Tunisia suspends energy price hike after protests

TUNIS Thu Jan 16, 2014 12:21pm EST

TUNIS Jan 16 (Reuters) - Tunisia's outgoing government said on Thursday it had suspended planned energy price hikes, its second policy reversal in two weeks after popular protests forced it to scrap a tax increase envisaged under its 2014 budget.

Three years after toppling their autocratic leader Zine El-Abidine Ben Ali in an uprising that inspired other 'Arab Spring' revolts, Tunisians are chafing under high living costs and a lack of economic opportunities.

But international lenders are pressing Tunisia to trim public subidies to cut a budget deficit the government expects to have reached 6.8 percent of national output last year.

Tunisia had initially budgeted 4.3 billion Tunisian dinars ($2.59 billion) for food and energy subsidies in 2014, down from 5 billion dinars in 2013.

"We have decided to suspend the increase in energy prices planned for the 2014 budget," Tunisian Finance Minister Ilyas Fakhfakh told the state news agency TAP.

He said revenues from the planned increase had been expected to total 220 million dinars in 2014.

Fakhfakh, who with other ministers steps down shortly under an accord that transfers power to a caretaker government, did not comment on how the budget shortfall might be covered.

Last week, protests and strikes prompted the outgoing Islamist-led government to suspend a hike in vehicle tax.

The economic discontent threatens Tunisia's largely peaceful transition to democracy, which has been seen as a model for other Arab nations struggling with instability.

Fakhfakh told Reuters last week the government had taken the necessary measures to keep the budget deficit under control, one of the main conditions for the International Monetary Fund to release a loan tranche worth $500 million.

Tunisia's new transitional prime minister, Mehdi Jomaa, took office last Friday and is due to form a caretaker cabinet in the next few days which will govern the small North African country until new elections. (Reporting By Aziz El Yaakoubi; Editing by Gareth Jones)

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