Country Brief

Context

Tunisia burst into the global imagination as the first North African country to take to the streets. In ousting a president of 23 years, Zine el-Abidine Ben Ali, the country set the scene for protests across a number of countries in the region.  The historic Jasmine Revolution marked a turning point for Tunisians who, following their successful civic call for change, hoped to work towards a peaceful and democratic transition. However, challenges abound as the euphoria of the revolution diminished and the complex reality began to surface.   Political discord has introduced a new set of challenges for the reforming nation but the interim government has made good progress on multiple fronts including: strengthening the National Employment Fund, establishing new programs for employment, beginning the process of financial and social sector reforms and increasing transparency.

Prior to the revolution , Tunisia was known for its progress on development, more liberal social norms, large middle class and gender equality. Despite these apparent advances, Tunisians experienced a stifling political system. And while the country had made progress on many fronts, it had failed to address its persistently high unemployment rate (13.3% in 2009) and growing political malaise. This burden had fallen primarily on young and educated citizens – unemployment peaking at 30% for individuals between 20-24 years and 25% for young university graduates. Three factors contributed to rising unemployment: large numbers of higher education graduates entering the labor market, swelling the labor supply; existing economic sectors –agriculture, textiles and clothing, automotive – catering to predominantly low-skilled workers; and insufficient knowledge intensive businesses in the economy.

In 2010, real growth had increased to 3.8%, the fiscal deficit was at 1.3% of GDP and public debt decreased to 40% of GDP.  However, the revolution and the neighboring Libyan crisis has  had a negative impact on Tunisia’s  short-term economic outlook, particularly in the area of tourism and foreign direct investment.  Tunisia’s GDP, previously expected to rise, is now projected to slow down, notably increasing the rate of unemployment. Despite these short-term challenges, Tunisia’s overall economic outlook remains positive.  The pace of growth is expected to increase in the next two years as the European Union – Tunisia’s main trading partner – recovers from the 2008 financial crisis.   Additional factors contributing to growth includes the recovery of exports, the contribution of major public investments and the interim government’s package of reforms. 

The interim government announced a stimulus package of $1.5 billion and an economic and social emergency plan. The plan outlines 17 main measures covering aspects of security, employment, private sector growth and financing support, regional development, social actions targeting the poorest families and the return of Tunisian immigrants from Libya. 

Strategy

Since the revolution, Tunisia has requested that the World Bank engage in a new program, building on the revolution’s achievements and breaking from past practices.  The interim Government outlined four program areas: (1) Increasing transparency, social accountability and citizen participation; (2) Creating jobs; (3) Increasing social and economic inclusion; and (4) Supporting private sector led growth.  The World Bank’ s Board approved and disbursed  $500 million Development Policy Loan to support the interim government’s program of reforms. This has helped to leverage an additional $800 million from the African Development Bank (AfDB), the Agence Francaise de Developpement (AFD), and the European Union. 

On July 14, 2011, the World Bank’s Board of Directors also approved  a $50 million financing for the Micro, Small and Medium Enterprise Facility targeting medium and long term finance. It is also fast tracking implementation of two recently approved community development projects totaling approximately US$125 million, to ensure that concrete job creation activities and related programs are put in place in the country’s poorer regions. Lastly, the World Bank is financing technical assistance for job creation; income generation and service delivery in disadvantaged interior regions; and providing support to those most affected by the crisis in neighboring Libya.  

The World Bank’s support in Tunisia will follow three phases:  1) Support to the interim Government, 2)Support to the second interim government appointed by the Constituent Assembly and tasked to write the  new constitution on October 23, 2011and 3) Supporting  the new Government  elected according to the provisions of the new constitution.  .

Results

Throughout the past decade, World Bank’s assistance to Tunisia has yielded significant economic and social progress. Some of which include:

• Northwest Mountainous and Forestry Areas Development Project helped increase the average household agricultural income by 85%; access to roads from 56% to 81% for communities in targeted areas; access to potable water from 69% to 81% of households (representing 4,980 additional households); and vegetation and forest cover within project areas grew from 32% in 2003 to 38% in 2009. Cultivated areas significantly increased from 17% to 23% for fodder crops and from 0.8% to 2% for market gardening; and crop yields almost doubled for olives and increased by 40% for wheat. In addition, some community members received small amounts of equipment and materials and training in technical and organizational skills. As a result, 101 development committees and three cooperatives were created.
  
  
• Global Competitiveness and Accelerated Economic Growth in Tunisia was helped by a range of development policy loan programs. Exports doubled over a 10 year period, total factor productivity rebounded from a negative rate in the 1980s to 1.24% in the 1990s and 1.4% in 2000–2006. Furthermore, exports of goods doubled in value between 1996 and 2007, while annual foreign direct investment flows increased steadily, averaging 2.2% of GDP in 1996–00, 2.6% in 2002–05 and 5% in 2006–2008. Tunisia ranked as Africa’s most competitive country in Davos’ 2009 Global Competitiveness Report. All this translated into a 5% growth since the mid-1990 despite recurrent internal (droughts) and external shocks.
  
  
• Employment was targeted with significant changes in policies and regulations governing the labor market. A World Bank-backed program helped restructure the portfolio of active labor market policies and helped reform operations and processes of the public employment services to enhance efficiency and effectiveness. The program supported the hiring of over 16,000 (vocational-technical) jobseekers in 2009 by the private sector through public-private training initiatives. It helped to create 464 jobs and modernize laws, regulations, and processes of public employment services for the difficult-to-place, long-term unemployed cases.

 

• Education Quality has been targeted by a $99 million World Bank loan contributing to the development of new school curricula, the creation and distribution of new textbooks and the implementation of new tools to measure student performance. In addition, an extensive training program for teachers was created to equip them with the skills needed for innovative teaching methods.  The new methodology aimed to provide each child with basic competencies in a range of core subjects. It also required teachers to focus on each student’s needs and progress. The Priority Schools Program now covers some 600 primary schools and 100 middle schools. Kindergarten classes have been created in over 400 schools to cater to the most disadvantaged children.
  
  

Partners

The World Bank operates as part of a broader international effort in Tunisia, together with the African Development Bank, European Union, bilateral donors (France, Japan, US, others), and United Nations agencies.  The Tunisian interim government is taking the lead in donor coordination efforts.  




All dollar figures are in US dollar equivalents. Updated September, 2011


For more information, please contact:
In Washington: Lara Saade, LSaade@worldbank.org; Esther Rosen; ERosen@worldbank.org
In Tunisia: Donia Jemail; DJemail@worldbank.org