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Mon 15 Apr 2013 10:41 PM

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Tunisia and IMF agree $1.78bn loan - gov't official

Interest rate on the loan will be 1.08 percent and Tunisia will repay it over five years

Tunisia and IMF agree $1.78bn loan - gov't official
The IMF loan is needed to shield Tunisias economy from global economic woes.

The IMF and the Tunisian government have reached agreement on a $1.78bn precautionary loan which will be announced on Tuesday, a senior government official told Reuters.

Tunisia had asked for support to ease financial problems seen since a revolution that toppled the former regime two years ago, but a deal was delayed by the killing in February of opposition politician Chokri Belaid.

A delegation from the International Monetary Fund began a new round of negotiations with Tunisia's Islamist-led government on April 8.

"The agreement is already won and it will be announced tomorrow, but the official signing will be next month," a senior official who declined to be named said on Monday.

Finance Minister Elyess Fakhfakh had told Reuters earlier this month that his country expected to sign a loan deal with the IMF in May.

The interest rate on the loan will be 1.08 percent and Tunisia will repay it over five years with a grace period of three years, an official source told Reuters.

Tunisia plunged into crisis on Feb. 6 after the assassination of secular politician Belaid ignited the biggest street protests since the overthrow of strongman Zine Al Abidine Ben Ali two years ago. But a new government has now been formed and protests have died down.

The loan is needed to shield Tunisia's economy from global economic woes, including the debt crisis in Europe.

However, several political parties, including the hardline Islamist Ettharir Party and the Popular Front party, oppose the loan, saying it violates the sovereignty of Tunisia on issues such subsidy reform.

The Tunisian government, led by the Islamic Ennahda Party, expects the economy to grow 4.5 percent this year against 3.6 percent last year.

Moody's Investors Service cut Tunisia's credit rating to junk territory in February, joining the other two major rating agencies, and the cost of insuring Tunisian debt against a default jumped to a four-year high - exceeding levels seen during the turmoil of the 2011 revolution.

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