Announcement of World Bank Supports Tunisia's Economic Adjustment Program on June 20, 1988

FOR IMMEDIATE RELEASE rworldBank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 88/90 Contact: Fawzi Rihane (202) 473-2675 WORLD BANK SUPPORTS TUNISIA'S ECONOMIC ADJUSTMENT PROGRAM WASHINGTON, June 20, 1988 -- Tunisia will use a $150 million loan from the World Bank to support the government's medium-term program of economic adjustment and stabilization as outlined in the country's seventh development plan (1987-91). The operation will prepare the country for the transition from an economy largely dependent on oil exports to one that is more diversified. It will help establish the macroeconomic conditions and price incentives that will allow the resumption of sustained growth. The program will contribute to economic growth and export diversification by supporting trade liberalization mostly through the reduction of import restrictions. It will help increase the efficiency of f \. ,. financial intermediation by bringing interest rates closer to market levels, improving the management of foreign currency transactions, and increasing competition among financial institutions. The program will also support tax reform, through changes in the consumption taxes, the introduction of a value added tax (VAT) and a new law on direct taxes. The World Bank approved two prior loans in support of the adjustment program launched by Tunisia: in September 1986, an agricultural sector loan, totaling $150 million, focused on public spending, prices, and the incentive system. This operation was followed, in February 1987, by an industrial and trade policy adjustment loan, again for $150 million, to support the first stages in tariff adjustments, price decontrol, and fiscal reform. Since 1962, the World Bank's lending to Tunisia has amounted to almost $2 billion in support for long-term investments in infrastructure and social development (agriculture, 28%; industry, 26%; transport, 16%; urban infrastructure, 16%; energy, 8%; education, 4%; health and technical assistance, 2%). The World Bank loan is for 17 years, including five years of grace, with a variable interest rate, currently 7.72 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on the undisbursed balances. ' . ·• .. , __ . Note: Money figures are in U.S. dollar equivalents.