RESTRICTED
WORLD TRADE WT/BOP/W/13
20May1996
ORGANIZATION(96-1946)
Committee onBalance-of-Payments Restrictions
1996 CONSULTATION WITH TUNISIA UNDER THE BALANCE-OF-PAYMENTS
PROVISIONS OFTHE GATT 1994 AND THE RELATED UNDERSTANDING
Background Paper bytheSecretariat
1. Thispaper hasbeenprepared inaccordance withparagraph 12oftheUnderstanding onthe
Balance-of-Payments Provisions oftheGeneral Agreement onTariffs andTrade 1994.1
I. Previous consultations withTunisia
2. IntheperiodsinceTunisia'sprovisionalaccessiontoGATTinNovember1959(fullmembership
on12March 1990), fivefullconsultations, withintervening simplified consultations, havebeenheld
withTunisia intheGATT 1947Committee onBalance-of-Payments Restrictions. Themostrecent full
consultation washeldinOctober 1992 (BOP/R/202).
3. Atthesimplified consultation ofJune1994, theCommittee agreed that,subject tonotification
ofitems restricted forbalance-of-payments reasons, Tunisia would bedeemed tohavefulfilled its
obligations for1994under Article XVIII:12(b). Following thepublication ofarevised listofliberalized
products inJuly1994, inthecontext ofthenewLawNo.94/41 oninternational trade, Tunisia notified
thelistofrestricted items on30September 1994. TheCommittee alsoagreed thatthenextconsultation
withTunisia would takeplace according totheregular schedule andshould beafullconsultation.
II. Trade Régime ofTunisia2
(i) Import licensing restrictions
4. Tunisia 'squantitative restrictions onimports areadministered byLawNo.41-94 of7March
1994, Article 39;Decree No94-1542 of29August 1994 and;thesubsequent implementing decrees.
Apermanent list(List A)contains imports restricted forreasons ofsecurity, public order, health,
preservation ofcultural heritage, theprotection ofendangered species, aswellasimports ofcertain
subsidized foodproducts, cereals andproducts derived thereof under animport monopoly heldbythe
Office desCéréales. Atemporary list(ListB)contains products imports ofwhich arerestricted pending
thecompletion ofthetrade liberalization program.
5. Thelistofproducts subject torestrictions forbalance-of-payments reasons notified byTunisia
inSeptember 1994included threemainsectors -agricultural products; articles ofapparel andclothing
1Itisrecalled that,under Article XII,paragraph 5oftheGeneral Agreement onTrade inServices (GATS)
procedures forconsultations "shall bethesame astheGATT 1994 procedures".
2Thissection reflects thedevelopments since theprevious Background Paper bytheSecretariat dated 30May
1994 (BOP/W/155).WT/BOP/W/13
Page2
andmotor vehicles -andanumber ofother items atfourdigitHSlevel3.Thedevelopments thattook
place inTunisia 'strade régime inconnection withtheentry intoforce oftheWTO havetruncated
theprevious listofrestricted products: (i)inaccordance withitscommitments under theAgreement
onAgriculture, Tunisia hastariffied itsquantitative restrictions onagricultural products .InTunisia 's
Schedule attached totheMarrakesh Protocol tariff reduction onthese products arephased intoyear
2004; (ii)Decree No95-2277 of13November 1995 abolished therestrictions onarticles ofapparel
andclothing inaccordance withtheAgreement onTextiles andClothing. Theratesofdutyonthese
items aretobereduced to60percentuptoyear2004 inTunisia 'sSchedule.
6. However, motor vehicles principally designed forthetransport ofpersons including carsand
stationwagons (some 110sub-items at9-digit levelunder HS87.03) remain under restriction.
7. Inaddition, Tunisia continues toimpose quantitative restrictions onthefollowing consumer
goods: marble andtravertine, merely cut,bysawing orotherwise intoblocks, etc.(HS 25.15);
monumental andbuilding stones, cut,sawn flatotworked (HSex68.02); drinking glasses, tableand
kitchenware ofleadcrystal (ex70.13); other articles ofglass(HSex70.20); imitation jewellery (HS
71.17); cruise ship,cargo ship,barges andsimilar vessels forthetransport ofpersons andgoods (HS
89.01); yachts andother vessels forpleasure orsports,rowing boats andcanoes (HS89.03); lamps
andlighting fittings n.e.s., signs, nameplates illuminated andparts n.e.s.(HS ex.94.05).
8. Therevision ofthenegative listshasnowbeencompleted. Thedecree eliminating agricultural,
foodandcertain industrial products from Lists AandBwillbepromulgated shortly.
(iii) Import taxes
9. Applied tariffs range between 0and43percent. Following thephasing outofquantitative
restrictions onimports, in1995 Tunisia hasrenewed temporary compensatory duties of30percent
forsome oftheliberalized products, initially introduced foraperiod ofthree years in1991. On19
January 1994 Tunisia wasaccorded awaiver under GATT 1947 covering bound ratesaffected by
theprovisional complementary duties. Tunisia undertook tophase outannually theincreased customs
duties untiltheexpiry ofthewaiver on1January 1997.4Inaccordance withDecree No.96/501
of25March 1996, thefirststage intheelimination oftemporary duties hasbegun andshould be
completed by31December 1997.
10. Simple average applied duty, inclusive ofprovisional complementary duties, is40.3percent
onagriculture andfishing, 33percentonmanufactured goods. Textiles, apparel andleather imports
aresubject toanaverage rateofover50percent(average ratesof70percentonimports ofgarments
and62percentonfootwear). Theaverage tariff applied tofood, beverages andtobacco is42.1per
cent;fabricated metal products, machinery andequipment aresubject tolower rateswithsimple average
rateat28percent.5
11. Tunisia hasbound 46percentoftariff linesinindustrial products (ofwhich 31percentat
ceiling duties) accounting for68percentof1989 imports. Bound ratesrange between 0and15per
centfor1.5percentofindustrial tariff lines(amounting to1percentof1989 imports ofindustrial
3L/7537.
4L/7380 of19January 1994.
5Republic ofTunisia, Towards the21stCentury, VolII,October 1995.WT/BOP/W/13
Page3
products); 15to20percentfor20percentoftariff lines(21percentofimports); between 20and
40percentfor62percentoftariff lines(55percentof1989 imports) and;between 50and60per
centfor17percentoftariff lines(23percentof1989 imports). Thesimple average ofbound tariffs
intheindustrial sector is34percent.
12. Inmid-1995 Tunisia concluded anAssociation Agreement withtheEuropean Union, involving
theestablishment ofafreetrade areainindustrial goods. Tunisia willphase outallimport duties or
equivalent charges overa12-year period according tofourseparate timetables applying todifferent
categories ofproducts.
III. Macroeconomic andtrade developments
Introduction
13. During 1991-1995, theTunisian authorities pursued thecomprehensive programme ofeconomic
reforms originally initiated in1986. Thestructural reforms involved theliberalization ofexternal trade
andpayments, ofdomestic prices andofthefinancial sector aswellasareshaping ofthedirect and
indirect taxsystems andarestructuring ofthepublic enterprise system. Thecontinued implementation
ofthese reforms andprudent macroeconomic policies contributed toanincreased diversification of
theeconomy andanimprovement initsresilience toadverse factors. TheGulfcrisis, together with
theweak economic growth inEurope andasevere drought, adversely affected Tunisia 'seconomic
performance. Thedrought, inparticular, wasresponsible forasharp contraction ofagricultural output
andapick-up ininflation during 1994-1995. Italsocontributed totheauthorities 'failure tomeettheir
fiscal deficit targets in1994-1995 andtoawidening ofthecurrent account deficit in1995.
Unemployment hasremained relatively high, reflecting therapid increase inthelabour force relative
tothepaceofjobcreation. Nevertheless, despite theseadverse exogenous developments, theeconomic
performance remained relatively solid.
(i) Demand, output, prices, andlabour market
14. Despite theGulfcrisis, theeconomic recession inEurope, andpersisting drought, theeconomy
performed relatively wellduring 1991-1995. RealGDPgrowth averaged 4.0percentovertheperiod
andisestimated at2.8percentfor1995, despite threeconsecutive years (1993-1995) ofsevere output
reductions intheagricultural sector duetothedrought. Growth wasfuelled byinvestment in1992-1993,
byexports in1992-1994 andbypublic demand throughout theperiod. Duetotwoforeign financed
projects intheenergy sector,6totalinvestment roseby9.3percentinrealterms onaverage during
1991-1993, butdeclined by5.6percentin1994 and0.3percentin1995 reflecting "awaitandsee"
attitude ofthebusiness community during thepreparation andpromulgation ofthenewInvestment
Code andthenearcompletion oftheenergy projects. Exports ofgoods andnonfactor services increased
by13.6percentin1994, butareexpected togrow by1.8percentonlyin1995, reflecting theeffect
ofasevere dropinagricultural exports. In1995, Central Government investment andconsumption
areexpected togrow by22.1percentand7.6percent, respectively, partially offsetting thesecond
yearofprivate investment decrease andtheslowing ofprivate consumption growth. Onaverage, exports
ofgoods andnon-factor services grewby5.1percentinrealterms during 1991-1995, while theannual
realgrowth rateofdomestic demand averaged 3.5percentayear. During thesame period, Central
government consumption expanded inrealterms by6.5percentayear, while non-central government
consumption grew by3.3percentonaverage.
6Agaspipeline toItaly andanoffshore gasfield.WT/BOP/W/13
Page4
Table 1-Tunisia -Demand components, 1991-1995
(Annual percentage change atconstant prices)
1991 1992 1993 1994 1995*
Consumption 2.0 6.1 3.3 3.7 3.6
Private 0.5 6.4 2.7 3.8 2.9
Central government 10.9 4.4 6.8 2.9 7.6
Gross fixed capital formation 3.0 16.3 8.5 -5.6 -0.3
Private sector -3.7 30.0 8.0 -5.6 -4.4
Central government 31.5 -26.8 11.1 -5.1 22.1
Domestic demand 1.3 9.4 2.3 -1.2 5.5
Exports ofgoods andnonfactor services -0.9 8.0 3.8 13.6 1.8
Imports ofgoods andnonfactor services -5.6 11.5 3.7 2.4 6.2
GDP atmarket prices 3.9 7.8 2.3 3.4 3.5
* Estimates
Source :IMF.
WT/BOP/W/13
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Table 2-Tunisia -GDP andselected components ofaggregate demand, 1991-1995
(Inmillions ofdinars atcurrent prices)
1991 1992 1993 1994 1995*
Consumption 9498 10654 11434 12412 13605
Private sector18042 9052 9665 10501 11474
Central government 1456 1602 1769 1911 2131
Gross fixed capital formation 2892 3695 4207 4151 4367
Private sector12195 3135 3554 3503 3532
Central government 697 560 653 648 835
Domestic demand 12625 14643 15636 16186 17908
Exports ofgoods andnonfactor services 4856 5419 5990 7165 7720
Imports ofgoods andnonfactor services 5452 6356 7019 7484 8413
GDP atmarket prices 12029 13706 14606 15867 17215
* Estimates.
1Includes alleconomic agents except thecentral government.
Source :IMF.
15. During 1991-1995, manufacturing andservices continued tobethemain sources ofgrowth.
Theshare ofagriculture andfishing intotaloutput declined from16.7to11.7percent,reflecting the
vulnerability ofthenon-irrigated agricultural sector tochanging weather conditions. By1995, the
drought hadreduced cereal andoliveproduction tobetween onethirdandonehalfof"normal" levels.
Cereal production declined forthefourth year, reflecting bothadecrease inthesown surface andin
productivity. Bycontrast, theproduction offruits andvegetables remained stable during 1991-1995
asaresult oftheupgraded irrigation system andanexpansion inarable land.
16. Incontrast, manufacturing output expanded atanaverage rateof5.1percentinrealterms
anditsshare increased from 16.8to17.8percentbetween 1993 and1995. Chemical andrubber
industriesregisteredthefastestsectoralgrowthrates,followedbytextiles,clothing,andleatheractivities.
Theperformance ofthemanufacturing sector in1991-1995 reflected mainly large productivity gains
achieved byabetter useoftheexisting capital.
17. Theservices sector alsocontinued toexpand, increasing itsshare intotal output from
41.8percentin1991 to46.7percentin1995. Realvalue added intheenergy sector stagnated in
1991-1995, entirely attributable tothedecline ofthepetroleum sector, whose output declined from
6.1million tonsofoilequivalent in1991to5.3million tonsin1994, duetothedwindling ofreserves
inthetwomost productive fields.WT/BOP/W/13
Page6
Table 3-Tunisia -Sectoral origin ofGDP, 1991-1995
(Inpercentage ofGDP)
1991 1992 1993 1994 1995*
Agriculture andfishing 16.7 16.1 14.7 13.0 11.7
Mining 0.8 0.6 0.5 0.6 0.7
Hydrocarbons, electricity andwater 7.4 6.8 5.9 5.6 5.6
Manufacturing 16.9 16.5 16.8 17.5 17.8
Food processing 3.5 3.3 3.1 3.2 3.0
Chemical andrubber industries 1.6 1.4 1.4 1.5 1.6
Textiles 5.2 5.4 5.7 6.0 6.2
Constructions andpublic works 3.8 4.3 4.0 4.1 4.2
Services 41.8 42.2 44.7 45.9 46.7
Transport andtelecommunications 6.7 7.1 7.7 8.0 8.3
Commerce andother services 17.4 16.8 18.0 18.5 19.2
Tourism 4.2 5.2 5.5 5.8 5.7
* Estimates.
Source :IMF.
18. Water scarcity isanimportant long-term resource issue inTunisia andthesub-region.
Agricultural activities andtourism areheavily dependent onwater resources. Nevertheless, despite
adverse climatic conditions, water production hasincreased inlinewithoverall economic activity in
recent years. Thisreflected mainly theGovernment 'slarge investments inthedevelopment ofwater
resources. Despite regular price increases, water continued tobeheavily subsidized.
19. Inflation decelerated sharply in1991-1993, butpicked upsomewhat thereafter, mainly asa
result ofadverse effects ofthepersistent drought. Onaverage, consumer prices roseby5.7percent
between 1991 and1994, compared to7.4percentonaverage during 1987-1990. However, therate
ofincrease ofconsumer prices rosefrom 4.0percentin1993 to4.7percentin1994, andtoan
estimated6.2percentin1995.Thedroughtseverelyaffectedtheagriculturalsector,fuellinganincrease
infoodprices of8.4percentin1995compared to4.3percentin1994, despite thefactthattheprices
ofsubsidized foodproducts werenotraised in1995. Consumer prices, excluding food, increased by
5.0percentbothin1993 andin1994, butwere estimated tochange by4.7percentin1995. This
suggests thatthepick-up ofinflation mayalsohavereflected theeffects ofpricederegulations, especially
in1994.
20. Domestic prices, which weresubject todiffering degrees ofcontrol havebeenliberalized in
recent years. Asofend-1995, retailprices wereliberalized forabout 81percentofdomestic absorption
while producer prices were setfreely forabout 90percentofdomestic production. Most ofthe
remaining controls attheproduction stage concern theagro-industries andconstruction material.
Measures were alsoenacted toimprove thedistribution system andtoencourage competition.
21. Bothgrowth ofwages andtheunemployment situation didnotundergo major changes. Average
annual wages increased by2percentperyearinrealterms during 1991and1992, andunemployment
declined, albeit moderately, since theearly 1990s. Fortheperiod of1993-1995, theavailability of
dataonwages andemployment ismorelimited. According toIMFestimates, realwages havecontinued
toincrease since 1993, following thegeneral wage increase ofupto6percentperannum resulting
fromthethree-year wageagreement inthecivilservice (1993-1996) andtheassociated sectoral collective
agreements. Thethree-year wage agreement mayhavereinforced downward rigidity ofwages and
salaries. Theofficial unemployment ratestood at15percentin1994, while, according torecent World
Bank estimates, unemployment isintherange of11-12 percent. Unemployment isparticularly high
among theyoung, women, andurban population, while underemployment prevails inruralareas. The
relatively highrateofunemployment isprimarily aconsequence ofthehighgrowth rateofthelabourWT/BOP/W/13
Page7
force, increasing female participation intothelabour market, rural migration andtheslowdown of
emigrationtoEuropeancountries.Moreover,despiteagradualimprovementoflabourmarketlegislation,
rigidities inthelabour market mayhavealsoslowed down employment creation. Unfortunately, there
isnoavailable information ontheeffects ofagricultural contraction onemployment.
Table 4-Tunisia -Selected indicators ofbalance ofpayments, 1991-95
(Inmillions ofdinars andpercentages)
1991 1992 1993 1994 1995
Current account -421 -774 -799 -316 -537
Trade balance -866 -1466 -1473 -1094 -1370
Exports, f.o.b. 2711 2850 2688 3243 3545
Energy 387 432 325 305 301
Non-energy 2324 2418 2363 2938 3244
Imports, f.o.b. -3577 -4316 -4161 -4337 -4915
Energy -289 -319 -326 -326 -334
Non-energy -3288 -3997 -3835 -4012 -4581
Total services 445 693 673 779 833
Nonfactor services (net) 469 753 789 895 906
Ofwhich: tourism 500 759 795 910 938
Factor services andtransfers (net) -24 -60 -115 -117 -73
ofwhich: workers 'remittances 417 410 428 480 535
interest onexternal debt -294 -313 -334 -360 -420
Capital account 366 861 794 674 679
Grants 89 58 74 72 83
Foreign direct investment (net) 121 346 450 262 184
Medium- andlong-term loans 189 203 211 350 409
Disbursement 805 832 831 988 1076
Amortization -615 -629 -620 -638 -667
Short-term capital andother1-33 254 59 -11 3
Overall surplus ordeficit (-) -54 87 -5 358 142
Change inofficial netforeign assets (increase -) 54 -87 5 -358 -142
Memorandum items: Average
1986-901991 1992 1993 1994 1995
Current account balance (in%ofGDP)
Trade balance (in%ofGDP)
Services balance (in%ofGDP)
Capital account, excluding grants (in%ofGDP)
Foreign direct investment
Netmedium- andlong-term borrowing
External debt(in%ofGDP)
Gross official reserves (inmonths ofimports of
goods)
Debt-service ratio2n.a.
-10.9
7.6
2.9
1.3
1.1
59.0
n.a.
n.a.-4.4
-9.1
4.7
2.7
1.3
2.0
55.1
1.8
23.8-7.0
-13.3
6.3
7.0
3.1
1.8
51.9
1.8
20.2-7.7
-14.1
6.5
7.2
4.3
2.0
55.2
1.9
20.6-2.9
-10.0
7.1
4.3
2.4
3.2
54.0
2.8
18.5-4.5
-11.5
7.0
5.0
1.5
3.4
51.1
2.8
18.7
1Includes changes inthenetforeign assets ofcommercial banks, anderrors andomissions.
2Asapercent ofexports ofgoods andservices; includes IMFcharges.
Source :IMF.WT/BOP/W/13
Page8
IV. Balance ofpayments
22. During1991-1995,Tunisiapursueditsintegrationintointernationalproductandcapitalmarkets.
Therégime governing, trade, exchange, andcapital movements, including foreign direct investment,
wasfurther liberalized. Quantitative import restrictions werereduced, andtheremaining restrictions
weremade more transparent bytheestablishment ofthe"negative list". Theconvertibility ofthedinar
forcurrent transactions andaninterbank foreign exchange market werealsointroduced. InJuly1995,
Tunisia concluded anassociation agreement withtheEuropean Union involving theestablishment of
afreetrade area.
23. After aserious deterioration in1992-1993 reflecting asurge ofimports related tothetwo
investment projects intheenergy sector andacontraction ofexports in1993, thecurrent account position
improved andthedeficit decreased sharply to2.9percentofGDPin1994. In1995, thedeficit again
widened to4.5percentofGDPin1995, mainly reflecting thepoorperformance ofagricultural exports,
which decreased by32percentin1995 duetothedrought andastrong increase infoodandraw
materials imports. After fouryears ofdecline, theterms oftrade improved by1.5percentin1994
andbyanestimated 1.4percentin1995. Thebalance ontradeinservices improved steadily between
1991-1995 astourism receipts recovered following theGulfcrisis.
24. Theexternaldebtpositionhasbeenstabilized.TheexternaldebttoGDPratiohasbeendeclining
since 1993, andstood at51percentin1995, afallofthree percentage points incomparison tothe
previous year. Interest payments onforeign debtwere stable ataround 3percentofGDP, nearly
onepercentage point ofGDP lower thanduring 1986-1990. Thereduction ofinterest payments on
foreign debtreflecting thetrend decline inthedebttoGDPratiowasoffset byhigher services paymentsWT/BOP/W/13
Page9
related toforeign investments intheenergy sector. These payments felltozeroin1995 withthe
completion oftheproject. Official grants remained stable asapercentofGDP during 1991-1995.
Inrecent years, Tunisia hasbeenalsoabletoaccess theinternational capital markets.
(a) Current account
25. Thecurrent account balance hasbeensubject toanumber ofseasonal andexogenous influences.
Astheservices balance steadily improved between 1991-1995, thechanges inthecurrent account deficits
mainly reflected changes inthetrade account. Thetrade deficit wasreduced from 13.3percentof
theGDPin1992and14.1in1993to10percentin1994and11.5percentin1995. Asalready noted,
thedeterioration in1992-1993 reflected anincrease inimports related totwoinvestment projects.
During 1994-1995, thevalue terms oftradeimproved. Atthesame time, theratioofexport toimport
volumes increased significantly in1994butisestimated tohavedeclined slightly in1995. Thewidening
ofthetrade balance estimated for1995thusmainly reflects thedifference between thegrowth oftotal
merchandise exports involume, estimated at1.3percent,andthegrowth oftotalmerchandise imports
involume, estimated at6.4percent.
26. Ontheexport side,exports ofolive oilreached anexceptionally highlevelin1994 andare
expected tohavedeclined sharply in1995. Energy exports havebeenstagnating. Onaverage, real
non-energy exports grew by6.3percentduring 1991-1995, while realenergy exports decreased by
0.1percentduring thesameperiod. Although slower thanduring 1986-1990, export growth remained
wellinexcess ofpartner countries demand growth, allowing Tunisian exporters togainmarket shares.
Exports oftextiles andmechanical andelectric manufacturing products grewfastest. Duetothegradual
depletion ofitsoilfields, Tunisia became anetimporter ofenergy in1993.
27. Theriseinmerchandise imports haslately beendriven byhigher foodandconsumer goods
imports, aswellashigher imported inputs formanufacturing. Realnon-energy imports grew by
3.2percentduring 1991-1995. Onaverage, theshares offoodandrawmaterials imports inGDP
weresmaller for1991-1995 thanfor1986-1990, while theshare ofconsumption goods increased from
anaverage of9.6percentduring 1986-1990 toanaverage of13.3percentin1991-1995. During
1991-1995, theshare ofconsumer goods imports steadily increased from 11.7percentofGDP in
1991to14.8percentin1995. However, thegrowth inimports ofconsumer goods slowed down from
11.6percentin1994 to5.6percentin1995.
28. Thegeographical structure ofTunisia ’straderemained stable during 1991-1995, withtheEU
accounting for80percentofTunisia ’sexports and70percentofitsimports. Members oftheArab
Maghreb Union accounted for7to8percentofexports and4percentofimports. TheUnited States
andCanada supplied around 6percentofTunisia ’simports, while playing amarginal roleasbuyers.WT/BOP/W/13
Page10
Table 5-Tunisia -Distribution ofmerchandise trade bymain regions 1991-1995
(Inpercentage)
Exports Imports
1991 1992 1993 1994 1995* 1991 1992 1993 1994 1995*
EU-12 76.6 78.4 78.3 80.1 79.2 71.7 71.1 72.3 69.5 69.3
Arab Maghreb Union 8.4 7.9 7.7 6.4 6.9 3.7 4.4 3.2 4.5 4.4
Other countries 15.0 13.7 14.0 13.5 13.9 24.6 24.5 24.5 26.0 26.3
* Estimates forthefirst9months.
Source: IMF.
Table 6-Tunisia -Commodity composition ofmerchandise exports andimports
(Inmillions ofdinars andpercentages)
1991 1992 1993 1994 1995*
(Millions ofdinars)
Exports, f.o.b. 2711 2850 2688 3243 3545
Energy products 387 432 325 305 301
Non-energy 2324 2418 2363 2938 3244
Phosphates andderivatives 389 395 336 412 469
Agricultural (including agro-processing) 412 296 313 421 351
Textiles andleather 1050 1231 1268 1543 1785
Mechanical andelectrical industry 320 341 315 430 488
Other goods 154 156 131 130 151
Imports, c.i.f. 3786 4567 4442 4590 5199
Energy products 289 319 326 326 334
Non-energy 3497 4247 4116 4264 4864
Rawmaterials andsemi-finished goods 1185 1477 1305 1311 1530
Equipment 953 1120 1124 1002 1021
Food 246 305 298 375 549
Non-food consumer goods 1113 1345 1359 1577 1764
Memorandum item: (Percentage shares)
Exports, f.o.b. 100 100 100 100 100
Energy products 14.3 15.2 12.1 9.4 8.5
Non-energy 85.7 84.8 87.9 90.6 91.5
Phosphates andderivatives 14.3 13.9 12.5 12.7 13.2
Agricultural (including agro-processing) 15.2 10.4 11.6 13.0 9.9
Textiles andleather 38.7 43.2 47.2 47.6 50.3
Mechanical andelectrical industry 11.8 12.0 11.7 13.3 13.8
Other goods 5.7 5.5 4.9 4.0 4.3
Imports, c.i.f. 100 100 100 100 100
Energy products 7.6 7.0 7.3 7.1 6.4
Non-energy 92.4 93.0 92.7 92.9 93.6
Rawmaterials andsemi-finished goods 31.3 32.3 29.4 28.6 29.4
Equipment 25.2 24.5 25.3 21.8 19.6
Food 6.5 6.7 6.7 8.2 10.6
Non-food consumer goods 29.4 29.5 30.6 34.4 33.9
* Estimates.
Source: IMF.WT/BOP/W/13
Page11
29. Thecurrent account position hasbeenhistorically strengthened bylarge inflows ofworkers '
remittances andother income fromservices suchastourism. During 1991-1995, theoverall services
balance suffered somewhat from theGulfwarcrisis andfrom aslight weakening ofnetworkers '
remittances. Asaresult, thebalance ofservices, expressed asashare ofGDP, declined onaverage
from7.6percentin1986-1990 to6.3percentduring 1991-1995. Tourism receipts asashare ofGDP
reached pre-crisis levels of7-8percentduring 1993-1995 afterafallto5.3percentin1991. The
fluctuations ofworkers 'remittances, which fellto3.7percentofGDP in1992 butrecovered and
reached 4.5percentofGDP in1995, reflected theeconomic evolution inEurope andtheslowing
emigration towards Europe.
(b) Capital account
30. During 1991-1995, netcapital inflows increased tofinance thelarger current account deficits
andthestrengthening ofofficial reserves. Onaverage, thecapital account balance excluding grants
increased from 2.9percentofGDP in1986-1990 to5.2percentduring 1991-1995. Thestructure
ofthecapital account remained broadly stable. Medium andlong-term borrowing accounted forthe
largest share ofgross inflows. Netmedium andlong-term borrowing increased from anaverage of
1.1percentofGDPduring 1986-1990 toanaverage of2.5percentduring 1991-1995. Foreign direct
investment increased sharply during 1992-1993 inrelation tothetwoenergy projects butreturned
toitsprevious levelof1.5percentofGDP by1995 afterthenearcompletion ofthetwoprojects.
Onaverage andincluding thefinancing oftheenergy projects, foreign direct investment increased
from1.3percentofGDP during 1986-1990 to2.5percentduring 1991-1995. Thecomposition of
gross borrowing byorigin alsoremained broadly stable. Multilateral creditors accounted foronehalf
ofthetotal, official bilateral sources foronequarter, andprivate bilateral sources fortheremaining
quarter. In1994-1995, Tunisia successfully floated fourbond issues intheJapanese market inorder
todiversify thesources ofitsexternal borrowing.
31. Theregulatory framework forforeign direct investment wasfurther liberalized. Thenewcode
allows foreigners toinvest inagriculture, eventhough foreign ownership ofagricultural landremains
strictly prohibited. Inmost other sectors, except anumber ofservice areas where foreign majority
participation issubject topriorapproval, foreign direct investment isaccorded national treatment and
doesnotrequire anyspecial authorization. According tothecentral bank, 80percentofforeign direct
investment wentintotheenergy sector during 1991-1994, withtheremainder going intotheindustrial
andtourism sectors. Partial datafor1990-1993 show thatalmost allforeign direct investment came
from EUcountries, withItalybyfarthemost important source. TheUnited States wasthemost
important non-EU source accounting foranaverage of13percentoftotalforeign direct investment
during 1990-1993, ashare similar tothose ofFrance andtheUnited Kingdom. Although another
governmentdecreefurtherliberalizedforeignequityinvestmentsin1995,portfolioinvestmentsremained
marginal, reflecting theslowpaceofliberalization andtherelatively underdeveloped capital market.
32. Tunisia’sexternaldebtincreasedbyaboutSDR0.3billionperyearduring1991-1995,stabilizing
theexternal debtratiotoGDP ataround 52-54 percent. Theshare ofmultilateral lenders rosefrom
30percentin1990to40percentby1994whiletheshareofbilateralcreditorsdeclinedfrom66percent
to56percentreflecting the“graduation ”ofTunisia from preferential lending. Theshare ofdebt
owed toprivate sources wasdeclining until1993. In1994, thefirstissueintheJapanese market brought
theshare backtoits1990 levelat4percentandfurther toanestimated 9percentin1995. Gross
official reserves rosetotheequivalent ofabout three months ofmerchandise imports by1995, which
places Tunisia inarelatively comfortable situation given thatasizable share ofimports, notably inputs
fortheoffshore textile sector andenergy equipment, isdirectly financed from abroad.WT/BOP/W/13
Page12
V. Fiscal andmonetary developments
(a) Savings-investment balance
33. Asnoted above, theincrease inthegapbetween savings andinvestment in1992and1993mainly
reflected theeffects ofthelarge private investment projects intheenergy sector andasubstantive
accumulation ofolive oilstocks in1993. Thereduction inthecurrent account deficit in1994 was,
therefore, mainly duetoareduction indomestic investment. Theworsening in1995reflects astrong
increase indomestic gross investment, primarily investment bythecentral Government. Savings
remained virtually stable during 1991-1995. For1995 thebalance between savings andinvestment
isestimated at2.6percentofGDPfortheprivate sector and1.3percentforthecentral government.
Table 7-Tunisia -Savings-investment gap,1991-1995
(Inpercentage ofGDP)
1991 1992 1993 1994 1995
Gross investment 26.0 29.1 28.8 23.8 25.0
Gross national savings 21.7 22.2 21.3 21.4 21.1
Savings-investment gap
(foreign ressources) -4.3 -6.9 -7.4 -2.4 -3.9
Private sector -1.1 -6.9 -7.2 -2.2 -2.6
Central government -3.2 -- -0.2 -0.2 -1.3
Source: IMF.
(b) Public finance
34. During 1992-1995, thefiscal situation remained stable andthebudget deficit, which never
exceeded 3percentofGDP, could beeasily financed without crowding outtheprivate sector. Fiscal
developments reflected theresponsiveness ofthetaxsystem tothereforms introduced in1988-1990
andthecontinuous efforts aimed atimproving taxadministration andcontaining thegrowth of
expenditures. After widening to5.7percentofGDP in1991 asaresult oftheGulfcrisis andthe
fallinpetroleum revenues, thebudget deficit wassubstantially reduced to2.8percentofGDPin1992
asaresult ofarecovery inrevenues andalargedecline inexpenditures. During 1993-1994, thedeficit
remained closeto3percentofGDP, justshortoftheGovernment ’sobjective based ontheassumption
ofstronger economic growth. Thebudget deficits, exluding grants, isnowestimated ataround 5per
centofGDP in1995. Thefiscal deterioration isduetoaweakening oftaxcollection coupled with
lower thanexpected economic growth andhigher expenditure onaccount offoodsubsidies.WT/BOP/W/13
Page13
35. Since 1990, totalrevenue hasremained stable atabout 30percentofGDP, except forarevenue
lossin1991-1992 reflecting theMiddle-East crisis andtheresulting dropinpetroleum revenue. The
ratiooftaxrevenue toGDP increased steadily from24percentin1991toanestimated 25.1percent
in1995. Thisincrease wasoffset byadecrease ofnontax revenue, dueessentially tothetrend decline
inpetroleum revenue. Thecomposition oftaxrevenue hasalsochanged. Taxes onhousehold incomes
andprofits, which accounted for17.4percentoftotaltaxrevenue in1991, increased toanestimated
19.2percentin1995, while taxes oninternational trade andservices decreased from 33.1percent
oftotaltaxrevenue to30.6percentduring thesame period. Theratioofimport duties toGDP rose
slightly to4.6percentin1992-1993 before declining to4.3percentin1995. Theincrease in1991-1993
reflected theintroduction oftheimport surcharge andthecomplementary import duties7,whereas the
decline in1995 wasrelated tothereductions inexemptions andtheincrease intheshare ofimports
bytheoffshore sector, which remained exempt from taxes onimports.
36. Thegrowth ofexpenditure wascontained during theperiod byrestricting thegrowth ofboth
current andcapital expenditures. Total government expenditures andnetlending asapercentofGDP
fellfrom 34.8percentin1991 to32.5percentin1992 before increasing slightly to33.4percent
in1995. Thedropoftotalexpenditure in1992reflects afallincurrent aswellascapital expenditures.
During 1993-1995 current expenditure roseto26.9percent, slightly higher thanthecorresponding
1991 levelof26.5percentwhile capital expenditure fellfrom 8.5percentin1991 to7.2percent
in1995. Theshare ofcurrent expenditure intotalexpenditure rosefrom 75.7percentin1991 to
anaverage of80percentinsubsequent years.
37. TheCentralGovernmentalsokeptthegrowthofitswagebillandofsocialbenefitsundercontrol.
Public expenditures onwages andsalaries rosemoderately from 9.7percentofGDP in1991 toan
estimated 10.4percentin1995, reflecting bothanincrease inthewage level andinthesizeofthe
civilservice, which hasexpanded atarateof2.5percentperyearonaverage. Subsidies andtransfers
haveremained stable atabout 11percentofGDP. Inthisexpenditure category, benefits paidbythe
social security funds registered thefastest growth during theperiod, reflecting abroadening ofcoverage,
while consumer subsidies forfoodproducts declined byhalfasaresult ofregular increases intheprices
ofsubsidized commodities andtheremoval ofcertain commodities from thesubsidy programme.
38. Between 1991 and1995, thefinancing ofthefiscal deficit gradually shifted from domestic
toexternal financing, resulting intheCentral Government ’sreduction ofitsindebtedness tothedomestic
banking system. Theshare offoreign financing ofthefiscal deficit rosesteadily from lessthan
20percentoftotalfinancing in1990toanestimated 72percentin1995. Thefinancing ofthefiscal
deficit increasingly tookplace onmarket conditions. Theshifttowards foreign financing, which aimed
atavoiding crowding outoftheprivate sector, wasfacilitated byTunisia ’seasier access toforeign
resources.
39. Theshare ofthevalue added ofnon-financial commercial public enterprises inGDP declined
from11.2percentin1990 to9.7percentin1994. Thisdecline wasachieved through restructuring
efforts which often implied partial ortotalliquidations andtheprogressive disengagement ofthe
Government from directly productive activities through privatization.
7Tocopewiththefiscal implications oftheGulfcrisis, Tunisia introduced inearly 1991 atemporary import
surcharge of5percentoftheimport duties andtaxes; thesurcharge waseliminated assuchin1994 andwas
partially incorporated intothestandard tariff. During 1991-1995, thegovernment embarked onafurther gradual
reduction ofQRs, butintroduced temporary compensatory duties ofbetween 10-30 percentforsome ofthe
liberalized products. These duties were tobegradually reduced tozeroover 3years after their introduction.WT/BOP/W/13
Page14
Table 8-Tunisia -Consolidated expenditures andrevenue ofthecentral government1,1991-95
(Inmillions ofdinars andpercentage ofGDP)
1991 1992 1993 1994 1995*
(Millions ofdinars)
Total revenue andgrants 3536 4119 4491 4913 5264
Total revenue 3503 4065 4454 4866 5249
Taxrevenue 2887 3312 3624 3951 4315
Taxes onforeign trade 955 1112 1162 1211 1321
Other taxes 1932 2200 2462 2740 2994
Non-tax revenue 617 753 830 915 934
Petroleum sector 254 296 301 349 309
Other non-tax revenue 362 457 530 566 625
Grants 33 54 37 47 15
Total expenditure andnetlending 4191 4450 4917 5335 5752
Total expenditure 4214 4393 4852 5239 5885
Current expenditure 3188 3502 3836 4253 4638
Wages andsalaries 1170 1314 1476 1599 1788
Goods andservices 286 289 293 312 343
Interest payments 416 440 512 550 667
Transfers andsubsidies21316 1460 1555 1791 1840
Capital expenditure 1026 891 1016 987 1247
Direct investment 697 561 654 648 835
Capital transfers andequity 329 330 362 338 412
Netlending -24 57 65 96 -133
Overall deficit -655 -332 -427 -423 -488
Financing 655 332 427 423 488
Foreign 319 80 175 217 352
Domestic 336 252 251 206 136
Memorandum item:
Overall deficit, excluding grants -687 -386 -463 -470 -503
Military expenditure 257 260 279 284 305
(Inpercentage ofGDP)
Total revenue andgrants
Revenue
Taxrevenue
Non-tax revenue
Grants
Expenditure andnetlending
Current expenditure
Capital expenditure
Overall deficit including grants
Overall deficit excluding grants29.4
29.1
24.0
5.1
0.3
34.8
26.5
8.5
-5.4
-5.730.1
29.7
24.2
5.5
0.4
32.5
25.6
6.5
-2.4
-2.830.7
30.5
24.8
5.7
0.3
33.7
26.3
7.0
-2.9
-3.231.0
30.7
24.9
5.8
0.3
33.6
26.8
6.2
-2.7
-3.030.6
30.5
25.1
5.4
0.1
33.4
26.9
7.2
-2.8
-2.9
* Estimates.
1IncludingSpecialFunds,FondsdeConcours,extrabudgetaryoperationsfinancedabroad,nettreasuryoperations,andsocialsecurity
funds.
2Comprises transfers related tohealth, education, andsocial security, aswellasconsumer subsidies.
Source: IMF.WT/BOP/W/13
Page15
VI. Money andcredit
40. Over theperiod 1991-1995, themonetary authorities continued topursue aprudent monetary
policy which helped achieve adecline ininflation. During 1991-1995, theannual growth rateofthe
broad monetary aggregate M2averaged 7percent, while nominal GDP grew byabout 10percent
onaverage. Theimplied increase intheincome velocity ofmoney mainly reflected thedeepening
ofthenonbank financial sector. Money expansion wasdriven mainly bytherapid expansion ofcredit
tothenonagricultural sectors. Netforeign assets ofthebanking system expanded moderately onaverage
although theypicked upsomewhat in1994-1995 reflecting thestronger netinflow offoreign capital.
Bycontrast, therateofgrowth ofnetdomestic assets hadbeenrelatively highduring theperiod, despite
aconsistent decline innetcredit tothegovernment during 1992-1995. With regard tothestructure
ofmoneysupply,currencyincirculationgrewatamoderateanddeceleratingpacewhiledemanddeposits
inthebanking system increased substantially. Therapid expansion oftimeandsavings deposits and
otherquasimoney components decelerated somewhat inrecent years, reflecting thegreater attractiveness
ofnewly introduced financial instruments. Following the1991-1993 reduction ininterest rates, the
Central Bankpursued itsconservative refinancing policy through astrictcontrol ofthevolume ofcredit
granted through itsrefinancing facilities.
41. Tunisia embarked onawideranging financial sector liberalization supported byafour-year
extendedarrangementwiththeInternationalMonetaryFund(1988-1992).Thedomesticfinancialsector,
includinginterestrates,wasgraduallyderegulatedandliberalized,particularlysince1993.Thedeepening
ofthefinancial sector hasbeenenhanced withtheadoption ofnewbanking legislation, theestablishment
ofnewfinancial institutions, andthecreation ofnewfinancial instruments. Banking supervision andWT/BOP/W/13
Page16
regulation havebeenstrengthened andthestock market hasbeenreformed. Asaresult ofthestock
market reform, stock market activity increased sharply during theperiod 1994-1995.
(a) Exchange rate
42. Following asharp depreciation in1986, therealeffective exchange rateofthedinar hasbeen
stabilizedsince1990inordertomaintainTunisia'sinternationalcompetitiveness.Thishasbeenachieved
byadopting amanaged floatexchange rateregime andbroadly targeting therealeffective exchange
rateonthebasisofabasket ofthecurrencies ofkeypartner countries. Thepositive inflation differential
withtheindustrial partner countries required frequent butmodest adjustments ofthenominal exchange
rate. Since 1994, transactions intheinterbank market havedeveloped rapidly, anditisestimated that
in1995, about 80percentofallforeign exchange transactions were carried outinthismarket.