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IMF's Lagarde urges more economic reforms as Tunisia slides into recession

TUNIS, Tunisia – The managing director of the International Monetary Fund on Wednesday urged Tunisia to speed up reforms of its economy, as the North African country slid into a recession following devastating terrorist attacks.

During a visit, Christine Lagarde lauded Tunisia for its democratic transition — the sole one to emerge from the Arab Spring — and praised the resilience of its economy during a period of turbulence.

“Now more than ever is the time to push for the reforms that are necessary to transform Tunisia into a dynamic, competitive economy and create jobs for its citizens,” she said.

The IMF has supported Tunisia with a $1.75 billion loan, which was also expected to prompt a number of key reforms, many of which have not yet been implemented.

“Tunisia didn’t make all the reforms that it promised to do in exchange of the (loan) instalments,” said Ezzedine Saidane, a financial analyst, who has faulted successive governments for focusing more on politics than economics. “The economic situation, instead of improving, got much worse.”

The central bank said on Aug. 27 that the economy had entered a technical recession, defined as two consecutive quarters of economic contraction.

The economy, never strong since the revolution, has been dealt a grievous blow by a pair of terrorist attacks against tourists in March and June that killed nearly 60 and resulted in at least a 50 per cent drop in arrivals compared to 2013.

Inflation is running at a brisk 5.1 per cent, making life increasingly unaffordable for people. Unemployment is at 15 per cent, and twice that for young people.

Lagarde urged the country to reform the financial sector, especially the banking system, to simplify business regulations and ensure that the budget promotes economic growth.

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Associated Press reporter Benjamin Wiacek contributed to this report.