TUNIS: Tunisia’s embattled Islamist-led government refocused on the economy yesterday, announcing plans to cut expenditure and freeze public salaries to narrow a deficit expected to reach 7.4 percent of GDP this year.
The government on Monday rejected a plan to step down pending elections, deepening a confrontation with secular opponents in a political crisis that is weighing on the economic outlook.
Under pressure from its international lenders to curb fuel and other subsidies and reduce public sector spending, the government said yesterday that it was moving ahead with austerity measures.
“The government has begun implementing austerity measures including a five percent cut in public spending, after the budget deficit reached seven percent (of gross domestic product) now,” Finance Minister Elyes Fakhfakh told state radio without giving full details of the cuts.
Officials said last week that Tunisia’s budget deficit should narrow to 6.5 percent of GDP next year from an expected 7.4 percent in 2013, as the government imposes strict new fiscal measures.
“Wages will remain unchanged in 2014, especially since the year 2013 saw a 5 percent rise in wages compared to 2010,” the minister said.
Extra government spending on salaries in the small North African country amounted to 1 billion dinars or around $608.2m in 2013, officials said last month.
Tunisia, which signed a $1.7bn standby loan agreement with the International Monetary fund (IMF) in June, is under pressure to speed up economic reforms and subsidy cuts.
Government spending on subsidies has risen to 5.5 billion dinars ($3.4bn) this year, from 1.5 billion dinars in 2010 before the ouster of former president Zine El Abidine Ben Ali in a revolt. The government needs to implement more fiscal measures to reduce its deficit, just as social and political upheaval has cut into the country’s foreign currency reserves, exports and foreign investments.