Tunisia seeks to borrow €500m from EU as US offers to guarantee loans

Tunisia is negotiating to borrow up to €500 million from the European Union, and the US has also expressed willingness to guarantee loans in 2014, the country’s finance minister told the state news agency.

Tunisia seeks to borrow €500m from EU as US offers to guarantee loans

Tunisia’s budget deficit should narrow to 6.5% next year, from 7.4% of GDP expected in 2013, as the Islamist-led government seeks to impose strict new fiscal measures, finance minister Elyess Fakhfakh said.

The assassination of two opposition figures has prompted Tunisia’s worst political crisis since autocratic leader Zine al-Abidine Ben Ali was toppled more than two years ago in the first of the Arab Spring uprisings.

The Islamist-led government is negotiating with the EU for the granting of credit of up to €500m, the minister said, adding that the US has “voiced readiness to grant a loan guarantee to Tunisia in 2014”.

The minister also suggested Tunisia could seek more guarantees from European countries if required.

“We will request a guarantee from the French market in case of need of additional resources,” he said, according to the TAP state news agency website yesterday.

The small North African country needs to further reduce its deficit, which worsened after the revolution and upheaval that cut into Tunisia’s foreign currency reserves, exports and foreign investments.

Tunisia’s economy will expand less quickly than hoped this year, with GDP growth forecast at 3.6%, compared with 4% previously, the minister said last month, putting partial blame on slower growth in Europe. The state budget for 2014 will reach 28.3 billion Tunisian dinars, with a rise of 2.2% compared to 2013, Fakhfakh said.

Among the new fiscal measures in 2014 will be the imposition of a tax of 10% on exporting companies which were exempt from taxes in the past.

Tunisia, which has signed a $1.7 billion (€1.28bn) standby loan agreement with the International Monetary Fund, is struggling with rising inflation and a large external deficit as well as its uncertain political outlook.

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