Tunisia to Raise Taxes, Curb Wage Growth in 2018 to Fix Finances

TUNIS (Capital Markets in Africa) – Tunisia plans to cut its budget deficit by raising taxes and curbing wage increases next year, as it implements an IMF-backed plan designed to fix state finances, spur growth and create jobs.

The government is aiming for a budget gap of 4.9 percent of gross domestic product in 2018, the state-run news agency TAP reported, compared with about 6 percent projected by the IMF for this year. Revenue measures include a one percent increase on value-added taxation and applying the levy to a broader set of goods and services, according to a document posted on the Finance Ministry’s website. Next year’s budget still requires approval from lawmakers.

Prime Minister Youssef Chahed is trying to accelerate reforms linked to a $2.9 billion International Monetary Fund loan without stoking unrest in a nation where unemployment — especially among young people — was a catalyst for the uprising that ousted President Zine El Abidine Ben Ali in 2011, the start of the Arab Spring. The government missed all but one of its 2016 targets, according to the IMF, amid opposition to policies including raising the retirement age.

Next year’s budget aims to “spur investment through allocating additional funds, encouraging saving, while rationalizing expenses,” the Finance Ministry said in the document. Spending will increase by 4.3 percent, with wages growing by about 3 percent. Subsidies will remain little changed at 3.5 billion dinars ($1.4 billion). The government will also introduce a levy of 3 dinars on tourists over 12-years-old.