EU to lend Tunisia 450 mln euros and pledges investment

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TUNIS, March 29 (Reuters) - The European Union plans to lend Tunisia 450 million euros ($500 million) to support its budget and invest 4 billion euros in the coming years, as the North African country seeks international help to address a looming crisis in public finances.

Speaking after a meeting with Tunisian government officials in Tunis on Tuesday, the EU commissioner for enlargement, Olivier Varhelyi, said the loan would be sent by April and included 300 million euros allocated last year.

Credit rating agency Fitch this month downgraded Tunisian sovereign debt to junk status and investment bank Morgan Stanley said it expected the government to default on loans.

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Tunisia's public finances were already stretched before the pandemic and political turmoil since President Kais Saied suspended parliament and moved to one-man rule last year has delayed efforts to seek additional help.

"We are ready to invest 4 billion euros in several projects, including renewable energy, technology and others in the coming years," Varhelyi said, without giving more details.

The Ukraine war has aggravated the government's problems, causing price rises in fuel and grains, which are both subsidised in Tunisia.

The impact of those price rises on Tunisia's budget will be slightly less than 5 billion dinars ($1.7 billion) this year, the economy minister Samir Saied told Reuters.

Varhelyi also said the EU had allocated 200 million euros to Maghreb countries - which also include Algeria and Morocco - to help alleviate the impact of grain shortages resulting from the Ukraine crisis.

($1 = 0.9001 euro)

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Reporting by Tarek Amara Writing by Angus McDowall Editing by Jonathan Oatis and Mark Potter

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