| Author (Corporate) | European Commission |
|---|---|
| Series Title | COM |
| Series Details | (2013) 860 final (5.12.13) |
| Publication Date | 05/12/2013 |
| Content Type | Policy-making |
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The Tunisian economy has been negatively affected by the domestic unrest that followed the 2011 revolution, regional instability (notably the war in Libya), and a weak international environment, particularly in the euro area, with which Tunisia maintains close trade and financial links. The economy experienced a recession in 2011 and, despite the moderate economic recovery witnessed in 2012, when tourism and foreign direct investment (FDI) rebounded and economic activity picked up, the macroeconomic situation remains very vulnerable. In particular, the fiscal and balance of payments situation has deteriorated quite markedly, generating important financing needs. At the same time, following the ousting of President Ben Ali on 14 January 2011, the country is taking significant steps towards the establishment of democratic mechanisms, including the organisation of free elections and the creation of a National Constituent Assembly. Although the political transition has not been without difficulties and episodes of instability, the process is expected to result in the approval of a new Constitution and the organisation of new elections in the first half of 2014. Against this background, the Tunisian authorities reached in mid-April 2013 an agreement with the International Monetary Fund (IMF) staff on a 24-month Stand-By Arrangement (SBA) in the amount of $1.75 billion (400% of quota), which was approved by the IMF Board in June. The aim of the SBA is to support the government’s economic reform programme, reduce economic vulnerabilities and foster sustainable and inclusive growth. In this context, the Tunisian government requested Macro-Financial Assistance (MFA) from the EU in the amount of €500 million on 28 August 2013, with a portion in the form of a grant (see the request letter in Annex). The European Commission submits to the European Parliament and the Council a proposal to grant a MFA to the Republic of Tunisia amounting to a maximum of €250 million. The assistance would take the form of medium-term loans, with no grant component being envisaged given that Tunisia does not meet the eligibility criteria for the use of grants in MFA operations. The proposed EU MFA would help Tunisia cover part of its residual external financing needs for the period 2014-15 in the context of the IMF programme, estimated at $3 billion. It would reduce the economy’s short-term balance of payments and fiscal vulnerabilities, while supporting the adjustment and reform programme agreed with the IMF and the World Bank, as well as the reforms agreed under the EU’s budgetary support operations, in particular the State Building Contract Programme d’Appui à la Relance (PAR), which is financed in part by the EU’s Support for Partnership Reform and Inclusive Growth (SPRING) programme. The proposed MFA is in line with the aims of the G8’s Deauville Partnership initiative and the orientations of the new European Neighbourhood Policy (ENP). It would signal to the other countries in the region that the EU is ready to support countries embarking on political reforms, in moments of economic difficulties. In this context, the Commission considers that the political and economic pre-conditions for a MFA operation of the proposed amount and nature are satisfied. |
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| Source Link | http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2013:860:FIN |
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| Countries / Regions | Europe, Northern Africa |
