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IMF urges Tunisia to increase fuel prices and raise the retirement age

UNITED STATES (OBSERVATORY) –┬áThe International Monetary Fund (IMF) on Friday urged the Tunisian government to continue to raise domestic fuel prices and raise the retirement age, saying it would be hard to bear any further rise in inflated public sector wages amid weak growth.

Tunisia has been at the heart of a severe economic crisis since the 2011 revolution that ended former President Zine El Abidine Ben Ali’s rule and faces strong pressure from international donors to cut public sector employment and curb the budget deficit.

Prime Minister Yousuf al-Shahid said this week that he wanted a broad consensus on economic reforms to be implemented, but the government could not “wait indefinitely.” Reforms in the government sector, subsidies, public companies and social funds will be launched quickly because the country is in dire need and to address imbalances. State finances.

But the powerful labor union has vowed to tackle “painful” reforms, especially aimed at the bustling of public companies, more price increases or a weakening of the purchasing power of Tunisians. The Federation of Labor will organize large gatherings in the coming days against such measures.

“Unequal energy subsidies should be reduced by increases in domestic energy prices in line with international oil prices,” a statement by the IMF said at the end of the IMF mission to Tunisia.

Last month Tunisia raised fuel prices for the second time in three months to cut deficits. Minister of Economic Reform Tawfiq al-Rajhi said fuel subsidies would rise from 1.5 billion dinars expected this year to three billion dinars as world oil prices rise.

“There is a huge wage bill in the public sector and any further wage increases will be impossible unless growth rises to unexpected levels … Similarly, it is necessary to raise the retirement age and introduce additional parametric reforms in pensions to contain the deficit in the system, Social security”.

The call for a halt to wage increases in the public sector comes amidst weak growth, while the Labor Union has announced that a round of negotiations on increases for public sector employees will soon begin.

Officials said a bill to raise the retirement age from 60 to 62 was sent to parliament this week for approval in a move by the government to bail out crippled social funds.

The IMF team agreed with the central bank that further increases in the base rate would be necessary if inflation did not fall quickly. Last month, the central bank raised its key interest rate from 5 percent to 5.75 percent to cut inflation, which hit a record high of 7.6 percent in March.