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UPDATE 2-Tunisia tourism could lose $1.4 bln, govt seeks loan guarantee to issue bonds

(adds details and background)

TUNIS, April 15 (Reuters) - Tunisia’s vital tourism sector could lose $1.4 billion and 400,000 jobs this year due to the new coronavirus pandemic, an official document showed, as the country seeks a loan guarantee from bilateral partners to issue sovereign bonds this year.

In a letter sent to the International Monetary Fund (IMF) that was reviewed by Reuters, Tunisia’s central bank governor and finance minister said the country’s economy would shrink by up to 4.3%, the steepest drop since independence in 1956.

The IMF, which approved on Friday a $745 million loan to Tunisia to counter the effects of the coronavirus, said a new funding programme with Tunisia could start in the second half of this year. The size of the new programme remains unknown.

The North Africa country has confirmed 747 cases of the virus and 34 deaths, and last month imposed a lockdown set to last until at least April 19. The outbreak is hammering its tourism sector which represents nearly 10% of gross domestic product (GDP) and is a key source of foreign currency.

“We are working with partner governments on a potential guarantee for future sovereign bond issuances in the currently difficult international context,” the central bank governor and finance minister wrote in their letter.

The IMF said that the fiscal deficit in Tunisia would rise to 4.3% of GDP this year, compared with 2.8% originally expected, due to the need for extraordinary expenditures over this crisis.

As part of its 2020 budget, Tunisia plans to issue bonds worth up to 800 million euros ($877 million), but officials have not given any details or date for the issue.

The IMF said also in a report that Tunisia was seeking a loan guarantee from a G7 country.

The Fund added that if such a guarantee were not forthcoming, Tunisia would need to seek alternative financing that could involve a syndicated loan from international banks.

In the letter, Tunisia pledged to contain its public wage bill, reform public companies and reduce subsidies for electricity and natural gas.

Prime Minister Elyes Fakhfakh said this month the government has allocated about $1 billion to tackle the economic and social effects of the crisis. ($1 = 0.9122 euros) (Reporting By Tarek Amara; Editing by Raju Gopalakrishnan and Kenneth Maxwell)