcomedthephase-outplanpresentedbytheGovernmentofTunisia,consisting
offourphases ofliberalization, starting on1July1997 withthelaststage tobeimplemented onWT/BOP/R/31
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31December 2000 (WT/BOP/N/25, 3July1997). However, opinions differed ontheduration of
thephase out.Some Members suggested thatquantitative restrictions beeliminated immediately, or
atleastwithin ashorter timeframe; others considered Tunisia 'sproposal acceptable. Itwaspointed
outthattheelimination ofquantitative restrictions inthepasthadhadapositive impact onthebalance
ofpayments. thatsectoral restrictions didnotconstitute themostefficient waytoprotect theexternal
balance andthatprice-based measures were amore appropriate instrument. Tunisia wasasked to
provide further information onhowtheimport quota wasallocated, preferential arrangements that
might affect thesystem ofallocation andonmotor vehicle import volumes. Answers willbecirculated
inanaddendum tothisReport.
Replies from theRepresentative ofTunisia
7. Therepresentative ofTunisia, while concurring withtheIMF'sdiagnosis, noted thaterratic
growth andaslowdown inprivate investment wereconstraints ontheattainment ofahealthier budgetary
situation andachievement ofother features oftheIXthDevelopment Plan. Hepointed outthatthe
restrictions remaining onmotor vehicles were residual totheliberalization process begun in1987.
Heargued thathighduties andtheexistence ofpreferential arrangements probably precluded conversion
toprice-based measures. Nevertheless, heoffered toreduce thephase-out period fromthreeandahalf
tothree years withthelastrestrictions being removed on1July2000.
Conclusions
8. TheCommittee commended theTunisian authorities fortheirsound macro-economic policies
which hadledtoanimprovement intheexternal situation. Although thebalance-of-payments position
hadstrengthened (toalevelofreserves adequate for3.2months ofimports) inthelasttwelve months,
andthere appeared tobenothreat ofaserious decline inthelevelofreserves, opinions differed as
towhether thesituation wasstable orremained fragile. According totheIMF, theoutlook was
encouraging.
9. Whileacknowledgingtheresidualnatureoftheremainingrestrictions,someMembersemphasised
thatsectoralmeasureswerenotinaccordancewiththeprovisionsoftheUnderstandingnoranappropriate
wayofaddressing abalance-of-payments problem.
10. Inthelightofthisexchange, Tunisia undertook tophase-out theremaining restrictions infour
steps from 1July1997, ending 1July2000, assetoutinadocument submitted totheCommittee.
TheCommittee invited Tunisia toaccelerate implementation ofthisphase-out planshould circumstances
permit. Onthatbasis, there wasconsensus toconclude theconsultation.
11. TheCommittee recommends totheGeneral Council that,inadhering toitsphase outplan,
Tunisia bedeemed tobeincompliance withitsGATT 1994obligations. Intheevent ofafuture threat
tothebalance ofpayments, during thisperiod, Tunisia could seekrecourse anew toArticle XVIII:B.WT/BOP/R/31
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ANNEX I
Statement bytheRepresentative ofTunisia
Mr.Chairman,
Distinguished Representative oftheInternational Monetary Fund,
Ladies andgentlemen,
Ishould liketobegin bysaying howhappy Iamtoseeyouchairing thisCommittee. These
consultations willnodoubt reach asuccessful conclusion under yourwiseguidance.
Ialsotakepleasure ingreeting themembers oftheCommittee andextending mywarm thanks
totheSecretariat foritswork andforthequality ofthereport submitted.
Asisitswont, Tunisia engages inthisexercise ingoodfaithandwithrealism andequanimity,
paying close attention toboththeconsultation process andtheCommittee 'sdeliberations.
Ishould nowliketointroduce toyouthemembers oftheTunisian delegation, whowillof
course beentirely attheCommittee 'sdisposal foranyclarification oradditional information.
Ishallbegin with:
- Mr.Abdelmajid TRIKI, Director-General intheMinistry ofEconomic Development;
- Mrs. Babya CHIHI, Director-General intheFinance Ministry;
- Mrs. Khadija CHAHLOUL, Director intheMinistry ofTrade;
- Mr.Karim ELGHARBI, Director intheMinistry ofTrade;
- Mrs. Jamila HAMZA, Director intheCentral Bank ofTunisia;
- Mr.Hafedh BEN ROMDHANE, Ministry ofForeign Affairs;
- Mr.Chiheb MEGHIRBI, Ministry ofIndustry;
- Mr.BAATI andMr.SNOUSSI, mycolleagues attheMission.
Mr.Chairman,
Since becoming acontracting party inJune1990, while theUruguay Round negotiations were
infullswing, Tunisia hasmade great strides inthefieldofliberalization, thepaceofwhich hasbeen
stepped upconsiderably overthelastthree years.
These efforts bearwitness toagenuine political resolve, signalled inthehighest reaches of
theState hierarchy, torisetothechallenge ofopening upandintegrating thenational economy into
theglobal economy. Thisistheresult ofanirrevocable decision torehabilitate market mechanisms
andtoendow theprivate sector withgenuine production, marketing andinvestment capability.
Withitscustomary caution anddetermination, Tunisia hasmade much headway, butispursuing
amethodical, progressive andunhurried approach toitsongoing work ofintegration. Thepriority
goalistoorganize thedevelopment process around twomain linesofapproach: thatoflaying the
structural foundations forsustained economic growth andthatofsecurely tying oureconomy tothe
global economy.
Thetaskisofcourse adifficult one,butthechallenge matches ourexpectations. Ourgrowth
andforeign trade performance inparticular broadens ourfuture horizons andstrengthens usinourWT/BOP/R/31
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policy decisions. Buoyed byitsconvictions anditsachievements, Tunisia hasbeenabletocushion
theimpact ofchance setbacks andtokeeponanevenkeeldespite thesmall sizeofthedomestic market,
thedifficulties ofglobal competition andthelackoftrade diversity.
Itwasmyintention inthisintroduction toplace thedevelopment oftheTunisian economy in
itstruehistorical context, thebetter tosizeuptheachievements and,more particularly, theconstraints.
Theperformance oftheTunisian economy makes itpermissible forustoentertain great ambitions
butalsocallsformore effort, perseverance andvigilance onourpart.
Wetakepride inthefactthattheparticipatory approach introduced atalllevels hastaken
precedenceoverthestrategyofassistance,enablingustomakeprogresswhilemaintainingsocialcohesion
andanoverall economic balance.
Mr.Chairman,
Since ourlastconsultations, wehavefulfilled theundertakings given tothisCommittee. The
listofproducts stillsubject torestrictions forbalance-of-payments reasons wascommunicated tothe
Secretariat. Wehavealsonotified thetotalelimination, inaccordance withtheagreed timetable, of
theprovisional rateincrease thatwasthesubject ofthewaiver approved on17January 1994withrespect
tobound ratesaffected bytheprovisional complementary duties (DCPs). Asagreed, theDCP for
theproducts concerned wasabolished on31December 1996.
Therestructuring planintroduced some years agohastoday entered anewstage marked by
thestrengthening ofstructural andlegislative reforms invarious economic andfinancial sectors, in
accordance withourWTO commitments andinpreparation fortheimplementation oftheAssociation
Agreement signed withtheEuropean Union.
Tunisia hasalsocompleted thetotalliberalization ofagricultural andagri-food products, the
ratesforwhich arefullybound. Thus, inaccordance withtheAgreement onAgriculture, Tunisia
hasliberalized itstariff quotas.
Inthesamevein,Tunisia autonomously andunilaterally abolished allcustoms duties oncapital
goods originating anywhere intheworld in1997. Thisdecision reflects mycountry 'ssustained efforts
attrade liberalization andeconomic integration.
Thereform programme hasalsoextended tothetaxation system andinvestments, aswellas
theprivatization process, which accelerated atasteady pacein1996.
Inorder torisesuccessfully tothechallenge ofintegration, andbesides theintroduction of
various programmes ofeconomic diversification, penetration ofnewmarkets, export promotion,
modernization oftrade intervention mechanisms, strengthening ofreforms andmeasures tocurbthe
budget deficit anddebtindicators, from1996Tunisia embarked onafar-reaching programme toupgrade
itseconomy, affecting allnational operators, thefirststageofwhich willbecompleted intheyear2000.
Thegoalofthisprogramme istomodernize Tunisian enterprises andadapt themtothepresent
competitive context. Tunisian enterprises nowhavetobecompetitive ontraditional aswellasnew
foreign markets, andtobeabletoviewithforeign competitors onthedomestic market.WT/BOP/R/31
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Mr.Chairman,
Tunisia 'smethodical andmeasured efforts tomeetthechallenge ofintegration haveproduced
tangible results. However, myauthorities cannot evade certain persistent constraints anddifficulties,
theeffects ofwhich needtobecontained. Theexternal payments situation continues tobeoneofour
central concerns.
Despite theimprovements recorded, thecurrent account continues toshow astructural deficit
andtobesubject tovarious pressures.
Concerning thetrade account, while imports showed moderate growth in1996, there wasa
substantial downturn inthegrowth rateofexports. Anumber offactors combined toexplain this
situation, forexample, thedecline insalesofcertain traditional products suchasolive oil,dates and
citrus fruits, exacerbating thepressure onthefoodbalance which hasalways shown achronic deficit.
However, self-sufficiency infoodremains astrategic objective. Theintroduction ofastructural
adjustment planforagriculture reflects astrong concern torestructure andrevitalize thissector.
Inthisconnection, itshould bepointed outthatTunisia isoneofthenetfood-importing
developing countries potentially eligible tobenefit fromthemeasures provided forintheMinisterial
Decision adopted atMarrakesh onthissubject.
Other sectors withexport potential, suchastheelectrical andengineering industries, capital
goods, textiles andrawmaterials andsemi-manufactures, generated considerably lower thanaverage
export earnings in1996.
Turning toanother matter, despite theefforts atdiversification, thestructure ofTunisia 'strade
continues tobecharacterized byahighdegree ofgeographical concentration. There isalsoapersistent
trade deficit withanumber ofourpartners.
Apart fromthesefactors, emphasis should beplaced onthedebtservice burden andthereverse
transfer ofresources which, despite thecontrol ofdebtindicators, aremajor additional factors
contributing totheincreased pressure onourcountry 'soverall balances anditsincreased financing
requirements.
Mr.Chairman,
Thesituation Ihavejustoutlined gives apicture ofthefragility, theriskofinstability andthe
structural deficit inourcurrent payments position. Firmandunwavering vigilance andalertness must
beourwatchwords.
Thankstosoundmanagement,theseconstraintshavenotonthewholeimpairedourliberalization
programme orourrealistic approach which isbothopen-ended andprogressive.
Theliberalization process hasnowreached averyadvanced stage. Thefinalphase isbeing
affected byasqueeze onthebalance ofpayments. Thus, onlytheautomotive sector continues tobe
subject torestrictive measures, ofcourse notcounting products covered bythegeneral exceptions under
Article XXoftheGATT.WT/BOP/R/31
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Three aspects ofthese restrictions deserve tobehighlighted:
- Firstly, these are"residual" restrictions, constituting thefinalstage inourprocess of
liberalization. They arebeing maintained temporarily during atransitional period
required tocomplete theimport liberalization programme;
- Secondly, these restrictions arenotinconsistent withtherelevant provisions ofthe
GATT, particularly paragraph 3oftheBalance-of-Payments Understanding, since
Tunisia hasnotintroduced newrestrictive measures butisendeavouring tophase out
oldones;
- Lastly, theserestrictions arenotmotivated byprotectionism, sinceTunisia hasneither
anestablished noranembryonic automotive industry.
Mr.Chairman,
Wewishneither toengage inanother ideological debate onthissubject nortodevelop dogmatic
arguments forthemaintenance oftheserestrictions based onArticle XVIII:B, butwedefend theoption
ofappropriate roll-back, taking intoaccount theconstraints towhich wearesubject andourinterests.
Anyroll-back process necessarily requires some adjustment period, whether longorshort.
Overnight liberalization isneither acredible norarealistic option. Ourapproach isbased onastrategy
ofgradual, stable andsustainable integration. Weseektoshow openness andresolve without moving
ahead tooquickly orcutting corners. Isincerely hopethattheCommittee willbeabletoappreciate
thebasic merits ofourposition.
Accordingly, withreliance onthespirit ofunderstanding andthesense ofmoderation which
havealways beentheCommittee 'shallmark, myGovernment proposes afour-year timetable forthe
phasing outofthequantitative restrictions thatcontinue tobeapplied intheautomobile sector. This
roll-back timetable comprises fourstages, beginning on1July1997. Each stage willbesignalled
officially byanotification totheSecretariat.
Forthisfinalphase ofliberalization, weconsider itnecessary tocontinue onthesame track,
particularly inviewofthesacrifices made andtheresults achieved byTunisia. Hence ourlegitimate
expectation offlexible andappropriate treatment.
Although ourfaithinthemultilateral trading system embodied bytheWTO isunshakable,
weconsider thattheWTO bodies, including thisCommittee, aredutybound, intheinterests ofall
concerned, tomake surethatthesystem remains universal byworking topromote theintegration of
developing countries likeourownintotheglobal economy.
Mr.Chairman,
Finally, Ishould notliketoconclude without paying tribute totheconstantly confirmed support
oftheWTO Members andtheinternational organizations, particularly theInternational Monetary Fund
andtheWorld Bank, andwithout reminding youofTunisia 'sfirmdetermination tocontinue the
liberalization process andthework ofintegration, withaconviction matched byrealism, taking into
account itsoverall balances, bothexternal andinternal.
Thank youforyourattention.WT/BOP/R/31
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ANNEX II
Statement bytheIMFRepresentative
1. Tunisia hasbeenengaged inamacroeconomic adjustment andstructural reform program for
anumber ofyears, supported byarrangements fromtheFundduring 1986–92.Since then,inthecontext
oftheFund’ssurveillance, Fund staffhascontinued towork closely withtheauthorities indiscussing
economic andfinancial policies andproviding technical assistance.
Recent economic developments
2. During theperiod oftheVIIIth Development Plan (1992 –96),Tunisia pursued prudent
macroeconomic policies andimplemented wide-ranging structural reforms. RealGDP expanded by
4.5percentayearonaverage driven mainly bygrowth inmanufacturing (5.3percent)andservices
(5.4percent); social indicators continued toimprove consistent withTunisia ’semphasis onhealth
andeducation within public expenditure; andfinancial imbalances narrowed. Inflation decelerated to
lessthan5percentperyearonaverage, andexternal debtdeclined from55percentofGDPin1991
to52percentin1996. Annual realexport growth averaged 4percentandtheshare ofTunisian exports
inworld markets remained broadly constant. Therateofunemployment stabilized at15–16percent.
Tunisia in1993 eliminated allrestrictions onthemaking ofpayments andtransfers forcurrent
international transactions, except forthemaintenance ofamultiple currency practice resulting from
honouring exchange rateguarantees extended priortoAugust 1988todevelopment banks. Thispractice
willautomatically expire intheyear2000 aftertheexisting commitments havematured.
3. In1996, realGDP grew by6.9percent, reflecting mainly astrong recovery ofagricultural
production(30percent)fromatwo-yeardroughtandstrongergrowthinenergyproductionandtourism.
Theaverage rateofincrease inconsumer prices fellto3.7percentin1996, facilitated byfavourable
agricultural supply conditions. However, these changes intheconsumer price index mayunderstate
underlying inflationary pressures, asplanned increases insome administered prices didnottakeplace
(petroleum products) orwere delayed untillateintheyear(subsidized foodproducts).
4. Theexternal current account deficit narrowed to3percentofGDP in1996, reflecting
improvements inboththetrade balance andservices .Export volume fellby2.4percent,asimport
demand inneighbouring countries contracted sharply andrecent droughts affected export crops,
particularly oliveoil.Import volume alsofell,mainly owing tolower foodimports andtheweakening
ofimport-intensiveexportssuchastextiles.Tourismreceiptsandworkers’remittancesexpandedstrongly,
afterstagnating in1995. Total foreign direct investment declined withthecompletion ofmajor energy
projects, butforeign investment innon-energy sectors roseslightly. Higher public borrowing from
capital markets more thanoffset atemporary shortfall ingrants, andtheoverall balance registered
asurplus ofUS$384 million (1.4percentofGDP) which brought gross official foreign exchange
reserves totheequivalent of3.2months ofimports byyear-end. Based onpreliminary data,exports
(inUSdollar terms) during thefirst4months of1997roseby4.6percentcompared tothesameperiod
lastyear; imports declined by1.5percentandthetradebalance narrowed further. Reflecting seasonal
factors andthetiming offoreign borrowing, official reserves declined totheequivalent of2.5months
ofaverage first-quarter imports byend-March 1997, compared to2.0months inMarch 1996.
5. Notwithstanding thestrong economic rebound, theconsolidated central government deficit
(excluding grants butincluding extra-budgetary foodsubsidies andsocial security operations) roseto
4.7percentofGDP(from4.4percentin1995)mainlyonaccountofimporttariffreductions,includingWT/BOP/R/31
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intheframework oftheAssociation Agreement withtheEuropean Union (AAEU). Expenditures were
larger thanenvisaged owing tohigher thanexpected outlays forfoodsubsidies (2.2percentofGDP).
6. Monetary andcredit policies in1996 were significantly more expansionary thanenvisaged,
withbroad money (M2) expanding by13.7percent. While thegovernment ’scontinued repayment
ofoutstandingbankcreditprovidedcontractionaryimpulses,credittotheeconomyroseby14.6percent.
Bank credits toparastatal agencies (Office descéréales andOffice national del’huile),related to
government arrears onextrabudgetary foodsubsidies, wereassumed bythecentral bankatend-1996.
Combined withtheelimination ofpenalty reserve requirements related tomandatory banklending to
priority sectors, thisresulted inasurge ofreserve money atyear-end. Asregards income policy, a
newthree-year wage agreement between theemployers ’association andthetrade unions provides for
annual average wageincreases ofaround 5percentduring 1997–99.Theauthorities continued topursue
apolicy ofmaintaining therealeffective exchange rateofthedinarbroadly constant through intervention
intheforeign exchange market .
7. Structural reforms progressed inanumber ofareasduring 1996. Regarding tradeliberalization,
import duties onanumber ofcapital goods were eliminated; temporary import duties (DCP) were
reduced; andremaining licensing requirements forimports ofagricultural goods werelifted. However,
because tariff reduction wasconcentrated oncapital goods andinputs, effective protection likely
increased, andimport licensing requirements remain inplace forcarsandsome other manufactured
goods. Foreign investment wasfurther liberalized, allowing non-nationals toacquire upto49percent
ofcapital inTunisian enterprises without prior approval.
8. Inthefinancialsector,theeliminationofpreferentialinterestandrefinancingratesandmandatory
lending topriority sectors inlate1996completed theliberalization oflending rates, although short-term
deposit ratesremain controlled. Continued provisioning against nonperforming loans allowed progress
inmeeting prudential norms. Revisions tothelabour codestrengthened thelegalbasis forpart-time
employment, fixed-term contracts, andmore flexible work-time regulations; theyalsoshortened layoff
procedures andliberalized hiring regulations. While administered prices forsubsidized foodproducts
andwater charges foragriculture were raised, theplanned adjustment inenergy prices didnottake
place. Privatization accelerated andpreparatory work wasdonetowards thegranting ofconcessions
totheprivate sector toprovide certain infrastructure andutility services.
TheIXthEconomic Development Plan
9. Intheperiod ahead, theauthorities intend tomove toahigher sustainable growth pathwhile
meetingthechallengesassociatedwithfullerintegrationintotheworldeconomy.Thestrategyformulated
inthedraftIXthEconomicDevelopmentPlanfor1997–2001aimsatanaveragegrowthrateof6percent
peryear, alowering oftherateofinflation to3.5percentby2001, andasteady decline intheexternal
current account deficit toabout 2.2percentofGDP, while maintaining foreign exchange reserves
atover3months ofimports. Thepolicy package underlying thisstrategy inparticular aimsathigher
exports ofmanufactures andtourism, withnon-energy exports growth involume terms accelerating
toabout 8percentperannum, compared to5percentduring 1992-96. Structural reforms areexpected
tostimulate rising direct investment flows, which would allow external debttodecline toabout
40percentofGDP.
10. Achievement ofthetargets oftheIXthEconomic Development Planwillrequire areinforcement
ofmacroeconomic policy andaboldapproach tostructural reform. Tunisia intends torelyonprudent
macroeconomic policies tocontain thepressures ontheexternal current account resulting fromtrade
liberalization, rather thanonrecourse totrade andexchange restrictions.WT/BOP/R/31
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11. Toensuremacroeconomicstability,theplanaimstoraisenationalsavingbymorethan4percent
ofGDP, mostly onaccount ofagradual increase inconsolidated central government saving bymore
than3percent.Theauthorities aimtomaintain taxrevenue stable inrelation toGDPbystrengthening
theVAT andother domestic taxes tocompensate forthelossintrade taxes from thedismantling of
import tariffs under theAAEU. Inthiscontext, theFund hasprovided technical assistance tostrengthen
direct andindirect taxation, taxadministration, andthetariff system. Current expenditure istobe
reduced by3.7percentofGDP, between 1997and2001, mainly through civilservice andfoodsubsidy
reforms. Thestrengthening ofpublic finances willallow themonetary authorities toredirect credit
insupport ofprivate sector growth, while maintaining aprudent monetary stance. Theauthorities intend
tokeepexchange ratepolicy under closereview inlightofexternal developments andpossible changes
intherealequilibrium rate.
12. Asthegrowth targets under theplancallforadoubling oftherateofproductivity growth,
Tunisia willhavetorelymore heavily thaninthepastoncomprehensive structural reforms. Trade
liberalization under theAAEU, which provides forthegradual elimination ofalltariff andnon-tariff
barriers tonon-agricultural imports fromtheEUovera12-year period, aswellastheharmonization
oftrade-related regulations, constitutes animportant stepping stone intheprocess ofTunisia ’sfurther
integration intotheworld economy. Tohelpavoid tradediversion andsecure maximum welfare gains,
importliberalizationwillneedtobeextendedonabroadergeographicalbasis.Advancingtariffreduction
forfinished goods imports willhelpavoid transitional increases ineffective protection thatwould weaken
incentives toadjust.
13. Other structural reform willbeessential toenable Tunisia ’sentrepreneurs towithstand more
intense competition overthelonger runandtostimulate higher foreign direct investment. Towiden
thescope ofprivate sector activity, thegovernment intends toinvolve increasingly theprivate sector
intheprovision ofutility services andaccelerate privatization. Greater useofpublic offerings could
beameans tospeed upthesaleofpublic enterprises, while broadening theprocess tokeysectors such
asbanking andtelecommunications. Theremoval ofrigidities ingoods andfactor markets, stemming
from continued price controls andregulations governing layoffs, needs tobecomplemented bythe
relaxation ofremaining investment controls.
14. Building ontheimpressive progress infinancial sector reform inrecent years, further steps
tostrengthen thefinancial system andprepare themove tofullcapital account convertibility would
include removing remaining controls ondeposit rates; ensuring thatcommercial banks takesteps to
meetminimum capital adequacy ratios; andpromoting afunctioning secondary market fortreasury
paper byestablishing appropriate settlement systems.
Outlook for1997
15. Theoutlook for1997isfavourable. Provided thatefforts atfiscal consolidation aresignificantly
strengthened early ontolimitthefiscal deficit to2.9percentofGDP in1997 astargeted, andthe
monetary stance sufficiently tightened toabsorb excess liquidity intheeconomy, theauthorities ’
targets —realgrowth ofaround 6percent,inflation below 4percent,andadeficit oftheexternal current
account atabout 3percentofGDP—arewellachievable.
16. Inparticular, thebalance ofpayments outlook isencouraging. Bothexports andimports are
projected togrow by5–6percentinrealterms. Export growth ispredicated mainly uponarecovery
inEuropean import demand, aswellashigher oliveproduction. Tourist receipts areexpected togrow
byabout 6.8percentinU.S.dollar terms, broadly inlinewithworld tourism. Stronger import growth
mainly reflects anexpected higher growth ofprivate investment. Withlevels ofgrants andcapital flowsWT/BOP/R/31
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similar to1996, maintaining thecurrent account deficit at3percentofGDPwhile stabilizing reserves
attheequivalent of3.2months ofimports appears feasible.
17. Inconclusion, theFund commends theTunisian authorities formaintaining macroeconomic
stability while pursuing structural reforms. TheFund welcomes theauthorities ’intention todirect the
medium-termstrategyunderlyingtheIXthEconomicDevelopmentPlantowardfosteringamarket-based,
open, andprivate sector driven economy, while consolidating macroeconomic stability. Thisstrategy
should alsocontribute tothefurther integration ofTunisia ’sgoods, services andfinancial markets into
theworld economy. Inthisregard, theFundencourages theauthorities topromptly eliminate remaining
quantitative trade restrictions maintained forbalance ofpayments purposes.