Identifier
Created
Classification
Origin
08TUNIS1255
2008-12-30 15:25:00
CONFIDENTIAL
Embassy Tunis
Cable title:  

TUNISIA'S 2009 BUDGET FAVORS EDUCATION AND JOB

Tags:  ECON EFIN EXIM FAO TS 
pdf how-to read a cable
VZCZCXYZ0000
PP RUEHWEB

DE RUEHTU #1255/01 3651525
ZNY CCCCC ZZH
P 301525Z DEC 08
FM AMEMBASSY TUNIS
TO RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 5851
RUCNMGH/MAGHREB COLLECTIVE
C O N F I D E N T I A L TUNIS 001255 

SIPDIS

STATE FOR NEA/MAG (NARDI,PATTERSON AND HAYES)
STATE PASS USTR (BURKHEAD) AND USAID (MCCLOUD)
USDOC FOR ITA/MAC/ONE (NATHAN MASON),ADVOCACY CTR
(TABINE),AND CLDP (TEJTEL AND MCMANUS)
USDOC PASS USPTO (ADAMS, BROWN AND MARSHALL)
CASABLANCA FOR FCS (ORTIZ)
AMMAN FOR ESTH HUB (BHALLA)
RABAT FOR FAS (HASSAN)
CAIRO FOR FINANCIAL ATTACHE (SEVERENS)
LONDON AND PARIS FOR NEA WATCHER
OES (SENSENEY AND LAWRENCE),

E.O. 12958: DECL: 12/24/2009
TAGS: ECON EFIN EXIM FAO TS
SUBJECT: TUNISIA'S 2009 BUDGET FAVORS EDUCATION AND JOB
CREATION

REF: TUNIS 1011

Classified By: Ambassador Robert F. Godec for reasons 1.4 (b) and (d).

-------
Summary
-------

C O N F I D E N T I A L TUNIS 001255

SIPDIS

STATE FOR NEA/MAG (NARDI,PATTERSON AND HAYES)
STATE PASS USTR (BURKHEAD) AND USAID (MCCLOUD)
USDOC FOR ITA/MAC/ONE (NATHAN MASON),ADVOCACY CTR
(TABINE),AND CLDP (TEJTEL AND MCMANUS)
USDOC PASS USPTO (ADAMS, BROWN AND MARSHALL)
CASABLANCA FOR FCS (ORTIZ)
AMMAN FOR ESTH HUB (BHALLA)
RABAT FOR FAS (HASSAN)
CAIRO FOR FINANCIAL ATTACHE (SEVERENS)
LONDON AND PARIS FOR NEA WATCHER
OES (SENSENEY AND LAWRENCE),

E.O. 12958: DECL: 12/24/2009
TAGS: ECON EFIN EXIM FAO TS
SUBJECT: TUNISIA'S 2009 BUDGET FAVORS EDUCATION AND JOB
CREATION

REF: TUNIS 1011

Classified By: Ambassador Robert F. Godec for reasons 1.4 (b) and (d).

--------------
Summary
--------------


1. (C) The Tunisian government has approved a 2009 budget
that focuses on supporting business and investment in the
wake of the world financial crisis. The GOT projects a three
percent budget deficit for 2009, and is targeting five
percent real GDP growth despite worsening economic conditions
both abroad and domestically. Businesses will continue to
benefit from tax relief and government ministries have been
directed to implement policies to encourage growth and
attract foreign direct investment. Education received the
largest budget allocation totaling close to US $3 billion.
Despite an all-around reduction in customs tariffs, the GOT
projects 12 percent growth in revenue without increasing
taxes for corporations or private individuals. On the
surface this budget sends all the right messages, but GOT
expectations seem unrealistic given the (economic realities
in light of the) international financial crisis. End Summary.

--------------
Credits and Debits
--------------


2. (U) On December 22, the GOT approved a 2009 budget of TND
17.2 billion (US $13.2 billion) and set the targeted budget
deficit at three percent (the same target as 2008) despite
the effect the global financial crisis is having on Tunisia's
economy. (NOTE: For both 2008 and 2009 figures, the current
exchange rate of TND 1.3 to US $1 is used.) Total government
revenue is expected to reach TND 13.25 billion (US $10.3
billion),an increase of 12 percent over 2008 revenue
projections. This estimated growth is consistent with the
previous year's collections increase and reflects the GOT's

optimistic outlook for 2009.


3. (SBU) In a statement to the press, the Prime Minister
emphasized the streamlining of the Tunisian tax code and the
modernization of collections. Over the last five years, total
revenue receipts maintained consistent growth rates ranging
between seven and nine percent, despite the dismantling of
import tariffs on imported European manufactured goods. 2009
income and corporate tax receipts are expected to increase 12
percent to TND 11.2 billion (US $8.6 billion). Non-tax
income is expected to grow 14 percent to TND 1.9 billion (US
$1.4 billion),because of planned privatizations, natural
resource revenues, and the sale of a third fixed/mobile
telephone license. The GOT expects to borrow TND 3.9 billion
(US $3.28 billion) of which 78 percent will be domestic and
the remaining foreign. Foreign loans will be directly
applied in the following way: 75 percent will go to public
infrastructure projects, 11 percent to state-owned companies,
12 percent to economic integration projects and two percent
from donor sources will be used for the acquisition of
agricultural products.

-------------- --------------
The Future's So Bright, Tunisians have to Wear Shades
-------------- --------------


4. (U) Setting five percent as the targeted GDP growth rate
is proof of the GOT's optimism for 2009, despite the real
impact the financial crisis is having on the private sector.
In late third quarter 2008, the GOT ratcheted down the
projected 2008 GDP growth rate from 6.1 percent to 5.1
percent. Forecasted GDP growth for 2009 reflects GOT
confidence that exports, tourism revenues and foreign direct
investment will remain strong. The Economist Intelligence
Unit, among others, is projecting a lower GDP growth rate for
Tunisia at around 3.9 percent for the coming year. Tunisia
has enjoyed relatively high average GDP growth rates of five
percent during the last ten years, allowing the economy to
out pace the world average. The GOT projects growth rates in
the agricultural sector, the manufacturing sector and


hydrocarbons of 2.5 percent, 2.3 percent 12 percent,
respectively.

--------------
Men At Work
--------------


5. (U) The Ministry of Employment's 2009 budget, TND 99
million (US $83.11 million) increased 14 percent over last
year's allocation of TND 86 million (US $72 million). The
primary focus, as in years past, will be job creation to
decrease the official 14 percent unemployment rate. The GOT
2009 goals are consistent with the target set in the 11th
Economic Development Plan of reducing unemployment to 11
percent by 2011. The present unemployment rate of 14 percent
remained largely unmoved in 2008, and experts express concern
over the likelihood of progress given the current global
economic situation. Aside from the Ministry's budget, a
total of US TND 257 million ($198.1 million) is destined for
job creation, which is a slight increase over the 2008
allocation of TND 247 million (US $198 million). Another TND
100,000 (US $98,000) will be set aside for the national
employment fund. The GOT's goal is to create a total of
77,000 new jobs in 2009, 43,000 of which are intended for the
estimated 50,000 graduates that will be entering the job
market.

--------------
Show me the Money
--------------


6. (U) The GOT talks about focusing resources on education,
and for 2009 follows through on this promise. The largest
budget allocation went to the Ministry of Education totaling
US $2 billion (TND 2.7 billion),the Ministry of Higher
Education is a close second with an allocation of TND 1.03
billion (US $790 million). Per capita education spending in
2009 will increase slightly over the 2008 allocation to $638
in 2009.


7. (U) The Ministry of Commerce is slated to receive TND 872
million (US $726 million). The Prime Minister said that TND
19 million (US $15.8 million) will be used to support
exports, the handicraft industry and upgrade distribution
channels for agricultural products and fisheries. This
export support fund is an increase from the previous year,s
allocation of TND 17.2 million (US $14.3 million).
Information Communication Technology will also receive
increased project support funds of TND 84 million (US $69
million),an increase of five percent over the 2008 budget
allotment.


8. (U) Other ministries will receive the following
allocations:

- Interior TND 1.03 billion (US $793 million)
- Industry and Energy TND 993 million (US $764 million)
- Public Health TND 834 million (US $695 million)
- Agriculture TND 776 million (US $596 million)
- Defense TND 720 million (US $553 million)
- Foreign Affairs TND 115 million (US $88 million)
- Tourism TND 114 million (US $87 million)
- Transportation TND 459 million (US $353 million)

--------------
Welfare, Government Cheese
--------------


9. (U) The GOT will set aside TND 1.6 million (US $1.2
million) for the public welfare system that will be bolstered
by an additional TND 650 million (US $500 million) for fuel
subsidies. The GOT based this allocation on the assumption
that oil prices will increase to US $90/barrel during the
course of the year. 131 items are subsidized under the
public welfare system with the bulk, 36 percent, going to
subsidize staple food items. Among the food items the GOT
subsidizes are cereals, dairy products, cooking oil and
sugar.

--------------
What is in it for Me?
--------------


10. (U) The budget law also sets forth the GOT's vision for
supporting business development. Companies currently
benefiting from tax relief that are purchased will be able to
convey the tax benefit to the new owners. The Small and
Medium-sized Bank (BFPME) will receive a TND 30 million (US
$23 million) injection of capital to increase lending to
small businesses. Customs tariffs on raw materials,
semi-processed goods and remaining imports will decrease to
15 percent, 36 percent, and 36 percent respectively, from the
current rates of 17 percent, 43 percent and 60 percent.

--------------
Comment
--------------


11. (C) This budget reflects consistency in the GOT's vision
for Tunisia, but probably does not adequately take into
account the financial crisis. Revenues from corporate and
individual taxes are not likely to hold steady if exports and
tourism decline, bringing into question the GOT's ability to
maintain the targeted three percent budget deficit.
Moreover, a downturn in these key economic sectors could have
a negative impact on government revenues, and as a secondary
effect, increase private citizen dependence on public
assistance. On the upside, if oil prices remain at current
levels, the GOT may be able to offset lower revenues from
taxes with lower expenditures on subsidies.


12. (C) We continue to follow closely the effects of the
financial crisis on Tunisia (reftel). Here as elsewhere,
what happens in the crisis will have a significant impact on
the viability of the government's budget. The good news in
the GOT budget is that the focus is where it should be: on
delivering services to its citizens. For that, at least, the
GOT deserves a pat on the back.

Please visit Embassy Tunis' Classified Website at:
http://www.state.sgov.gov/p/nea/tunis/index.c fm
Godec