Tunisia Targeting 5 Percent Growth by 2020

Five years since the Arab revolutions, Tunisia stands as the lone country to have embarked on a democratic path -- our exceptionalism instilling both a sense of pride and significant concern.
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Five years since the Arab revolutions, Tunisia stands as the lone country to have embarked on a democratic path - our exceptionalism instilling both a sense of pride and significant concern. We endured three horrific terrorist attacks last year, the most recent one in the heart of Tunis killing 12 presidential guards. Keeping our citizens and visitors safe is our top priority.

Years of instability have also ravaged our economy. The current unrest in Kasserine -- sparked by the death of Reda Yahyaoui, a young man electrocuted while protesting his exclusion from a list of government jobs -- illustrates that we need to tackle the conditions that lead our youth to such desperation. One in six Tunisians currently lives below the poverty line and unemployment is nearly 29 percent among graduates of higher education. In a country where three-quarters of the unemployed are 15-30 years of age, upward mobility of a promising economy is pivotal to reducing our vulnerability.

Steady progress on critical reforms

Over the last year, Tunisia's coalition government has been hard at work focused on economic reforms. The parliament recently passed a new law to facilitate joint private-public partnership projects. To boost investment, the government presented a new code to simplify the investment framework and open up new opportunities for the development of industrial incubators. This will promote added-value sectors such as IT and aerospace and facilitate transition away from the informal sector. The economic reform program will provide the state budget with approx. $2 billion over the next five years.

Progress has also been made on reforming the subsidy system in the energy sector, striking a balance between improving fiscal and equity considerations without increasing social tensions. Energy subsidies, which peaked in recent years, are expected to decline from approximately $400 million in 2015 to approx. $270 million in 2016.

The government is stepping up efforts to revamp the regulatory environment, adopting long-standing legislation to boost investment and initiating labor market reforms. This will improve employability of graduates through additional training and reconnecting unemployed youth, particularly the long-term unemployed, with mentors and enterprises. In parallel, an entrepreneurship program is being introduced to facilitate the launching of start-ups in close cooperation with financial institutions. This will strengthen the business ecosystem and stimulate entrepreneurial spirit among our youth.

Tunisia is also working closely with the International Monetary Fund (IMF) to meet its criteria for reforms, particularly to narrow the budget deficit, reform the banking system and make the economy more efficient. Quantitative performance criteria noted in the IMF-supported program have been met. Despite the difficult international economic environment, Tunisia has succeeded in maintaining its macroeconomic stability. After the success of the IMF's Stand-By program, we have started discussion of a new Extended Fund Facility program for the next four years.

To ensure that these reforms do not result in an increase in short-term poverty rates, Tunisia is increasing its public spending. Last month, we injected $440 million into state-owned banks ("Société Tunisienne de Banque" and "Banque de l'Habitat") to boost their restructuring. The government is also working with the IMF and other partners to provide technical assistance and capacity building in the public sector. A new banking law is currently in the works that will make our central bank independent of government.

The five-year development plan 2016-20

We are drawing on the same spirit that united Tunisians to design our unique political consensus model to now come together around our structural reforms. The Tunisian government, in collaboration with political leaders, civil society and professional organizations, is developing a five-year plan that we will begin to implement this year.

Our success will depend on the effective improvement of the business environment, as well as progress in the execution of the structural reforms, especially those pertaining to modernization of the administration, the revision of the procurement system, the promulgation of a new investment code and the implementation of tax and customs reforms. The reforms will allow a gradual recovery and consolidation in economic activity over the next two years, before realizing takeoff beginning 2018.

Aiming High: 5 percent growth by 2020

Tunisia expects to grow 2.5 percent in 2016 and about 5 percent in 2020. This is an ambitious target -- but given our demographics, potential and challenges, a crucial one for our future. Tunisia has the ability to successfully make these reforms and grow at our planned levels, but we need international support - a dramatic increase in economic assistance from the G8 countries. We need $25 billion over the next five years to finance the development of infrastructure projects such as roads, bridges and other public works, particularly in previously neglected regions. This will create much-needed jobs and stimulate economic activity.

We are pleased to note that the U.S. Senate has voted to reinstate the assistance package to Tunisia and increase the allocation beyond that requested by the U.S. administration. Visible support for Tunisia from the U.S. and other leading economies is critical to showing our youth that democracy, not dictatorship or extremism, are the long-term solutions to building a brighter future.

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