Tunisia’s Finance Ministry unveiled a government plan to reduce budget deficit from 4.9 percent of the country’s GDP in 2018 to 3.9 percent this year.
It said it will work on having greater control over the proportion of the deficit to not exceed three percent in 2020, 2.4 percent by 2021 and only two percent in 2022.
There are several economic challenges that hinder the implementation of this plan, sources said, including the dependence of the Tunisian economy on borrowing money, which caused debt to exceed 70 percent of its GDP.
Borrowing is not an option for Tunisia but a need to overcome the financial and economic difficulties, said Finance Minister Ridha Chalghoum.
Chalghoum stressed the government’s commitment to keep its budget deficit below 3.9 percent this year as indicated in its budget for 2019.
However, wages' increase demanded by the General Labor Union and of which was obtained by many of its members may hinder the achievement of this goal.
“It is not enough to control the budget deficit,” he said, explaining that the increase in the country’s indebtedness is somehow due to the devaluation of the Tunisian dinar (local currency) since loans are taken in foreign currency.
Tunisian authorities are currently implementing a series of measures aimed at supporting institutions, such as doubling the funds allocated to them through the revitalization of the National Fund to support traditional industries and minor professions.
It is also working on the structural reform by establishing KfW Development Bank within the framework of Tunisian-German cooperation, and it is expected to be inaugurated in summer 2019.
Despite the government's optimism that economic reform will lead to a qualitative leap, economic realities still require much work and reform, according to a number of Tunisian economic and financial experts.
