Tunisia - Structural Adjustment Loan Project

Document of The World Bank FOR OMCIAL USE ONLY Report No. 11354 PROGRAM COMPLETION REPORT REPUBLIC OF TUNISIA STRUCTURAL ADJUSTMENT LOAN (SAL I) (LOAN 2962-TUN) NOVEMBER 16, 1992 Country Operations Division Country Department I Middle East and North Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Official exchange rate: Dinar (TD) per US$ Period End of Period Period Averaae 1988 0.8985 0.8578 1989 0.9046 0.9493 1990 0.8368 0.8783 1991 0.8645 0.9246 ABBREVIATIONS ASAL I Agricultural Sector Adjustment Loan CGC Caisse Generale de Compensation EFF Extended Fund Facility EFRSL Economic and Financial Reform Support Loan EM2CO Country Operations Division of the Maghreb Department of the MENA Region FPC Fonds de Per6quation de Changes GDP Gross Domestic Product ITPAL Industrial and Trade Policy Adjustment Loan MNA 1 Country Division of the Middle East and North Africa Regional Office PCR Program Completion Report PERL Public Enterprise Reform Loan SAL Structural Adjustment Loan VAT Value Added Tax QRs quantitative restrictions SMIG Salaire Minimum Interprofessionnel Garanti FISCAL YEAR OF BORROWER January 1 - December 31  FOR OMCIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-Genored Operations Evlustion November 16, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Program Completion Report on Tunisia Structural Adjustment Loan (Loan 2962-TU Attached, for information, is a copy of a report entitled "Program Completion Report on Tunisia - Structural Adjustment Loan (Loan 2962-TUN)" prepared by the Middle East and North Africa Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment This document has a restricted distribution and may be used by recipients only In the performance of their official dutie. Its contents may not otherwise be disclosed without World Bank authorization.   FOR OFFICIAL USE ONLY REPUBLIC OF TUNISIA STRUCTURAL ADJUSTMENT LOAN (Loan 2962-TUN) PROGRAM COMPLETION REPORT Table of Contents PREFACE .......................................... EVALUATION SUMMARY ............................... iii PART I: PROGRAM REVIEW FROM THE BANK'S PERSPECTIVE .... 1 A. Program Identity .................................... 1 B. Background ....................................... 1 The Rapid Expansion of the Seventies .................. 1 The Emerging Crisis of the Early Eighties ................. 2 C. The Adjustment Process .............................. 3 D. Assessment of the SAL.1 2 Specific Measures ................................ 12 Strengths & Weaknesses ........................... 16 E. Implementation and Monitoring ..........................17 PART Il: PROGRAM REVIEW FROM BORROWER'S PERSPECTIVE .... 18 PART IlIl: STATISTICAL INFORMATION ...................... 19 Table 1: Loan Data ............................... 19 Loans Related to the SAL I ............ .. ............ 20 Table 2: Mission Data ............................. 20 Table 3: Macroeconomic Indicators .................... 21 Table 4: Export Earnings in Millions of Dinars at 1990 Prices . . 22 Table 5: Real Return to Labor ....................... 22 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   REPUBLIC OF TUNISIA STRUCTURAL ADJUSTMENT LOAN (SAL I} (LOAN 2962 TUN) PROGRAM COMPLETION REPORT PREFACE The first Structural Adjustment Loan (SAL I) to Tunisia was approved by the Board on June 16, 1988, for an amount of US$150 million. The loan was closed on June 30, 1991, fourteen months behind schedule. It was fully disbursed, with the last disbursement made on August 1, 1991. This Program Completion Report (PCR) was prepared by the Country Division of the Middle East and North Africa Regional Office (MNA I). On March 13, 1992, the Bank sent a letter to the Borrower with a request to prepare Part II by the end of June. However, as yet Part II has not been received. Preparation of this PCR was started during the Bank's supervision mission of the Economic and Financial Reform Support Loan (EFRSL) in May 1992. The basic information is drawn from the President's Report (P-4806-TUN), the loan agreement, supervision reports, internal Bank papers and documents provided by the Tunisian authorities. The PCR has also benefitted from numerous discussions with Tunisian officials and industrialists, as well as with Bank and IMF staff members who had been involved with the implementation of the Tunisian adjustment programs.   iii REPUBLIC OF TUNISIA STRUCTURAL ADJUSTMENT LOAN (SAL I) (LOAN 2962 TUN) PROGRAM COMPLETION REPORT EVALUATION SUMMARY Backaround During the seventies, Tunisia took advantage of its oil revenues to invest more and to diversify its economy; real GDP increased by 7.4% a year on average. This remarkable growth was associated with increasing government interventions which were financed from the rapid expansion of oil royalties. But, with a steady decline in oil production after 1980 and the collapse of oil prices in 1986, Tunisia had to adjust. The warning signal was drawn in the Sixth Plan document published in mid-1 982. The authors rightly foresaw the reversal of Tunisia's terms of trade, and they stressed that the easy days were over and that the time for adjustment had come. But expansionary policies were pursued until 1984, when the external current account deficit reached a record level (10.9% of GDP) and Tunisia encountered serious difficulties in borrowing abroad. During the 1984 annual meetings, the Tunisian delegation requested Bank support for implementing policy reforms in the industrial and the agricultural sectors. After a thorough investigation, the Bank recommended implementation of broad economic reforms which were discussed at the occasion of the 1985 annual meetings. This initiated a long and fruitful policy dialogue between Tunisia and the Bank. It resulted in a series of six adjustment loans by the Bank, the loan under investigation (SAL I) being the third in that series. Ovb*ectivesF Stabilization was the first phase of the adjustment process which started in 1985. This phase had been virtually completed with the successful devaluation of the dinar when the Bank approved its first adjustment loan to Tunisia (ASAL I) in September 1986, two months before a stand-by was approved by the IMF. A strong rebound of Tunisia's export earnings had already occurred by mid- 1988, when the Structural Adjustment Loan (SAL I) was approved one month before the Extended Fund Facility (EFF). As a matter of fact, 1988 was the only year during which Tunisia registered a surplus in its external current account balance before grants. The objective of the SAL was, therefore, to consolidate the progress already achieved, to tie together the various adjustment efforts under way and to generate the proper environment for sustainable growth. The key instruments were the liberalization of prices and trade, the improvement of financial intermediation and the reforms of the direct and indirect tax systems.  iv Implementation Experience Rapid progress was made in liberalizing producer prices; but progress was slower as regards trade margins, because the authorities feared that competition was not yet strong enough to protect the interest of consumers. Tariffs had already been substantially reduced in the context of the Industrial and Trade Policy Adjustment Loan (ITPAL), but non-tariff barriers on consumer goods domestically produced had remained unchanged. In retrospect, it would probably have been preferable to tackle the problems of tariffs and non-tariff barriers simultaneously. But, since it had not been done under the ITPAL, the reduction of non-tariff barriers had to be dealt with in the SAL. When the second tranche of the SAL was released in March 1991, the share of goods subject to import restrictions had been reduced to 74% of the domestic output of the agricultural, fishing and manufacturing sectors, from 95% at end-June 1988. But the removal of most non-tariff barriers, which was supposed to be achieved by 1991 under the ITPAL, was postponed to 1992 under the SAL and to 1994 under the EFRSL. Some progress was made in improving the functioning of the money market, in rationalizing the credit system, and in liberalizing interest rates. But the tasks of deepening financial markets, improving the quality of the portfolios held by the banks and increasing competition among financial institutions were essentially left for the EFRSL, which was in fact a second SAL. The reforms of the direct and indirect tax systems were very successful. The Value Added Tax (VAT) on production activities took effect in July 1988 and it was extended one year later to wholesale trade, with the exclusion of foodstuffs. The VAT replaced three turnover taxes and an array of excise taxes which were responsible for large distortions. The establishment of the VAT did not have the effect of lowering tax receipts. The new law of direct taxation represented also a considerable improvement over previous practices. The new system was much simpler, the incidence of the tax was enlarged and the marginal rate of taxation was reduced. The new system took effect on personal incomes earned in 1990 and on corporation incomes earned in 1991. In addition, the authorities proceeded to very useful reforms of the tax registration and of local tax systems, although these reforms had not been included in the SAL program. Results The macroeconomic results were, on the whole, more favorable than had been foreseen when the SAL was negotiated; in particular, the increase in export earnings was greater than anticipated. It is not possible, however, to differentiate the contribution of the SAL to these favorable developments from that of the EFF. The two programs covered similar periods; they were designed to complement each other, and the staff of the Bank and the IMF worked in close cooperation. Moreover, it would be difficult to identify the respective contributions of the successive adjustment loans made by the Bank. The period covered by the SAL was only a slice of the lengthy adjustment process which was initiated three years before approval of the SAL and is not yet completed. It is clear, however, that the SAL made an important contribution to the success of the adjustment process.  v Sustainabilitv The reforms supported by the SAL are likely to be sustainable for three reasons. Firstly, they were built on foundations established before the SAL. Secondly, they prepared the ground for further reforms supported by the EFRSL. Thirdly, and most importantly, they were conceived by the Tunisians themselves in the context of a broad program of social and economic development. Political risks cannot, however, be ignored in a subregion where socio-political developments are difficult to predict. Findinas and Lessons Learned The Bank support was useful in strengthening the position of the Tunisian officials who were advocating the need for structural adjustment. The SAL had its greatest impact when it supported reforms for which a political consensus had already been built. Thus, the SAL was particularly successful in supporting the fiscal reforms which were implemented by a competent staff and did not raise special socio-political problems. The Bank was less successful in promoting changes for which a political consensus did not yet exist. The Bank and the IMF staff considered that the pace of reforms was too slow in some cases. But the authorities wanted to proceed at their own pace and attempts by the Bank to accelerate this pace generally failed; the reduction in non-tariff barriers was a case in point. In this particular case, the Bank should probably have devoted more attention to non-tariff barriers before dealing with tariffs, and the staff could have established closer contacts with industrialists in order to gain a better understanding of their problems. Transforming an economy based on strong government intervention into one relying primarily on market forces is a long process which requires a political consensus. The authorities tended to overestimate how quickly this could be done, both as regards liberalization that was specific loan conditionality and as regards liberalization that was planned as a continuation of the loan program. The SAL should therefore be viewed as one component of a broader adjustment process. When this component is properly integrated within the broader process, as appears to have been the case there, the reforms supported by the adjustment program are likely to be sustainable.  I  REPUBLIC OF TUNISIA STRUCTURAL ADJUSTMENT LOAN (SAL I) (LOAN 2962 TUN) PROGRAM COMPLETION REPORT PART I: PROGRAM REVIEW FROM THE BANK'S PERSPECTIVE A. Proaram Identity Name : Structural Adjustment Loan (SAL I) Loan Number : 2962-TUN RVP : MNA Region Country : Republic of Tunisia Sector : SAL B. Background The Rapid Expansion of the Seventies 1. Tunisia benefitted from the rapid growth in the volume of its oil exports and from increasing oil prices until 1981; in that year, export earnings from oil reached a peak of US$1.3 billion, equivalent to 15% of GDP. Tunisia took advantage of this windfall gain to diversify its economy and to increase investments which reached 30% of GDP in the late seventies. But, unlike a number of other oil exporting countries, Tunisia succeeded in preserving a satisfactory macroeconomic equilibrium. The government deficit remained under 5% of GDP, balance of payments problems were avoided, inflation remained moderate and real GDP increased on average by 7.4% a year. 2. The remarkable economic expansion of the seventies was not without generating sources of future problems which resulted from increasing government intervention. An elaborate system of regulations contributed to creating a dichotomy between two types of industrial enterprises: those producing for the export market were exempt from import duties and benefitted from a very favorable fiscal treatment; those producing for the domestic market were heavily protected by import duties and non-tariff barriers. An increasing share of fixed capital formation went to public enterprises and a number of them suffered chronic operating deficits which had to be covered by budgetary transfers and bank loans, which increased progressively. Credits to priority sectors could be obtained at interest rates that were negative in real terms and the use of fertilizers was subsidized. The increase in the cost of living remained moderate, because prices of a number of basic food items (cereals, in particular) were subsidized by the "Caisse Generale de Compensation" (CGC) which absorbed resources equivalent to about 3.5% of GDP by the end of the seventies.Through this process, government expenditures rose from 26% at the beginning of the seventies to 34% of GDP by the end of the decade. As long as government revenues from oil were increasing briskly,  - 2 - the system could work in a satisfactory manner; but it had to be modified with a decline in oil revenues. The Emerging Crisis of the Early Eighties 3. The alarm signal was given by a few influential government economists during the course of the preparation of the Sixth Plan for Economic and Social Development, which covered the period 1982 through 1986. In the Plan document, published in mid-1 982,' the authors stated that the easy days were over and that the time for adjustment had come. They stressed that, during the Fifth Plan period, Tunisia had been able to consume more than it produced, to import more than it exported and to raise real wages at a rate exceeding that of labor productivity gains, because the terms of trade had improved by 5% a year on average. For the sixth Plan period, they foresaw a drastic reversal of the situation with a 2% annual decline in the terms of trade and a progressive reduction in oil production. Consequently, they argued that the level of investment in relation to GDP had to be reduced by about 5 percentage points and that capital had to be used more efficiently. They pointed out that a policy of low interest rates and high wages was not consistent with the stated objectives of reducing unemployment and avoiding a debt crisis. 4. In spite of this strong warning signal, expansionary policies were pursued throughout 1983. In the three-year period ending in 1983, money supply and the minimum wage (SMIG2) expressed in nominal terms increased by 23% a year (Table 3, Part ll). In 1984, however, when the terms of trade had already fallen by 8.5% from the 1981 peak, when the debt service ratio rose to 23% and when Tunisia experienced difficulties in borrowing abroad, the government became convinced that, indeed, the time for adjustment had come. At the occasion of the 1984 Bank/IMF annual meetings, the authorities requested Bank support for sectoral policy reforms, starting with one adjustment loan for the agricultural sector and the other for the industrial sector and trade. As a response, a mission was sent in January 1985 to review the industrial sector. After a thorough investigation, the Bank concluded that narrowly focussed measures did not provide the appropriate solution and that broad economic reforms were needed. An outline of the proposed reforms and the industrial sector report were discussed simultaneously with the Tunisian delegation in September 1985. This was the beginning of a long and fruitful policy dialogue between the Bank and the authorities which, by then, were preparing their Seventh Plan. 1/ "Adjustment of economic and social policies: Priorities" Chapter I, Part II. Sixth Plan for Economic and Social Development, Republic of Tunisia, July 1982. 2/ SMIG: Salaire Minimum Interprofessionnel Garanti.  -3 - C. The Adjustment Process 5. The fist sign of adjustment came in 1984 with a freeze of the SMIG; the latter had increased by 84% in nominal terms from 1980 to 1983, which represented an unsustainable 11 % average yearly growth in real wages. But other policies remained expansionary; government expenditures increased sharply in 1984 reaching a peak equivalent to 41 % of GDP; domestic demand rose by 6.7% in real terms and the external current account deficit reached the record level of 10.9% of GDP in that year. In 1985, the deterioration of relations with Libya led to the repatriation of more than 30,000 Tunisian workers from Libya and a sharp fall in exports to that country. The government responded to these additional pressures on the external balance by deflationary measures. The SMIG remained frozen for the second year in a row, which had never occurred since the oil boom of 1973. Government expenditures were curtailed by an amount equivalent to 4% of GDP in 1985. Allocations of import licenses were severely curtailed. The dinar was depreciated leading to a 6% decline in the real effective exchange rate from September to November 1985 and aggregate domestic demand declined by 1.4% in real terms. Imports of goods and non factor services valued at constant prices fell by 13% in 1985, and the external current account deficit declined to 7.1 % of GDP from its peak value of 1984 (Figure 1). FIGURE 1: GOVERNMENT & EXTERNAL CURRENT ACCOUNT DEFICITS AS PERCENTAGE OF GDP 2. -7. 0.0- -2.5-. -12.5 81 2 83 84 B5 86 87 88 89 90 9 92 _1111Gov't Defleit Clxterncl current Account Deficit  -4- 6. The year 1986 was even more difficult than the two preceding ones, because the adverse impact of a poor crop was compounded by the collapse of oil prices. The authorities reacted by depreciating the dinar, and the nominal effective exchange rate fell 26% from December 1985 to October 1986. It is remarkable that a devaluation of this magnitude did not induce significant inflationary effects. As a matter of fact, the average yearly increase in the consumer price index (CPI) was lower in the 1985-91 period than in the 1981-84 period (7.3% compared with 10%). Inflation remained somewhat higher in Tunisia than in trading partner countries, but the real effective exchange was 3% lower in March 1992 than in October 1986, because the inflation differential during that period was more than compensated by the nominal depreciation of the dinar (Figure 2). Tunisia had suffered a 21 % deterioration in its terms of trade between 1980 and 1 991, but it adjusted its real effective exchange rate by 31 % (Figure 3). FIGURE 2: NOMINAL & REAL EFFECTIV EXCHANGE RATES & APPROVAL DATES OF STRUCTURAL ADJUSTMZNT LOANS, JAN. 1980-MARCE 1992 1101- . 87 .88, 89 .90. 91. m._ o -100 0 80 1 a4 70 -, ^" *70 60_ 80 50 80 81 82 83 8 85 8 87 88 8S 90 .t NominAl --.__ Real  -5 - 7. The success of the devaluation can be attributed to the enforcement of strong supporting measures: tight credit, fiscal restraint and wage freeze. From unsustainably high levels in the early eighties, the increase in domestic credit fell to 2% in 1988 and aggregate domestic demand measured at constant prices was 6% lower in 1988 than in 1985 (Figure 4). The external current account improved, but real GDP fell by 1.4% in 1986. It is precisely toward the end of that recession year that three structural adjustment programs were approved by the Boards of the Bank and the IMF. FIGURE 3: TERMS OF TRADE & REAL EFFECTIVE EXCHANGE RATE, 1980-9] (Indlces 100 - 1980) 110 100 90 80 _ \ Real Effective Exchange 70 ---------- - R ate 6 0 81 82 83 84 85 86 87 88 89 90 91 92 8. The first Agricultural Sector Adjustment Loan (ASAL I) approved in September became effective in November 1986 (Table 1). In the same month, the IMF Board approved, simultaneously, a 19-month stand-by arrangement and a drawing under the Compensatory Financing Facility. The program supporting the Industrial and Trade Policy Adjustment Loan (ITPAL) approved in February 1987 had been designed concurrently with that of ASAL I. Both programs included important macroeconomic components, but the Structural Adjustment Loan (SAL) was the first Bank loan supporting a comprehensive macroeconomic program. The latter was approved by the Board of the Bank in June 1988, one month before the IMF Board approved an arrangement with Tunisia under the Extended Fund Facility (EFF). These two programs loans were, in turn, followed by three other Bank adjustment loans. One dealing with agriculture (ASAL II) and another with public enterprises (PERL) were approved in 1989. The Economic and Financial Reforms Support (EFRSL) approved in December 1991 was, in fact, a second SAL.  FIGURE 4: DOMESTIC CREDIT, DOMESTIC DEMAND & EXTERNAL CURRENT ACCOUNT DEFICIT Domestic Credit 20- E 10U Domestic Demand Dome st Dredit| U "______-' > ,' \ ~~~~~~~~~~~Demand - rei __- Dericit 0 - - -- -- - - - --_ / - ~~~~~~~~~~External Current Account __ ~~~~~~~~~~~~~~~~~Def icit External Current Account Deficit -20- A 81 82 83 84 85 86 87 88 89 90 91 92 I'rojjectioll  -7- Table 1: Structural Adjustment Programs supported by the World Bank and the IMF Type of Program Date of approval Amount committed by the Board in millions of US$ SDR ASAL I 09/10/86 150 IMF Stand-by 11/04/86 103.7 IMF Compensatory Financing Facility 11/04/86 114.7 ITPAL 02/24/87 150 SAL 06/16/88 150 IMF Extended Arrangement 07/25/88 207.3 (EFF) ASAL II 06/01/89 50 PERL 01/11/89 130 EFRSL 12/12/91 250 9. Because cooperation between the Bank and the IMF was, on the whole, very good and because the staff of these two institutions were working closely with the Tunisian authorities, the various adjustment programs complemented each other. They could be considered as the pieces of a pattern which, in the eyes of the Tunisians, fitted tightly into their Sixth and Seventh Plans of Economic and Social Development. To a large extent, the ITPAL prepared the ground for the SAL which, in turn, prepared the ground for the EFRSL. On the one hand, the ITPAL, the SAL and the EFRSL dealt each with the elimination of non-tariff barriers against imports competing with goods produced by Tunisian industries for the domestic market. On the other hand, a number of measures- such as those relating to the reform of the tax system- figured prominently in both the SAL and the EFF which were negotiated concurrently and covered almost the same period. It is, therefore, virtually impossible to isolate the specific contribution of the SAL from those of other programs. 10. Before dealing specifically with the SAL, it is convenient to summarize the overall objectives of the adjustment process and to assess its broad results. The first objective of the adjustment process initiated in 1984 was to contain emerging macroeconomic disequilibria and to avoid a debt crisis. This first objective had been essentially reached by the end of 1986, when the ASAL I became effective and the stand-by was approved; but the strong adjustment measures were essentially enforced through government controls and they led to an economic recession.  -8 - 11. The second set of objectives was to resume economic growth, to reduce unemployment and to attain a viable balance of payments situation in a non-inflationary context. This required a series of structural reforms which were supported by the various adjustment programs. The central theme was to rely more heavily on the private sector and progressively to replace government controls by market forces. The key instruments were the liberalization of prices and trade; the reduction in the level of effective protection and the promotion of competitive practices; the improvement of financial intermediation, and; the establishment of neutral and efficient direct and indirect tax systems. 12. Although a number of measures were implemented later than specified in the programs, the rebound of exports was stronger and more rapid than had been anticipated. Exports of goods and non factor services valued at 1 990 prices increased at an average rate of 1 7.3% a year from 1986 to 1 988, compared with an average rate of only 1.0% during the six preceding years. This performance was particularly remarkable, because export earnings from oil, phosphates, and derived chemical products accounted for almost half of total exports of goods in 1986 and rose by only 2.1 % a year from 1986 to 1988. The negative impact of a severe drought in 1988 was more than compensated by exceptionally high receipts from Libyan tourists, and 1988 was the only year during which Tunisia had a positive balance in its external current account before grants. 13. Foreign exchange earnings from tourism are sensitive to external events. Thus, earnings from tourism measured at 1990 prices jumped by 84% in 1988 after the borders with Libya were reopened, precisely at a time when basic consumer goods were very scarce in that country (Figure 5 Table 4 of Part ll). By contrast, earnings from tourism fell by 30% in 1991 because of the Gulf crisis. In order to assess the adequacy of export policies, it is convenient to consider the exports of goods other than oil, phosphates, and derived chemical products. For this group, export earnings valued at 1990 prices more than doubled from 1986 to 1991, which corresponds to an average growth of 1 5% a year. This rapid expansion was very widespread.  -9 - FIGURE 5: EXPORT EARNINGS OF GOODS & SERVICES 1986-92 6000 - ~_5000 - _ O ..-* s. *^ Th,Sm a 4000 _- -- - --- --- X 3000 -. - UMVS___ a - ,_-- a_Si.^Xs wSfi - ____ a----- o 2000 _ - TextUa A LaUth.r q _ ---gYt a?------u---- ---- - Ia - 1000- , _ _ PeLiaau . Pboap aUs a Camhuah Prdu _ o T 1986 1987 1988 1989 1990 1991 1992 Pirojection 14. Results during the Seventh Plan period were somewhat better than the macroeconomic forecasts made by the Bank in the context of the SAL. The decline in the value added by the oil sector was lower than foreseen, while the increase in the value added by agriculture was slightly higher (Table 2). The growth of investments, imports and exports was stronger than foreseen; moreover, after a sharp deterioration from 1981 to 1986, the debt service ratio started to improve (Table 2 and Figure 6). In spite of this progress, the unemployment rate reached 1 5% by 1991, which represented a slight deterioration, but remained in line with the SAL's base case projection. Real GDP increased, on average, by 4.3% a year from 1986 to 1991. On the one hand, this average would have an upward bias because 1986 was a very bad year; on the other hand, this bias would be partly offset by the choice of 1991 as end- period, since 1991 was not a good year due to the Gulf crisis and 1992 is expected to be a better year. I  - 10 - FIGURE 6: DEST OUTSTANDING DISBURSED OVER GDP & DEBT SERVICE OVER EXPORT O GOODS & SERVICES 30 ,' *, Debt Service Ratio 80 2 _5 * 70 - .... q -,~~~~~~~~~~~~~~~~z I 0 - 6 i0- ,: Debt Outstanding Dlsbursed 1 50 I. a! 81 82 83 8+ 85 8B 87 88 89 90 91 92 Projectlon 1 5. The strong export rebound reflected the improvement in Tunisia's competitive position, which resulted from the successful devaluation and the fall in real wages. The main burden of adjustment was carried by wage earners. From 1983 to 1991, the index of real wages declined by 16%, while real income of non-wage earners in the non-agricultural sector improved by about 20% (Figure 7 and Table 5 Part ll). Because this was a reversal of the developments in the three preceding years, the discrepancy between the two groups is less striking when 1980 is used as reference basis. Between 1980 and 1991 real wages declined by less than 0.29% a year, while real income of non-wage earners in the non-agricultural sector increased by 1.2% a year. It may be noted that the greatest gain was achieved by non-wage earners in the agricultural sector (Table 5), which may explain why migration from rural to urban areas did not raise problems as acute in Tunisia as in most other developing countries.  - 11 - TABLE 2: MACROECONOMIC EVOLUTION DURING THE VIITH PLAN PERIOD, SAL FORECASTS AND RESULTS Average Real Growth 1986 Basis Rates (in millions 1991 over 1986 of dinars) (in % per year) (1) SAL Forecasts Actual ______________ (2) (3) GDP 7025.0 3.9 4.3 Agriculture 933.0 4.1 6.7 Energy 534.8 -4.4 -1.7 Others 5557.2 4.5 4.5 Consumption 5886.0 3.2 3.0 Investments 1649.0 1.5 4.7 Exports (GNFS) 2161.0 5.8 7.6 Imports (GNFS) 2671.0 2.8 5.2 1986 ratios Changes from 1986 to as 1991 (in percentage percentages points) Gross Fixed Investment/GDP 23.8 -2.9 0.9 Gov't Fixed Investment/GDP 5.1 -1.2 0.7 Public Enterprises Inv./GDP 8.2 -2.5 -1.8 Government Expenditures/GDP 36.9 -9.1 -6.2 Government Deficit/GDP 5.3 -3.8 -1.5 Export/GDP 30.8 5.2 8.5 Import/GDP 38.0 1.2 5.8 External Current Account 8.0 -4.3 -3.8 Deficit/GDP 64.0 -3.6 -6.3 Total Debt Outstanding 28.5 -1.0 -1.4 Disburs d/GDP Total Debt Service/Export GS Increase from 1986 to 1991 (in percent) Real Effective Exch. Rate -0.0 -16.0 SMIG 40 hrs. Monthly Nominal 15.1 23.3 Source: Col. (1) & Col. (2) SAL President's Report, Annex II, and Ministry of Planning and Regional Development.  -12 - FIGURE 7: REAL WAGES & REAL INCOME OF NON-WAGE EARNERS, 1980-91 140 130 BReal Income of - Non-Wage Earners /, Outside Agriculture , 120 :' 8 - 110 - . o 100 : _---- 100 Non-Agricultuire Sector 80 , 80 81 8Z 83 84 85 86 87 88 89 90 91 D. Assessment of the SAL 16. Macroeconomic developments were, on the whole quite favorable during the period covered by the SAL. It is not possible to single out with any accuracy the specific contribution of the SAL to these developments, but it is possible to gauge these developments against the objectives of the SAL and to assess the strengths and weaknesses of the SAL program. Specific Measures 1 7. The measures specified in the SAL may be reviewed under three headings: liberalization of prices and trade, improvement in the efficiency of financial intermediation, and fiscal reforms.  - 13 - 18. Liberalization of price and trade. The SAL contributed to a substantial liberalization of producer prices; when the second tranche of the SAL was released, producer prices had became unregulated for 70% of the value added by production activities in the agricultural, fisheries and manufacturing sectors. But progress was slower for distribution margins. The authorities claimed that they had to proceed cautiously, because competition was not strong enough to protect the interests of consumers. It should be noted, however, that the government did not do much to enlarge access to trading activities, which would have been a way to increase competition. 19. In the context of the ITPAL, import tariffs had been reduced very substantially while quantitative restrictions (QRs) had remained virtually unchanged, except for capital goods. The letter of Economic Development Policy signed September 1, 1986 specified that "Starting in 1989, the Government will introduce a program leading to the abolition, by 1991, of the remaining quantitative restrictions, mainly those on consumer goods".3 It would have been desirable to start reducing QRs at an earlier stage when tariffs on imported inputs were being lowered, since the latter could have been used to facilitate the former. As it had not been done in the ITPAL, the QRs problem was passed over to the SAL which, to a large extent, passed it over to the EFRSL. The deadline for eliminating most quantitative restrictions was postponed from 1991 in the ITPAL to 1992 in the SAL and to 1993 in the EFRSL. Given the QRs protected practically all domestic production in 1986, it is not surprising that the Tunisian authorities felt the need for more time. 20. The share of imports subject to quantitative import restrictions was reduced to 74% of the output value of the agricultural, fishery and manufacturing sectors by February 1991 before the second tranche of the SAL was released, from 95% at end-June 1988. But the lowering of non-tariff barriers which occurred towards the end of 1990 had to be partly compensated by the imposition of temporary compensatory duties ranging from 10% to 30%. These duties were to be removed within three years, and the first reduction occurred in February 1992 as planned. Non-tariff barriers were lowered in 1992 for a second set of products with the introduction of a similar system of compensatory duties. 21. Improving the competitiveness of the domestic industry is a slow process which requires a thorough knowledge of the industry. It seems, in retrospect, that, staff resources and time permitting, the Bank staff should have established closer contacts with industrialists in order to understand better their problems and work out practical solutions. 22. In order to reduce the protection provided by QRs without adverse effects on the industry, measures had to be taken to ensure fair price competition and progress has been made in this respect. The draft of the law prohibiting anticompetitive pricing activities has been thoroughly discussed with the Bank and a satisfactory legislation has now been passed. The new law is likely to provide a basis for antidumping practices, which is important for protecting infant industries with a limited domestic market against the competition of powerful 3/ End of para 12 of attachment to the Letter of Development Policy signed 9/1/1986.  - 14 - foreign firms. But Tunisia's accession to the GATT in 1990 will restrict the types of anti- dumping and safeguard measures that can be applied. 23. Improvina Financial Intermediation. The objective of the SAL was to reduce further the distortions in financial markets and, thus, to pave the way for the development of markets in longer term instruments. 24. Until 1987, the Central Bank relied essentially on its rediscounting facility for regulating money supply. Deposit banks were refinanced at administratively determined rates and the amounts which each bank could obtain was directly controlled by the Central Bank. After 1987, the Central Bank, with IMF technical advice, shifted to a system of indirect control by auctioning the total amount to be refinanced among the various banks. This practice promoted competition among banks and contributed to the determination of a "money market rate" reflecting the equilibrium between the supply of money and the demand for it. The money market rate has remained a few percentage points above inflation and the share of priority credits has been reduced. Moreover, the differential between the money market rate and the effective cost of preferential credits was reduced by more than one-third, which was a condition for the release of the second tranche. But, the three percentage points cap on the spread between the interest rates on bank loans and the money market rate remained in spite of recommendations by the IMF and the World Bank. This cap should, however, be lifted by the end of 1993 in the context of the EFRSL. A first step was made in January 1992 by relating the 3 percentage point differential to the average of the loans made by each bank, instead of applying this cap to each individual loan. 25. Treasury borrowing was a major source of distortions in the financial sector. Deposit banks were obliged to hold up to the equivalent of 20% of their deposits in 10 year Treasury bonds, bons d'eauiDement, whose coupon of 6.5% enjoyed partial tax exemptions that varied according to the holder. The social security system and insurance companies were also obliged to hold these bonds. Since the after tax yield was usually well below the money market rate, the bons d'dauinement were in effect a tax on holders. To all intents and purposes, they were also untradable. By removing the tax exemptions and by raising the coupon to give the same after tax yield, the SAL took a first step in putting Treasury borrowing on a market basis. This step was followed by the initiative of the Tunisian authorities, in 1989, of issuing Treasury bills (one year or less) with interest rates roughly in line with the market. The final steps are being taken under the EFRSL; the issue of bons d'eauipement has ceased, Treasury bonds with maturities of up to five years are being placed by auction, and the outstanding stock of bons d'6auipement will be almost fully redeemed by end-1 996. 26. Another distortion was caused by the foreign exchange risk coverage mechanism. This was based on an equalization account (Fonds de Perequation de Changes - FPC) financed by fees that were, in practice, taxes. The account had been depleted by the devaluations of the dinar and the fall of the US dollar in 1985-86, besides which the IMF judged that it represented a multiple exchange rate practice. With some modifications, the arrangement adopted under the SAL has proved workable. The FPC was closed to new loans. In its place the banks incurring foreign loans at the behest of the State (notably lines of credit from multilateral and bilateral sources of assistance) would pay the Central Bank the difference  -15 - between the cost of the loan and the Tunisian money market rate for it to assume the foreign exchange risk. Although the basic intention of ensuring that the cost of the loan to the banks was in line with the cost of domestic resources was sound, the problems of linking long term resources to short term interest rates and the absence of a domestic market-determined long term interest rate obliged the authorities to resort to putting a fixed charge of three percentage points for the cover. So far this charge has been profitable to the Central Bank without causing the borrowing banks any difficulties. Other mechanisms were added as well. Options up to 12 months to purchase foreign exchange are sold by the Central Bank and though they got off to a slow start, partly because of a mistake in the pricing formula that has been corrected, they are now used by a number of enterprises. 27. The cap on lending rates may have prevented enterprises that were not sufficiently creditworthy from obtaining credits, but it has also limited the profitability of commercial banks and their ability to constitute provisions for non-performing loans. The need for such provisions is considerable. A number of banks are quite fragile because of an accumulation of problems originating from the period of close control over credit. This was not an issue addressed by the SAL, but is being addressed through the EFRSL, which supports the institution of a much strengthened prudential framework and, together with lines of credit being prepared for industry and agriculture, the auditing and restructuring of banks. In brief, as regards the improvement of financial intermediation, the SAL did not do much more than break the ground for the reforms which have to be implemented under the EFRSL. 28. Fiscal Reforms. The Government undertook major reforms of the indirect and direct tax systems under the SAL and these reforms were implemented very successfully. 29. The value added tax (VAT) was established to replace three turnover taxes and an array of excise taxes which created large distortions. During the preparation of the VAT, extensive discussions were held between the Bank staff and the authorities. The law establishing the VAT was ready for submission to Parliament in November 1987, but the Bank staff convinced the government to postpone submission by five months in order to improve the proposed legislation. The VAT on production activities was enacted with effect from 6/11/1988, that is nine months before effectiveness of the SAL. It had been feared that the VAT would initially affect adversely government revenues; this was one of the reasons for maintaining temporarily a few consumption taxes, on luxury goods in particular. But the feared revenue loss did not materialize. In August 1989, the VAT was extended to wholesale trade, excluding foodstuffs. The loan document required extension of the VAT to wholesale trade including that of foodstuffs before releasing the second tranche; but the loan document provided for the exclusion of trading firms with a turnover lower than 500,000 dinars, whereas the VAT was in fact applied to all firms irrespective of their turnover. The Bank was perfectly justified to trade one exclusion for the other, since both had about the same revenue effect. 30. The Government mandated a study on possible extension of the VAT to retail trade. The study concluded that extension to small-scale retail was not feasible, but that extension to large-scale retail could be profitable. The World Bank did not press for an extension to retail trade because, at the time, the Tunisian administration was engaged in reforming the systems of registration duties and local taxes. These reforms were considered by the Bank  -16- as more important than an extension of the VAT to retail trade, even if they had not been included in the original SAL program. 31. The new law on direct taxation represented also a considerable improvement. The new system was much simpler than the previous one, the incidence of the tax was enlarged and the marginal rate of taxation greatly reduced. The new system took effect on personal incomes earned in 1990 and was extended to corporation incomes earned in 1991. Strengths and Weaknesses 32. The SAL was approved by the Board in mid-1 988 after the major macro-disequilibriums had been corrected and when export earnings were already on the upswing. The objective of the SAL was, therefore, to consolidate the progresses already made and to create the conditions for viable growth in the medium term by supporting needed structural changes. The evolution of the economy through mid-1 992 suggests that this broad objective has been achieved. It was also anticipated that the liberalization process would continue on its own momentum after the SAL tranches had been released. However, it needed another balance of payments shock - the Gulf crisis - and another adjustment loan - the EFRSL - for this to happen. 33. The review of the measures implemented during the period of the SAL has shown that the fiscal reform was the most successful achievement. This reform was conducted with great professionalism and the Bank played a useful role in supporting competent technicians in performing a good job. The Bank was less successful in supporting measures which had more direct socio-political implications. The targets set for the deficit of the CGC were observed when the crop was good, but were exceeded in drought years because import prices of cereals rose sharply at that time and the authorities considered that the priority was to avoid substantial increase in the prices of basic foodstuffs. Similarly, the deadlines set for the removal of non-tariff barriers had to be postponed repeatedly, because the authorities did not want to run the risk of harming industries producing for the domestic market. The role of the State in the Tunisian economy remained more important than had been anticipated when the SAL was negotiated and the various reforms supported by the SAL did not succeed in lifting private investments very substantially. These various observations suggest that Bank's financial support is most productive when it relates to the implementation of measures for which a political consensus has already been built. The pace of reforms was often slower than the Bank and IMF staff would have liked it to be; the authorities proceeded cautiously, but they succeeded in preserving a political consensus and they avoided moving backward. 34. Because Tunisia was never in a desperate financial situation, it was able to negotiate with the Bank and the IMF in a position of relative strength. Discussions with the staff of these institutions before negotiations and during the course of program implementation contributed to sharpen the issues and the formulation of the measures to be implemented. The support of the Bank and the IMF strengthened the position of those, inside the administration, who supported adjustment; but the programs which were implemented were essentially homemade.  - 17 - 35. The adjustment process is not over. Further progress is required in liberalizing trade margins, reducing non-tariff barriers and improving financial intermediation. These measures would facilitate the elimination of the remaining restrictions to the convertibility of the dinar, which in turn would help Tunisia in attracting more direct foreign investment and gaining access to international capital markets. The Bank has a role to play in assisting Tunisia in this further stage of the adjustment process. E. Implementation and Monitoring 36. Effectiveness of the SAL was declared six months later than originally foreseen; the second tranche was released 28 months after the signature of the loan agreement and the closing date of the loan was postponed by 14 months. Modest though they were, the measures for liberalizing trade and prices were the main reasons for the delays of effectiveness and second tranche release. The preceding reductions in tariffs had made the removal of QRs more painful, but, even more important, full awareness of what outward orientation of the economy really implied was only gradually spreading through the administrative system. Between mid-1 988, when the SAL was approved, and the end of 1991, when removal of all QRs was agreed under the EFRSL program, the understanding of the implications of outward orientation has greatly improved. Much of this improvement was due to the supervision of the SAL and the Bank's ESW. 37. A total of 1 5 legal conditions had to be met for the release of the second tranche. Soon after effectiveness it became clear that this large number of conditions made the program difficult to implement and supervise. The fact that no waiver was asked for was in good measure due to the desire of the Tunisian authorities to keep a perfect record in this respect. But some of the institutionally complex reforms, such as the anti-trust and anti- dumping policies, needed substantially more time to become effective reforms, although the authorities were receptive to the comments and views of the Bank. It is only now (mid-1 992) that these two reforms can really be said to be taking on practical significance. 38. Disbursement was slower than anticipated for the SAL, as in the cases of the other adjustment loans made by the Bank to the borrower. Almost two years after the beginning of the EFF arrangement, Tunisia requested a one-third reduction in its access to the facility; the first purchase under the EFF was made in May 1 991, when Tunisia started to encounter balance of payments difficulties arising from the Gulf crisis. It could, therefore, be said that Tunisia used the financial assistance provided by the Bretton-Woods institutions as stand-bys were supposed to be used. 39. The conditions for withdrawing the proceeds of the SAL were fairly straightforward. The borrower had to provide evidence of imports of goods which did not appear on a negative list for a value equivalent to the amount withdrawn. The list was not unduly restrictive; it allowed Tunisia to withdraw on account of petroleum and foodstuffs imports up to a maximum of US$30 million. Contracts for the procurement of goods in excess of US$5 million had to be awarded through International Competitive Bidding in accordance with World Bank established procedures. Tunisia did not always follow these procedures, notably in the  - 18 - case of a 20,000 tons contract for steel imports. However, since the price negotiated for this shipment was found to be fairly advantageous for Tunisia and since such purchases are difficult to fit into ICB procedures, the World Bank considered that the steel shipment could qualify for withdrawal from the SAL proceeds. 40. Implementation of the program supported by the SAL was monitored by the Country Operations Division of the Maghreb Department of the EMENA Region (EM2CO). A fairly sophisticated and comprehensive system had been elaborated to monitor the progress achieved on the macroeconomic front. But the system was not as useful as had been anticipated, because it required a number of data which proved difficult to collect in a timely manner. For this reason, a less ambitious monitoring system was used for the EFRSL. It was felt that the monitoring system should be simple in order to provide the authorities with an easy way of identifying the problems arising and taking timely remedial actions. PART II. PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE 41. By letter of March 13, 1992, the Bank formally requested that the Government of Tunisia submit comments to this Project Completion Report. No comments have been received.  - 19 - PART III: STATISTICAL ANNEX STRUCTURAL ADJUSTMENT LOAN (2962-TUN) TABLE 1: LOAN DATA Amounts: US$150 Million As of May 4. 1992 Original Disbursed Cancelled Repaid Outstanding 150.0 150.0 -- -- 150.0 Original Loan Date Actual or Re-estimated Initiating memorandum 2/10/88 2/10/88 Letter of Dev. Policy 5/09/88 5/09/88 Negotiations 5/05/88 5/05/88 Board Approval 6/15/88 6/15/88 Loan Agreement 9/26/88 9/26/88 Effectiveness 9/08/88 3/31/89 Loan Closing 4/30/90 12/31/90 & then 6/30/91 | Actual completion n/a 6/30/92 CUMULATIVE LOAN DISBURSEMENT FY90 FY92 (i) Planned 150.0 150.0 |(ii) Actual 93.2 150.0 (iii) (i) as % of (i) 62.2% 100.0%  - 20 LOANS RELATED TO THE SAL I 1. IIPAL (Industrial & Trade Policy Adjustment Loan - Ln 2781-TUN) in the amount of 150 million USS. Board date: 24/87. Effectiveness: 815/87. Closing date: 12/31/89. PCR: June 90. 2. IV Agricultural Credit (related to the SAL because of preferential credits) LN 2865-TUN, in the amount of 30 million USS. Board date: 7/7/87. Effectiveness: 1/22/88. Closing date: 12/31/91. PCR issued on July 16, 1992. 3. PERL (Public Enterprise Reform Loan - Ln 3109-TUN) in the amount of 130 million USS. Board date: 7/11/89. Effectiveness: 2/22/90. Closing date: 6/30/93. 4. EFRSL (Economic & Financial Reform Support Loan - Ln 3424-TUN) in the amount of 250 million USS. Board date: 12/12/91. Effectiveness: 12/23/91. Closing date: 12/31/94. TABLE 2: MISSION DATA Mission No. of No. of Staff Date of Month/Year Weeks Persons Weeks Report Preparation I 4/22/87- l ___________________ 5/07/87 2.5 3 7.5 6/19/87 Preparation II 11/07/87 11/20/87 2.5 9 22.5 1/27/87 Appraisal 2/10/88- 2/27/88 2.5 9 22.5 3/15/88 Supervision I 2/16/89 1 4 4 3/30/89 Supervision II 10/27/89 1 6 6 11/2/89 Supervision m 6/10/90 1 5 5 9/8/90 Supervision IV 12/10/90 2 2 4 1/3/91 Completion 6/7/92 1 2 2 n/a  - 21 - PART III TABLE 3: MACROECONOMIC INDICATORS Project. 1U1 1982 19U113 194 198 198 1987 198 1989 19900 11 1992 annual percentage chnges In Real Terms: GOP 5.5 -0.5 4.7 5.7 5.6 -1.4 6.7 0.1 3.7 7.6 3.5 6.9 Consumption 7.4 3.8 4.9 0.0 2.9 1.0 1.2 -0.3 3.9 6.6 4.0 4.1 Fixed Investment 14.2 6.2 -4.7 4.7 -4.3 -17.8 -10.1 -4.0 12.4 19.1 2.9 10.0 Domestic Demand 1/ 9.5 2.5 2.9 6.7 -1.4 -3.8 0.6 -2.7 7.7 11.0 0.9 5.0 ExportofGoods&NFS 3.5 -8.9 0.9 2.7 3.3 5.2 13.4 21.4 5.0 1.8 -1.9 13.2 Export-Manufactured 20.2 7.2 4.7 -0.8 1.7 13.1 19.7 16, 17.3 14.7 14.7 6.1 ImportofGoods&NFS 13.0 0.9 -2.2 5.7 -13.0 -2.1 -3.5 16.1 14.6 3.9 -77 8.9 Real Effective Exchange tate -2.9 1.1 -2.8 -1.6 -3.4 -21.0 -5.3 0.5 -2.2 -0.3 2.5 In Nominal Terms: CPI 9.0 13.6 8.9 8.6 7.6 6.2 8.2 7.2 7.7 6.6 7 8 GOP 17.6 15.4 14.4 13.5 10.7 1.6 13.9 8.6 11.2 13.8 10.4 13.5 Money(M2) 20.2 21.0 17.1 11.7 14.4 4.9 14.9 17.5 15.5 7.7 5.8 DomesticCredit 29.6 25.0 21.0 15.9 16.2 8.3 8.8 4.4 22.5 7.7 8.2 Government 16.4 20.1 15.4 27.8 22.8 13.2 14.9 -0.1 -6.9 28.1 5.5 Economy 31.8 26.4 21.8 14.4 15.2 7.5 7.8 6.1 20.9 5.4 8.5 percentage ot GOP Government Revenue 29.3 32.0 31.6 34.0 31.9 31.8 29.6 30.0 29.3 27.3 27.1 20.3 Govemment Expenditure 34.0 37.9 39.2 40.7 36.9 37.3 32.7 33.0 33.1 31.1 31.1 29.0 Deficit including grant -5.2 -a.o -76 -4.7 -4.9 -5.5 -3.1 -3.6 -3.8 -3.8 4.0 -2.7 Export 41.4 36.9 35.4 33.9 32.6 30.4 35,0 41.9 44.0 41.8 39.3 41.9 Import 49.8 47.4 44.0 45.0 38.7 38.0 36.0 41.5 48.0 50.0 43.8 44.9 Currcnt Account oefict -7.7 -9.4 -7.4 -10.9 -7.1 -8.0 -1.0 1.0 -3.3 -5.3 -4.2 -2.0 Public Investment 3t 5.1 5.1 5.6 5.3 5.5 4.9 4.1 4.1 4.5 5.4 5.6 5.3 Gross Investment 32.3. 31.7 29.6 32.0 26.0 23.5 20.6 19.4 22.6 26.6 23.2 23.4 GrossDometUc Savings 23.9 21.2 21.0 20.3 20.4 16.2 19.6 19.8 18.0 19.3 18.7 20.4 Debt Outstanding DIsbursed 42.8 48.4 50.1 51.0 58.9 66.9 70.2 66.7 68.0 61.5 60.5 59.1 ratio and indices as specifled Debt Service Ratio 15.2 16.2 19.2 22.5 24.7 28.2 28.2 21.9 21.7 23.8 27.0 21.7 Public over Private Investment 18.9 19.2 23.5 19.7 26.0 26.3 24.5 27.2 24.8 25.5 31.6 29.3 Terms ol Trado (1980.100) 105.3 103.0 99.0 96.3 93.4 82.0 84.2 83.4 84.3 84.0 82.7 83.0 Real Effective Exchange Rate 99.3 98.8 96.4 96.2 95.1 81.8 70.5 69.7 69.0 68.9 68.9 (1980- 100) Source: MInisy of Planning and sWtaf estimates. 1/ Domestic demand equal consumption plus fixed investmont plus net changes in stocks V December of current yea or Oecember of previous yer based on IMF weights revised in 1992 (France 32.7%. Itly20.8%. Gemany 15.0%, Belgium 6.8%. USA5.1I%. Spaln, 4.3%, Netherlands. 3.2%. ANgeia2.8%. Greece 2.2%. U.K. 2.0%. Japn 1.0%. Turkey 1.5% and India 1.3%). Y Defined as Investment by Central Govemment (1985 onward P-5030 Tunisia).  - 22 - TABLE 4: EXPORT EARNINGS IN MILLIONS OF DINARS AT 1990 PRICES Proj. 1986 1 1987 1 1988 1 1989 I 1990 1 1991 1992 Petroleum & Products 560 520 504 633 535 518 441 Phosphates & Products 416 471 S14 523 454 460 505 Agricultur- C Processed 248 302 296 302 348 496 428 Textiles & Leather 637 692 769 936 1,179 1,235 1,371 Mechanical & Electrical 159 177 224 249 302 353 389 Others 84 129 181 314 272 193 231 Total Goods 2,103 2,290 2,488 2,956 3,089 3,255 3,364 Tourism 483 672 1,236 925 828 585 957 Other Services 537 578 576 632 676 664 779 Total Services 1,020 1,251 1,811 1,557 1,503 1,249 1,735 Grand Total 3,123 3,540 4,299 4,513 4,592 4,504 5,100 Source: Ministry of Planning. TABLE 5: REAL RETURN TO LABOR 1/ 1973 1980 1981 1982 1983 1984 1988 1986 1987 198| 1989 1990 1991 SMIG 2/ 46.4 73.3 82.0 98.1 1000. 92.7 85.6 894 86.3 90.0 80.3 81.4 78.8 PubII AdII*Wsv. 93.9 99.3 1000. 95 5 896. N9 87.4 85. 893 879 89.7 Al Wage Earner 3/ 67.4 86.3 89.1 95.8 100.0 94.2 90.7 86.4 83.7 821 828. 82 1 03.7 Non-Wage Earne , I I Exckuding Agri. 4/ 40.0 10. 109. 95.9 10080 99.0 98.8 102. 104. 120. 128. 133. 121 5 5 0 0 5 4 8-- 4 Ag,*cuftarel Stor 83.6 121. 116. 109. 1000 11. 146. 121. 162. 121. 136. 1 ts6. 216. 2 6 6 9 2 9 0 5 7 a 7 C.P.I. 80.6 91.8 100.0 108. 11e. 124. 134. 143 155 188 177 I I I a 0 2 8 0 5 9 Source: WlOy Rat Planwing. 1/ Delated by the consumew price Index ICR). 2/ SaIake mln nustriel garant guaranteed minknum rnduufflel wgags. 31 Averg wages in pubit admnstation, pubca entoei anid p,tIvte nragrlcutural set or.