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Tunisia to issue international bonds, borrow from US

Tunisia International bonds
Tunisia International bonds

Minister of Finance, Ali Al-Kali, said Tunisia intends to resort to international bonds and borrow from the U.S., by issuing bonds of about $3 billion this year.

Al-Kali said his country “is seeking a billion-dollar loan guarantee from U.S. President Joe Biden administration”.

He said the Tunisian government “is preparing to pay record debts in 2021 and launch an urgent reform package to revive the economy”.

Sukuk [Islamic bonds] will be issued in the local market with a value of 300 million dinars ($109 million), in the first half of 2021, Al-Kali said.

He said the government might also issue Sukuk in the international market later.

The Tunisian government aims to address its high public wage bill and to cut subsidies and restructure poorly performing state-owned companies.

Al-Kali pointed to “the possibility of turning to targeted support in the next few months, and announcing plans to restructure state-owned enterprises”.

He said the salaries had reached the “maximum” level and the government will study options to contain them.

According to official data, the public wage bill will reach more than 20 billion dinars this year. The country’s total budget is 52 billion dinars.

Al-Kali described the situation “difficult”, but “this does not mean that we cannot pay our salaries or pay off our debts”.

The fiscal deficit reached 11.5% during 2020, and the public debt exceeded 90% of GDP.

In 2021, Tunisia will need loans of about 19.5 billion dinars ($7 billion), 5 billion of which to be foreign loans.

Debt payments due during this year will reach 16 billion dinars, a significant increase from last year, which amounted to 11 billion dinars.

In 2019, debt payments were at 8 billion dinars, while it did not exceed 3 billion in 2010.

A loan from the US

Al-Kali also expressed his government’s hope for “obtaining a loan guarantee from the U.S. to facilitate its mission in the bond market”.

“The government hopes to reach an agreement with IMF on a new financing program, and the recent consultations was a step towards that.”

The minister said “his country has not decided the sum it needs”, but it is taking steps to improve its credit rating and gain IMF’s support.

He said there is a real possibility to get bonds of at least $1 billion during 2021. “We can reach $3 billion in bonds if we find the right conditions”.

He noted that targeted subsidies would include distributing digital cards to low-income people. The government aims to deliver the subsidy to eligible to reduce the burden on the state.

Al-Kali said these cards had proved their effectiveness in the process of delivering support, during the first wave of the Coronavirus pandemic in 2020.

The Tunisian government “is working on estimating the number of people who are eligible for assistance with these cards, and the size of the products they have to support, and not to fall into a significant rise in inflation”.

In January, IMF called on the Tunisian government to “contain wages and transfers intended for public companies and reduce subsidies”.

The IMF also warned that “the reversal of these measures will expand the fiscal deficit to about 9% of GDP this year.”

Al-Kali said the government is studying appropriate options to contain the public wage bill, such as a limited reduction in the wages of those who wish fewer working hours.”

Ways to control wages can be different, and this will be under discussion and investigation, he said.

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