UPDATE 1-Tunisia takes sensitive step to trim fuel, sugar, bread subsidies

Tue May 20, 2014 10:50am EDT

* Petrol prices to rise in coming days

* No time frame for bread, sugar price rises

* 2014 budget deficit seen at 7.5 to 8 pct of GDP

* Opposition says "economic dialogue" just a cover (Adds quotes, details)

TUNIS, May 20 (Reuters) - Tunisia will raise subsidised petrol prices by 6.3 percent in the coming days and also decrease subsidies for bread, sugar and other basic materials to trim its worsening budget deficit, the government said on Tuesday.

Subsidies are a sensitive political issue in Tunisia where bitter anger over rampant unemployment, economic deprivation and social injustice exploded into a mass revolt in 2011 that triggered the Arab Spring uprisings in other countries.

"We will raise the price of sugar. There will be a slight increase in the price of bread," Trade Minister Najla Harouch told reporters on the sidelines of an economic conference.

Harouch did not give any details or date for increases.

Finance Minister Hakim Ben Hamouda told local radio on Tuesday that the government would raise the price of petrol to 1.670 dinars ($1.03) a litre from 1.570. The last increase was in March 2013.

Prime Minister Mehdi Jomaa's government is tackling the Tunisia's budget deficit by seeking international aid and looking at subsidy cuts to reduce high public spending.

But Jomaa is wary of balancing fiscal needs against the risk that austerity measures may spark popular protests among Tunisians already worried about high costs.

"We will not cancel subsidies. There are proposals for a slight raise in prices," the trade minister said.


An economic dialogue between the government and opposition parties is scheduled to start at the end of this month, in large part to address the issue of how best to reduce subsidies.

But the Popular Front, a coalition of nine secular parties have said they will boycott the conference because key decisions have already been made and that the dialogue is the government's way of pushing through painful decisions.

Tunisia's planned subsidy reforms and public spending cuts should help reduce the budget deficit by 1.5 billion dinars or $927 million in 2014, Jomaa said on Wednesday.

Jomaa, whose caretaker administration is governing until elections later this year, told reporters the budget financing needs were 3.5 billion dinars ($2.16 billion) through the end of this year.

The government has said growth should reach 3 percent this year, on the basis of tourism figures, forecasts for the wheat harvest and phosphate production, and that the budget deficit will be 7.5 to 8 percent of gross domestic product.

Three years after the uprising that toppled long-time ruler Zine El-Abidine Ben Ali, Tunisia will hold elections later this year that will complete its transition to democracy. ($1 = 1.6218 Tunisian Dinars) (Reporting By Tarek Amara; Editing by Patrick Markey and Raissa Kasolowsky)