Exclusive: Tunisia to cut 2018 deficit to 4.9 percent of GDP, eyes GDP growth of 3 percent - minister

TUNIS (Reuters) - Tunisia plans cut its budget deficit to 4.9 percent of gross domestic product in 2018, down from about 6 percent expected in 2017, as fiscal reforms take effect, the economic reforms’ minister said on Wednesday.

The North African country is under pressure from the International Monetary Fund and its partners to speed up reforms to create jobs and cut its deficit after its vital tourism sector was hit by deadly militant attacks in 2015.

“Next year’s budget would be a budget of major reforms that were delayed a lot, including fiscal reforms aimed at raising state resources, as well as reforms in the public sector,” Taoufik Rajhi, the minister of economic reforms, told Reuters in an interview by phone.

Rajhi said that Tunisia’s financing needs next year will be about 10 billion dinars ($4.11 billion) compared with about 8.5 billion dinars in 2017.

“Foreign loans are expected to reach about 65 percent of the country’s total financing”, Rajhi said.

“With our package of new reforms we aim to raise GDP growth to about 3 percent and possibly more in 2018 compared with 2.5 pct this year ... we will cut the budget deficit to 4.9 pct,” he said.

The budget will not exceed 36 billion dinars next year, up from 32 billion dinars in 2017.

He said the government was in talks with the powerful UGTT labor union on an agreement to raise the retirement age from the current 60 years.

The government will also impose a 1 percent contribution on annual income to prop up strained social funds, he said, and the value-added tax would be also raised by 1 percent.

The government is expected to face opposition from trade unions and some professions, such as lawyers, who have threatened to go on strike if taxes rise.

Tunisia has been praised for its democratic progress after its 2011 uprising against autocrat Zine El-Abidine Ben Ali, but successive governments have failed to pursue economic reforms to trim deficits and create growth.

In April, the IMF agreed to release a delayed $320 million tranche of Tunisia’s $2.8 billion in loans.