UPDATE 1-European Investment Bank grants Tunisia $690 million loans

Tue Mar 4, 2014 12:44pm EST

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TUNIS, March 4 (Reuters) - The European Investment Bank (EIB) will lend Tunisia 500 million euros ($690 million) to support its democratic transition in 2014, EIB Vice President Philippe de Fontaine told Reuters.

Tunisian Prime Minister Mehdi Jomaa said on Monday that external borrowing needs this year would be nearly double previous budget estimates at around $8 billion, mainly because of rising public sector pay.

Tunisia has already secured $1.2 billion in loans from the World Bank and another $500 million from the International Monetary Fund earlier this year.

Tunisia has received so far some 500 million euros from EIB since the revolution that toppled autocratic president Zine El-Abidine Ben Ali and sparked uprisings across the region.

"We have increased our support to 500 million euro only in 2014. It is a clear message of our support to the democratic transition in Tunisia," de Fontaine said in an interview with Reuters.

The package includes a $200 million loan to develop the Nawara gas field in southern Tunisia.

"We will continue to support this country to improve its economy as we want Tunisia to succeed in its political transition," de Fontaine added.

The North African country's economy relies heavily on European tourism and is still recovering from the aftermath of its political upheaval three years ago.

A caretaker government has taken over pending elections later this year. High living costs and a lack of economic opportunities remain major concerns for many Tunisians.

Political sources told Reuters that Prime Minister Mehdi Jomaa was preparing to announce subsidy cuts and tax rises to hold down government borrowing.

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