The IMF urged Tunisia on Friday to raise energy prices and the retirement age to help curb the budget deficit and said any further public wage hikes would be difficult to sustain given weak growth.
The North African country is currently in the throes of an economic crisis and and feeling pressure foreign donors to cut a bloated public service and budget shortfall, according to a report by The Times of Oman.
Prime Minister Youssef Chahed conceded that Tunisia needed to reach consensus on reforms but could not wait indefinitely; curbs to social benefits, subsidies, and public enterprises would be launched without further delay.
In March this year the International Monetary Fund (IMF) approved payment of a $257 million tranche from its loan programme for Tunisia but urged it to pick up the pace of economic reform. In a statement on Friday, the IMF said that it is necessary to reduce unfair energy subsidies through increases in domestic energy prices.
In an effort to rein in the deficit, fuel prices were raised on Saturday for the second time in three months. Fuel subsidies will also rise from the TND1.5 billion ($617.56 million) level originally expected this year to TND3 billion in line with the latest rise in world oil prices, Minister of Reforms Taoufik Rajhi said according to media reports.
The public-sector wage bill is very large and any further pay increases would be very difficult to sustain unless economic growth surprises on the upside, according to the IMF, adding that raising the retirement age and additional parametric reforms on pensions are crucial to contain the deficits in the social security system.
Tunisian officials told Reuters earlier this week that the government had sent a bill to parliament to raise the retirement age from 60 to 62 years of age.
The government has forecast the budget deficit to fall to 4.9 per cent of GDP in 2018 from about six per cent in 2017.