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Company News

UPDATE 1-Tunisia government to pump $1.5 billion into state firms, agrees to raise wages

(Adds details, background)

TUNIS, Oct 18 (Reuters) - Tunisia’s government will pump $1.5 billion into state firms as part of an attempt to overhaul the struggling sector and will pay a new instalment of wage increases for public employees, the prime minister said on Sunday.

The country’s public finances are in a critical situation, with a budget deficit expected to reach 14% of GDP in 2020, the highest in nearly four decades.

Tunisia also is under pressure from international lenders to reform public companies and freeze public-sector wages — which doubled to more than 17 billion dinars in 2020 from 7.6 billion in 2010 — as part of measures to reduce its budget deficit.

Most of the public firms have financial difficulties, and some are threatened with bankruptcy because of a lack of financial resources.

“The government allocated 4 billion dinars to public firms as one of the first steps to reform these companies and to give them a dose of oxygen,” Prime Minister Hichem Mechichi said in an interview with state TV.

Tunisia’s state airline, Tunisair, is one of the most prominent companies experiencing financial difficulties, which have deepened because of the coronavirus pandemic.

The company asked the government this year for financial support in the face of difficulties.

Mechichi said he decided to pay the third instalment of the wage increases for public employees to respect the state’s commitment with the UGTT union.

Next year, the nation’s borrowing needs are estimated at about 19.5 billion dinars ($7.08 billion), including $6 billion in foreign loans for the first time, a government official told Reuters on Friday.

Tunisia is the only Arab state that managed a peaceful transition to democracy after the “Arab Spring” uprisings that swept through the region in 2011.

But its economy has been crippled by high debt and deteriorating public services, made worse by the global coronavirus outbreak, and a year of political uncertainty has complicated efforts to address those problems.

$1 = 2.7560 Tunisian dinars Reporting By Tarek Amara; Editing by Daniel Wallis and Peter Cooney

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