AFRICAN DEVELOPMENT BANK · (SDP) 2016-2021 Lack of a national multi-year strategy SDP adopted...

AFRICAN DEVELOPMENT BANK

PROGRAMME : INCLUSIVE REGIONAL DEVELOPMENT

SUPPORT PROGRAMME (PADRI)

COUNTRY : TUNISIA

APPRAISAL REPORT

OSHD DEPARTMENT

October 2016

Translated Document

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TABLE OF CONTENTS ACRONYMS AND ABBREVIATIONS ............................................................................................................................. i

PROGRAMME INFORMATION ...................................................................................................................................... ii

GRANT/LOAN INFORMATION ...................................................................................................................................... ii

PROGRAMME EXECUTIVE SUMMARY ........................................................................................................................ v

PADRI RESULTS FRAMEWORK .................................................................................................................................... v

I. INTRODUCTION : THE PROPOSAL ....................................................................................... 1

II. COUNTRY CONTEXT ......................................................................................................... 1

2.1. Political Situation and Governance Context ..................................................................... 1

2.2. Recent Economic Developments, and Macroeconomic and Fiscal Analysis ................... 2

2.3. Competitiveness of the Economy ...................................................................................... 3

2.4. Public Finance Management ............................................................................................. 4

2.5. Inclusive Growth, Poverty Situation and Social Context ................................................. 4

III. GOVERNMENT DEVELOPMENT PROGRAMME ................................................................................ 5

3.1. Government Development Strategy and Medium-Term Priorities ................................... 5

3.2. Obstacles to Implementation of the Strategic Development Plan (SDP) .......................... 6

3.3. Consultation and Participation Process ............................................................................. 6

IV. BANK SUPPORT FOR GOVERNMENT STRATEGY ............................................................................ 6

4.1. Linkages with the Bank Strategy....................................................................................... 6

4.2. Compliance with the Eligibility Criteria ........................................................................... 7

4.3. Collaboration and Coordination with Other Partners ........................................................ 7

4.4. Linkages with Other Bank Operations and Lessons Learned ........................................... 7

4.5. Analytical Work Underpinning PADRI ............................................................................ 8

V. THE PROPOSED PROGRAMME ..................................................................................................................... 9

5.1. Programme Goal and Objective ........................................................................................ 9

5.2. Programme Components ................................................................................................... 9

5.3. Policy Dialogue ............................................................................................................... 16

5.4. Loan Conditions .............................................................................................................. 16

5.5. Good Practice Principles for the Application of Conditionality ..................................... 17

5.6. Financing Needs and Mechanisms .................................................................................. 17

VI. IMPLEMENTATION OF THE OPERATION ......................................................................................... 18

6.1. Programme Beneficiaries ................................................................................................ 18

6.2. Impact on Gender, the Poor, and Vulnerable Groups ..................................................... 18

6.3. Impact on the Environment, Climate Change and Other Areas ...................................... 18

6.4. Implementation, Monitoring and Evaluation .................................................................. 19

6.5. Financial Management, Disbursement and Procurement ............................................... 20

VII. LEGAL DOCUMENTATION AND AUTHORITY ................................................................................. 21

7.1. Legal Documentation .......................................................................................................... 21

7.2. Conditions for Bank Intervention ....................................................................................... 21

7.3. Compliance with Bank Policies .......................................................................................... 21

VIII. RISK MANAGEMENT ............................................................................................................................... 21

IX. RECOMMENDATION ................................................................................................................................. 21 ANNEX I. LETTER OF DEVELOPMENT POLICY ...................................................................................................................... I

ANNEX II: TUNISIA – MATRIX OF REFORM MEASURES OF THE 2016-2017 INCLUSIVE REGIONAL DEVELOPMENT

SUPPORT PROGRAMME ............................................................................................................................................................... II

ANNEX III. NOTE ON RELATIONS WITH IMF......................................................................................................................... III

ANNEX IV. KEY INDICATORS AND MACRO-ECONOMIC OUTLOOK ………………………………..... .......................... IV

CURRENCY EQUIVALENTS July 2016

UA 1 = 3.06 Tunisian Dinars (TND)

UA 1 = 1.26 Euros (EUR)

UA 1 = 1.40 US Dollars (USD)

FISCAL YEAR 1 January – 31 December

ACRONYMS AND ABBREVIATIONS

GBS General Budget Support

AfDB African Development Bank

ANETI National Employment and Self-Employment Agency

ARP Assembly of the Representatives of the People

CBT Central Bank of Tunisia

CFAD Decentralization Training and Support Centre

CGDR Regional Development General Commission

CSP Country Strategy Paper

DGCL General Directorate of Local Authorities

FCCL Local Authorities Common Fund

FDI Foreign Direct Investment

FIPA Foreign Investment Promotion Agency

FL Finance Law

HAICOP High Authority for Public Procurement

HE Higher Education

ILO International Labour Office

IMF International Monetary Fund

ITCEQ Tunisian Institute of Competitiveness and Quantitative Studies

LA Local Authority

MAS Ministry of Social Affairs

MDICI Ministry of Development, Investment and International Cooperation

MESRS Ministry of Higher Education and Scientific Research

MFPE Ministry of Vocational Training and Employment

MTND Million Tunisian Dinars

MUA Million Units of Account

NIS National Institute of Statistics

PADRCE Regional Development and Job Creation Support Programme

PADRI Inclusive Regional Development Support Programme

PAGDI Governance and Inclusive Development Support Programme

PARDI Economic Recovery and Inclusive Development Support Programme

PME Small and Medium-Sized Enterprises

SFL Supplementary Finance Law

SDP Strategic Development Plan

SIC Select Inter-Ministerial Council

VSME Very Small and Medium-sized Enterprise

VT Vocational Training

WB World Bank

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PROGRAMME INFORMATION INSTRUMENT General Budget Support

PBO DESIGN TYPE Programme-Based Operation

LOAN/GRANT INFORMATION

Information on the Client

BORROWER : Republic of Tunisia

EXECUTING AGENCY: Ministry of Development, Investment and International

Cooperation

Financing Plan

Source Amount (UA) Amount (EUR)

2016

2017 2018 Instrument

AfDB

142.85 million

180 million

180

million

(indicative)

To be

determined

Loan

TOTAL AMOUNT 142.85 million 180 million

AfDB/ADF Key Financing Information

Loan Currency Euro (EUR)

Loan Type Total flexibility loan

Interest Rate Base rate + Funding cost margin + Loan margin +

Prepayment premium

Base Rate Floating (6-month EURIBOR revised on 1 February

and 1 August)

A free option is offered to fix the base rate

Lending Margin 80 base points (0.0%) per year

Funding Cost Margin: Bank’s financing margin relative to 6-month EURIBOR.

This margin is revised on 1 February and 1 August of

each year.

Front-end fee 25 base points (0.25%) on the loan amount

Commitment Fee A fee of 25 bps/year will be applied to the undisbursed

amounts.

Prepayment premium Zero

Average Maturity 12.75 years

Tenor 20 years

Grace Period 5 years

Base rate conversion option In addition to the free option to fix the base rate, it is

possible for the borrower to return to the floating rate or

reset it for all or part of the undisbursed loan amount.

Transaction costs shall be paid.

Rate ceiling or tunnel option It is possible for the borrower to fix a ceiling or tunnel

on the base rate for all or part of the undisbursed loan

amount.


iii

Loan currency conversion option It is possible for the borrower to change the currency of

all or part of its loan, disbursed or not, into another

Bank lending currency.


Time Frame – Main Milestones (expected)

Appraisal June 2016

Programme Approval September 2016

Effectiveness October 2016

Completion December 2017

Last Disbursement December 2017

iv

PROGRAMME EXECUTIVE SUMMARY

Programme

Overview

Programme Name : Inclusive Regional Development Support Programme (PADRI)

Overall Implementation Schedule: General Budget Support – Stand-Alone Programme-based Operation

– 2016/2017

Programme Cost: MUA 142.85 (EUR 180 million) per year (indicative for 2017).

Programme

Outcomes

PADRI will contribute to the achievement of strong and inclusive growth by reducing regional

disparities. To that end, the programme will support major reforms initiated by the Government in order

to boost regional and local development by reviving investment, through social inclusion and the

promotion of local governance. PADRI will benefit 5,689,000 people, 50% of whom are women in the

16 priority governorates1. Almost 242,000 needy families will also benefit from the programme. More

specifically, PADRI will also benefit disadvantaged students in the priority governorates, as well as

13,000 higher education and vocational training graduates, 66% of whom will be female.

Alignment

with the

Bank’s

Priorities

The programme is aligned with the following three of the Bank’s high-five priorities: Improve the Quality

of Life for the People of Africa, Feed Africa, and Industrialize Africa. It is focused on the Bank’s Ten-

Year Strategy (2013-2022) particularly on the following operational priorities: “Qualifications and

Technology” and “Governance”. PADRI is also aligned with the I-CSP’s governance pillar, as well as

its Infrastructure Pillar which focuses on the acceleration of investment in the governorates and capacity

building directly linked to the Human Capital Strategy (2014-2018).

Needs

Assessment

and Rationale

PADRI addresses three challenges facing Tunisia in order to revive its growth and improve the quality

of life of its population: persistent regional disparities, high youth unemployment, and strong social

demand from its citizens for employment and well-being given the available budget resources. From a

financial standpoint, the Bank’s support is justified by Tunisia’s current fiscal deficit which needs to be

narrowed to successfully implement the country’s economic transformation programme and continue its

reform programmes, which is dependent on the availability of budget resources.

Harmonization Coordination and harmonization with the other technical and financial partners is carried out bilaterally,

as well as through thematic groups, one of which concerns employment and another regional

development. The Bank already co-chairs the employment and employability group with GIZ, and

discussions are ongoing with the WB and EU in order to establish a thematic group on the issue of

decentralization and the least developed governorates. Because of partners’ own constraints and

scheduling, a parallel programme approach was preferred. However, PADRI is harmonized with the

European Union’s Decentralization Support Programme (2015-2018) and the Economic Recovery

Support Programme under preparation by the WB.

Bank’s Added

Value

The Bank was one of the first partners to invest in regional development in the wake of the Tunisian

revolution. This programme builds on the achievements of the three pervious budget support operations

and adds value to social and economic inclusion in the 16 priority governorates by improving human

resource quality and access to economic opportunities, and by strengthening local governance.

Contributions

to Gender

Equality

PADRI supports three flagship measures with a significant impact on gender relationships: (i) the law on

violence against women; (ii) the opening of a line of credit for women and which will benefit at least 800

women project sponsors, 50% of whom will be HE graduates; and (iii) support for the mobility of rural

women, which will affect about 85,000 beneficiaries. Women will also benefit from opportunities

stemming from other measures concerning, for example, investment.

Policy

Dialogue and

Related

Technical

Assistance

Since 2011, the Bank has maintained policy dialogue on regional development and employment with the

Tunisian Authorities. Indeed, this dialogue has been dominated by employment issues, particularly for

young graduates and women, local governance and inclusive access to high-quality basic services in the

priority governorates. To-date, the Bank’s support has helped to launch a White Paper on regional

development, technical assistance, local governance and the identification of regional potential. The

Bank will also prepare two technical assistance operations on women’s economic empowerment and on

the social and solidarity economy as a vehicle for creating jobs in the governorates.

1 Tunisia has 24 Governorates which are ranked according to the Regional Development Index (RDI). The 16 lowest governorates

in the 2015 ranking with RSI scores below 0.530 are the PADRI’s main targets. Refer to Annex C3 for the rankings.

PADRI RESULTS FRAMEWORK Country and Operation Names: Tunisia- Inclusive Regional Development Support Operation (PADRI)

Operation Goals: Contribute to the achievement of sustainable and inclusive growth by reducing regional disparities.

Results Chain Indicators Means of

Verification

Risks/

Mitigation

Measures Indicator Baseline Situation Target

Imp

act

Impact : GDP growth rate

Human capital development index

0.8% in 2015

0.721 in 2015

Above 4% in

2020

0.750 in 2020

Ministry of

Finance

Human

Development

Report

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tco

mes

Outcome 1 : Increased

economic investment in priority

governorates

Share of investment budget allocated to 16

priority governments

Investment budget execution rate in the 16

priority governorates

Share of FDI as % of GDP

64.4% (2011-2015)

39.51% in 2015

19% in 2014

70% in (2016-

2020)

65% in 2021

24% in 2020

MDICI report

Risk: Deepening of

fiscal deficit and

external debt to

address urgent

social demands and

revive growth

Mitigation

Measure:

Continuation of

recovery

programme

implemented with

IMF.

Outcome 2: Intra and inter-

regional social disparities

reduced

Scale of disparities on the basis of the RDI2

reduced

Proportion of population living below the

poverty line

Reduction in HE graduate unemployment rate

0.551 in 2015

01 / 6 in 2015

20.7 (men) and

41.1% (women) 4th

quarter 2015

0.260 points in

2021

01 /10 in 2020

15.7 (men) and

32% (women) 4th

Quarter 2020

MDICI Report

Outcome 3: Institutional

framework for local governance

strengthened and administrative

coverage improved

Number of municipalities

Ratio of municipality population/total

population

289 municipalities

in 2015

67.8% in 2015

350 in 2018

100% in 2018

Ministry of Local

Government report

COMPONENT 1 : IMPROVEMENT OF ECONOMIC INCLUSION IN 16 PRIORITY GOVERNORATES

Public and private investments

in the sixteen (16) priority

governorates increase

Adoption of the Strategic Development Plan

(SDP) 2016-2021

Lack of a national

multi-year strategy

SDP adopted

MDICI Report

2 The regional development index is a total index calculated for each governorate a compilation of 4 thematic indices: amenities of life (basic services), size of labour market, socio-demographic aspect, and human capital. It is

calculated on the basis of statistical indicators produced by specialized institutions (INS). (see Supplementary Technical Annex C3).

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Rate of annual increase in regional public

investment

In 2015

N/A

At least 10% in

2017

Risk: Deployment

and maintenance

of highly qualified

human resources

in priority

governorates

Mitigation

Measure:

Introduction of an

incentive package

for assigned

personnel and

increased

investment to

enhance the

attractiveness of the

governorates.

Risk: Increased

social and security

tensions

Mitigation

Measure: Ongoing

reinforcement of

social and security

measures in

anticipation of an

upsurge in violence.

Adoption of a new investment code

Existing Code not

suitable for priority

governorates

New Code

adopted in 2016

Ownership capacity of

governorates strengthened

Number of local authority officers and

governorate officials trained

0 Units in 2015 360 in 2017 CFAD Report

COMPONENT II : IMPROVEMENT OF SOCIAL INCLUSION AT LOCAL AND REGIONAL LEVELS

Disparities in access to health

care are reduced

Establishment of regional health pools 0% in 2015 25% in 2017 Ministry of Health

report

Equity and quality of education

in priority governorates are

improved

Establishment of student welfare office Non-existent Office Office

established by

Decree

Extract from CMR

report

School yearbooks

Reduction in school drop-out rate

Increase in number of students with access to

student welfare

TBC

25% in 2015

TBC

50% in 2018

Number of research laboratories and units in


0 in 2015 1 research

laboratory and 6

units -2018

MESRS Report

Effectiveness of social

protection programmes

strengthened

Number of families benefiting from the

consolidated social assistance programme

235 000 families in

2015

242 000 families

in 2018

MAS report

Women’s empowerment

strengthened

Opening of line of credit for women in the 16

Governorates

Existing financing

system not very

gender sensitive

Line of credit

opened for

women’s

entrepreneurship

Ministry of

Women’s Affairs

report

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COMPONENT III : IMPROVEMENT OF LOCAL AND REGIONAL GOVERNANCE

Institutional and regulatory

framework established for local

development and

decentralization

Adoption of decrees establishing and

expanding municipalities

Low level of

transfer of power to

priority

governorates

Decrees to be

adopted to

establish and

expand

municipalities

Copies of decrees

establishing new

municipalities

Adoption of a Local Authorities Code Non-existence of

Code governing the

decentralization

process

Adoption of

Local

Authorities Code

(2017)

Tunisian Official

Gazette (JORT)

Financial situation of

municipalities improved and

access to the resources of the

Cooperation Fund facilitated

Outstanding debt of poor and indebted

municipalities

Cooperation Fund’s annual execution rate

TND 130 million in

2015

26% in 2015

TND 20 million

in 2018

50% in 2018

DGCL Report

Human resource capacities of

local authorities (LA)

strengthened

Number of officials assigned to the

management of newly established or expanded

municipalities

N/A

At least 344

officials in 2018

DGCL Report

Number of local authority officers trained in

project management (PM) and procurement

N/A 821 officials,

40% of whom

are women

DGCL Report

Key

Act

ivit

ies

Key Activities:

Fulfilment of conditions precedent to presentation of the Programme to the Bank’s Board

Signature of Loan Agreement

Fulfilment of disbursement conditions

Implementation of selected reforms

Resources : ADB loan of 200 million

dollars to be disbursed in a single tranche in

2016

I. INTRODUCTION: THE PROPOSAL

1.1. Management hereby submits the following proposal for a loan of 180 million Euros to

the Republic of Tunisia to finance the Inclusive Regional Development Support Programme

(PADRI). This programme aims to contribute to the achievement of sustainable and inclusive growth

by reducing regional disparities and improving social and economic inclusion, especially in the sixteen

priority Governorates. This is the first phase of two general budget support (GBS) programme

operations for the 2017-2017 period for an indicative total financing of EUR 360 million to support the

Government’s efforts towards reducing regional disparities. PADRI is consistent with the Tunisian

Government’s Policy Note adopted in August 2015 with integrated regional development as one of the

five priorities selected and reiterated as key pillars in the 2016-2020 Five-Year Development Plan. The

programme is line with the Governance Pillar of the 2014-2016 Interim Country Strategy Paper and the

Bank’s Human Capital Strategy (2014-2018). More specifically, PADRI contributes to three of the

Bank’s High-Five priorities: Feed Africa, Industrialize Africa, and Improve the Quality of Life for the

People of Africa.

1.2. In efforts to consolidate and deepen the reforms already initiated under the Regional

Development and Job Creation Support Programme (PADRCE), PADRI addresses social and

economic demands to build a fairer and more equitable society that will provide equal

opportunities to young people, women and governorates. The general budget support option is

justified by the diversity of the areas to be covered (social sector, governance, etc.) and the persistent

regional disparities due to lack of public investment in the 16 Governorates that lag furthest behind

according to the Regional Development Index (IDR). These regional disparities are also reflected in

foreign direct investment. Only 13% of the 653 investment projects implemented in 2013 were located

in the priority areas, i.e. 6% of the total. The main reforms supported by the Bank’s Programme Budget

Support over a period of two years (2016-2017) are presented in Annex II. The measures in the matrix

were defined in consultation with the other partners, in particular the European Union, World Bank and

JICA which intends to join the Bank for PADRI Phase II.

1.3. The programme-based approach option was selected subject to fulfilment of the

required conditions. The selection of this option is justified by the need to support the country in the

preparation of the five-year plan with medium term-financing projections, as well as to provide dynamic

support to the reforms required to fulfil the vision and achieve the objectives of the plan. Thus, while

ensuring the timely supply of resources to close the public financing gap, disbursement in one annual

tranche is justified by the importance of the reforms to be implemented as from 2016 and by the need

to pursue dynamic dialogue on key actions scheduled for the 2017 fiscal year. The adoption of this

approach will help to reduce transaction costs relating to the annual preparation of budget support

operations for both the Bank and Government, and it is facilitated by the availability of the Five-Year

Development Plan as from 2016 and the existence of a Medium-Term Expenditure Framework

(MTEF).

II. COUNTRY CONTEXT

2.1. Political Situation and Governance Context

2.1.1. Since the 2011 Revolution, Tunisia has consolidated its democratic achievements which

now place the country among nations committed to the promotion of human rights and

democratic values. The country has adopted a new constitution which promotes social justice, gender

equality (especially gender parity in elected bodies) and freedom of conscience and worship while

giving prominence to youth. The Government formed following the Presidential elections of December

2014 has initiated important work to revive the economy and address urgent social demands and

2

establish an appropriate framework for freedom of expression and citizen participation in the decision-

making process. As regards transparency, Tunisia is ranked 79th out of 175 countries, with a score of

40 out of 100 in 2014 according to the report of the anti-corruption organization, Transparency

International.

2.1.2. However, the democratic transition remains fragile in view of the demands of

unemployed youths and poor communities in the priority governorates. Indeed, the

Government has successfully met civil servants’ wage demands and limited civil service

recruitment. However, the challenges of youth unemployment and reducing regional disparities

remain. To that end, the Government has initiated exceptional emergency measures, such as those

concerning the accelerated financing of young developers’ projects and the suspension of requests for

guarantees. This social demand affects budget resources in a context where the Government is required

to maintain security at national and regional levels (Libya, Syria, etc.) and ensure the recovery of the

national economy which has suffered greatly from years of transition and attacks by fundamentalist

groups. To address these problems, the 2016-2020 Strategic Plan prioritizes the 16 priority governorates

and reinforces the security system.

2.2. Recent Economic Developments, and Macroeconomic and Fiscal Analysis

2.2.1. Five years after the Revolution, and in spite of a successful political transition and some

resilience capacity – confirmed by record growth in absolute terms in 2012 following the

recession, Tunisia is, however, struggling to restore a sustained level of growth. Average growth

since 2011 has, in fact, remained below its estimated long-term potential of between 4.5% and 5%.

Average growth over the 2011-2015 period was 1.73% compared to 3.6% over the 2008-2010 period.

In 2015, growth reached 0.8% compared to an initial forecast of 3% as indicated in the 2016 Finance

Law and is expected to rise to 1.6% in 2016.

2.2.2. The economic slowdown and slippage on the implementation of structural reforms have

created major macroeconomic imbalances. The scale of these imbalances prompted the Tunisian

Authorities to seek support from the International Monetary Fund (IMF). The first programme for 1.73

billion US dollars was signed in 2013 and expired in December 2015 with mixed results as regards

stabilization of the economy. A new programme for an amount of 2.8 billion US dollars was approved

by the IMF Executive Board in May 2016 for a 4-year period targeting four areas: (i) macroeconomic

consolidation, (ii) reform of institutions, (iii) financial sector development, and (iv) improvement of the

business climate.

2.2.3. The Tunisian economy has been weakened by a combination of cyclical and

structural factors. The cyclical factors concern the deterioration of the security situation due

mainly to the Libyan conflict, a tense social climate – which, in 2015, blocked the productive

apparatus in the mining (phosphate) and oil and gas sectors and to a poor business climate and have

slowed down investment. The structural factors include the investment rate which averaged 25% before

the revolution, but had contracted to below 20% by 2015. Fueled by increased public employment and

wage increases (in 2015, the wage bill represented 14.1% of GDP), public and private consumption are

now the main drivers of the Tunisian economy and the main GDP counterparts (85%), as well as two

of the main sources of tax revenue. The Government has, however, undertaken to control the civil

service wage bill and gradually bring it down as from 2017 to 12% in 2020. The efforts made in 2015

include: (i) acceleration of public investment, (ii) reduction of current expenditure (-1.8% of GDP) and,

(iii) savings on power subsidies (-1.6% of GDP) due to the gradual removal of oil and gas subsidies

begun in 2014 and to the drop in world oil prices.

2.2.4. Consumption has also benefited since 2011 from the relatively accommodative

monetary policy of the Central Bank of Tunisia (CBT). The CBT’s strategy has mainly

3

consisted of supplying the banking sector with liquidity in order to support the economy at the

expense of inflation running at around 5% since 2011 compared to 2.1% in 2010.

Since 2011, the CBT has fine-tuned its monetary policy by targeting inflation under a twinning

with the Bank of France financed by the European Union.

2.2.5. The budget composition and pace of investments remain problematic. Since the

revolution, recurrent expenditure has been prioritized over investment expenditure, the latter often

playing the role of adjustment variable during the preparation of supplementary finance laws (SFL) in

mid-year. Tunisia’s external position has deteriorated, and the current account deficit remains high. The

current account deficit, which reached 8.4% of GDP in 2013, increased to 8.9% in 2015. However, it is

expected to improve in the medium term (5.2% in 2020) as a result of the improved export performance

of phosphates and a reduction in energy imports.

2.2.6. Finally, the persistence of high primary deficits since 2011 has been accompanied by a

significant increase in debt. In 2015, the debt overhang accounted for 53.2% of GDP compared to

49.4% in 2014 and 39.7% in 2010. Since 2010, Tunisia’s debt ratio has increased by about 32%, i.e. an

average annual rate of about 5.3%, higher than the economy’s average growth rate (2%). However, the

debt service expressed as a percentage of exports remained relatively stable over the 2014-2015 period

at around 13%. For the moment, Tunisia’s public debt is considered to be sustainable since it mainly

comprises: (i) fairly long maturities (an average of 10 years) and (ii) a declining weighted average

interest rate since 2011, with the exception of domestic debt which is twice the level of external debt.

Nevertheless, since most of the public debt is external debt (70% of public debt), the latter remains

exposed to shocks and adverse economic situations as well as exchange rate variations (-37% against

the Euro since January 2008) and growth uncertainties.

Table 1

Selected Macroeconomic Indicators (in % GDP) 2014 (prel.) 2015 (prel.) 2016 (bud) 2017 (e) 2018(e) 2019(e) 2020(e) 2021(e)

Real GDP Growth (%) 2.3 0.8 2 3 3.7 4.3 4.7 4.5

Inflation (period average, %) 4.9 4.9 3.9 3.9 3.8 3.7 3.5 3.5

Total Investment 23.2 21.8 21.8 22.3 22.8 23.5 24.3 25.2

Current Deficit -9.1 -8.9 -7.7 -7 -6.2 -5.5 -5.1 -4.4

Foreign Direct Investment (FDI) 2.3 2.5 2.1 2.2 2.2 2.2 2.2 2.4

Official Reserves (USD billion) 7.7 7.6 8.3 8.5 8.8 9.3 10.0 10.6

Official Reserves (in months of imports) 4.2 4.3 4.6 4.5 4.5 4.6 4.7 4.8

Revenue 25.4 23 23.9 24.1 24.4 24.9 24.8 24.8

Fiscal Deficit – excl. grants -5.4 -4.7 -4.6 -3.9 -3.7 -2.4 -2 -1.8

Structural Fiscal Deficit -4.3 -4.3 -4.0 -3.3 -2.8 -2.1 -1.9 -1.8

Government Debt 49.0 53.2 54.6 54.5 53.1 50.9 48.7 46.4

Foreign Exchange Debt (% total debt) 62.6 62.6 68 68.6 69.6 70.1 70.3 70.5

Credit to the Economy (% change) 9.4 6.4 7.1 7.4 8.2 8.4 9 7.8

2. Source: International Monetary Fund and Tunisian Authorities.

2.3. Competitiveness of the Economy

2.3.1. Slippage on the implementation of structural reforms and the fragile nature of the

security and social context have weakened Tunisia’s external competitiveness and damaged its

image abroad. The country has fallen by several places in the international rankings since 2011, such

as Doing Business in which Tunisia was ranked 74th out of 189 countries compared to a 2011 ranking

of 45th. Tunisia’s loss of influence on the international economic scene is reflected in its ranking in the

World Economic Forum’s (WEF) Global Competitiveness Index (GCI), according to which the country

slipped from the 87th position in 2014 to the 92nd position out of a total of 140 countries. The WEF

classification also ranks Tunisia in the 133rd position as regards labour market efficiency and in the 122nd

position for financial development. The four main constraints on the business climate as identified by

4

the WEF concern, in addition to the financial sector: (i) the inefficiency of the administration, (ii)

political instability, and (iii) corruption.

2.4. Public Finance Management

2.4.1. Public Finance Management Reform is required to enable Tunisia to fulfill its ambitions

in investment and budget consolidation. According to the most recent diagnostic reviews of public

finance management (PEFA 2010, OECD 2013 Integrity Scan), the Tunisian national public finance

management system has allowed for acceptable preparation and execution of the annual budget and has

an adequate mechanism for internal control and verification of expenditure. Multi-year budget planning

was consolidated since 2015 through the preparation of a development plan accompanied by a medium-

term expenditure framework. However, there are still priority intervention areas such as the

streamlining of internal control bodies and modernization of the accounting system and its convergence

towards international standards. These reforms are expected to significantly enhance PFM efficiency

and transparency in the country.

2.5. Inclusive Growth, Poverty Situation, and Social Context

2.5.1. There are still wide social disparities, with 16.7% of the population continuing to live

below the poverty line at a time when social transfers made by the Government have reached

about 23% of PIB. The National Assistance Programme to Needy Families (PNAFN) set up in 1987

provides for monetary transfers to the poorest households. These households receive TND 150 per

month (2015 amount – about 50% of the poverty threshold, i.e. TND 820). In 2015, 235,000 households

received this assistance. The number of families benefiting from the programme was significantly higher

in the North-West and Mid-West regions. Whereas the national average is 21 households per 1,000

inhabitants, the number of households per 1,000 inhabitants is particularly high in the Governorates of

El Kef (49 per 1,000), Tozeur (51 per 1,000) and Siliana (59 per 1,000). Almost 50.9% of PNAFN

beneficiaries live in the West, North-West, Mid-West and South regions of Tunisia, with 21.2%, 19.4%

and 10.4% respectively. However, these regions represent 30% of the country’s total population. The

RDI ranking reflects these disparities even more and justifies the selection of the 16 priority

governorates.

Box 1 : RDI Ranking of Governorates

After fine-tuning the results of the

development index work started in 2012,

four areas that reflect the main sources or

causes of regional disparities in Tunisia

were identified and used for the 16 target

Governorates: (i) lifestyle amenities

(providing each governorate with

infrastructure, as well as health and

recreational facilities) ; (ii) socio-

demographic aspect, which summarizes

variables relating to social aspects ; (iii)

the scope of the labour market; (iii) human

capital which represents the human

potential.

Graph 1: RDI Ranking of the 24 Governorates

2.5.2. Tunisia is ranked fifth among African countries, with an HDI of 0.721 and an overall

ranking of 66th in 2015. However, investment in human capital remains too low in the priority

governorates. Indeed, the 16 lowest ranked countries in the Regional Development Index are still

experiencing a public investment capacity gap and are unable to attract sufficient private investment and

5

settle the labour force. An analysis conducted in 2014 by the Ministry of Education and UNICEF

showed that the education system still had about 747 primary schools with multi-grade classes3. About

42% of the schools with multi-grade classes are concentrated in Kef, Kasserine, Siliana, Sidi Bouzid

and Gafsa. This type of organization of teaching for students in remote areas has not yet produced the

expected results due to insufficient teachers trained in differentiated instruction and an inadequate

learning conditions. The analysis found a significant correlation between attendance of multi-grade

classes and the school repeater rate in these Governorates, and showed that boys had a 4% to 15% higher

chance of obtaining the average in Mathematics and written work than girls.

2.5.3. The challenge of employment remains one of the main causes for concern. This

is exacerbated by problems concerning the quality of learning and skills acquisition.

Indeed, the structural mismatch between training and employment is one of the main reasons

for youth unemployment and once again calls for sector reform. The persistent disparities in

employment are reflected in different ways according to Governorate, gender and certificate. The south

and west of the country are therefore the hardest hit by unemployment with a 2015 rate of 22.2% in the

south-west (compared to 15.3% at national level), 26.1% in the south-west compared to 16.0% in the

north-west, and 16.7% in the mid-west. The unemployment rate reached 10.4% in the north-east.

Women and higher education graduates remain most vulnerable to unemployment. As at the third

quarter of 2015, the number of unemployed members of the labourforce was 612,100 nationwide, with

58.4% men and 41.6% women. Irrespective of their certificates, women remain underpaid in relation to

men in all sectors. The unemployment rate was 15.3%, with a wide disparity between women (22.5%)

and men (12.4%).

III. GOVERNMENT DEVELOPMENT PROGRAMME

3.1. Government Development Strategy and Medium-Term Priorities

3.1.1. The Government defined its strategic vision in a Policy Note published in August 2015

(see Annex 5), the focus areas of which are reiterated in the 2016-2020 Five-Year Plan currently

being validated. Departing from previous approaches, the plan was subject to consultations extended

to all levels, and is based on three fundamental principles: efficiency, inclusiveness, and sustainability.

The plan is also peculiar in that it adopts the principle of positive discrimination in favour of the

disadvantaged governorates. It is structured around five pillars: (i) good governance, reform of the

administration, and the fight against corruption; (ii) Transition from a low-cost economy to an economic

hub; (iii) human development and social inclusion; (iv) Fulfilment of the regions’ ambitions; and (v) the

green economy as a pillar of sustainable development. Through its Pillar III on human development and

social inclusion, the Plan aims to enhance the performance of the education and cultural sectors and

improve the effectiveness of social service delivery. It also seeks to provide an economic treatment of

poverty, establish a social protection platform, and equitably redistribute wealth.

3.1.2. PADRI is fully consistent with Pillar IV of the Plan, whose objective is to begin

decentralization and lay the foundations for local and regional governance that will improve the

population’s living conditions. The existing regional development challenges are at three levels: (i) the

need to support the decentralization process promoted as the preferred type of governance by the

Tunisian Constitution, (ii) the need to boost regional and local development through the promotion of

local governance; and (iii) the urgency of establishing a strategic and operational reference framework

for stakeholders at various levels. In order to operationalize these strategic directions, the country has

opted for inclusive, integrated and sustainable regional development based on: infrastructure

3 This is a class which combines in the same classroom at least two cohorts of pupils at different levels with a

single teacher.

6

development, the delivery of public services, the promotion of social capital, and sustainable

environmental management.

3.2. Obstacles to Implementation of the Strategic Development Plan (SDP)

3.2.1. However, there are three main obstacles to the plan’s implementation: (i) the

mobilization of substantial financing to implement the plan’s projects, (ii) difficulty in implementing

reforms against a backdrop of heightened social and security tensions, and (iii) the implementation

capacity of the governorates. Indeed, the sluggish business climate and weak growth over the past five

years have limited the Government’s self-financing capacity and affected the level of foreign direct

investment. This makes it difficult to mobilize the public and private resources required for financing

since the FDI fell by 21% compared to 21%. Furthermore, the Government’s leeway is limited by costs

related to meeting workers’ social demands in addition to those of demand from the regions and security

expenditure. Finally, the existing human resource situation in the regions calls for urgent upgrading

measures in order to ensure successful implementation of the SDP.

3.2.2. To overcome these obstacles, the Government intends to adopt the new Investment Code

and make exceptional financial efforts to develop the various potentials of the sixteen priority

Governorates. In this respect, the adoption of the new Investment Code, which seeks to rekindle

investor’s interest in these zones, is one of the major reforms supported by PADRI; furthermore, 70%

of public investments will be allocated to the priority Governorates under the SDP. These measures

must, however, be accompanied by prior actions to calm down the social climate and reduce security

tensions, as well as build the regions’ implementation capacities.

3.3. Consultation and Participation Process

3.3.1. In order to address the challenge of participation and ownership of the plan by the

citizens, the Government has established 292 regional and local committees in which over 20,000

people have participated directly. The committees mainly comprised women and representatives of

civil society and other segments of society. In addition, there were also 150 sector committees and sub-

committees with 6,000 participants who reflected the diverse aspects of the sector priorities in the Plan’s

strategic orientations taking into account the specificities of the priority governorates. As a result of this

process, the social inclusion and economic dimensions of these territories were mainstreamed in the

plan.

3.3.2. PADRI was subject to consultations at national and regional levels. Indeed, consultations

at national level involved civil society actors such as UTICA, UGTT, the employers’ association, and

youth integration associations, etc. These consultations were complemented by others in the regions,

particularly in Kef and Siliana where the issues discussed concerned human resource development,

youth employment, access to basic social services, and involvement of civil society actors in the

decentralization process.

IV. BANK SUPPORT FOR THE GOVERNMENT STRATEGY

4.1. Linkages with the Bank Strategy

4.1.1. PADRI is aligned with the two pillars of the 2014-2015 Interim Country Strategy,

extended to the end of 2016, namely: i) the Governance pillar of Tunisia’s I-CSP focused on reforms

and capacity building; and (ii) the Infrastructure pillar focused on the acceleration of investment in the

governorates. The programme is also aligned with the 5th operational priority: “Improve the living

conditions of the people”. The linkage with “Industrialize Africa” is established by measures to set up

new generation industrial platforms in the priority governorates, as well as by the training of human

7

resources for these platforms. As for the priority "Feed Africa", the linkage is established by measures

to facilitate agricultural SME access to markets, as well as the agricultural projects financing line for

rural women. The linkage between the PADRI, the CSP and the Government’s Plan are summarized in

the Table below:

Table 2

Linkages between the SDP, CSP and PADRI

SDP CSP Planned Operation

Strategic Objective Strategic Objective PADRI Strategic Objective Strengthen competitiveness and generate strong,

inclusive and job-creating growth.

Promote job creation for young graduates

and improve the economic attractiveness of the regions

Goal: Contribute to the achievement of strong

and inclusive growth by reducing regional

disparities.

Specific Objective: Improve economic and social inclusion in the 16 priority governorates.

Main Thrusts Priorities Programme Components A1: Good governance, reform of the administration,

and the fight against corruption

A2 : Transition towards an economic hub A3 : Human Development and Social Inclusion

A4 : Achievement of the regions’ ambitions

A5 : Green economy, a pillar of sustainable development

Improvement of governance by

supporting reform and capacity building

in the regions. Support for infrastructure development to

address the country’s main challenges.

Improvement of economic

inclusion in priority governorates

Strengthening of social inclusion.

Improvement of local governance

4.2. Compliance with the Eligibility Criteria

4.2.1. Tunisia fulfills the pre-conditions for using the budget support mechanism as presented

in Technical Annex 4. At the political level, the country has experienced a successful transition and,

despite the constraints, the Government is determined to implement the reforms requires for the

country’s economic transformation and reduction of regional and social disparities. This determination

is also reflected in the SDP strategic orientations. In spite of the constraints identified, the country has

maintained its programme with the IMF and is making efforts to achieve macroeconomic stability. The

country continues to benefit from the support of technical and financial donors (TFP) and has a sound

public finance system whose fiduciary risk is considered moderate.

4.3. Collaboration and Coordination with Other Partners

4.3.1. Coordination with the other technical and financial partners is conducted at the bilateral

level as well as through thematic groups, one of which concerns employment and another regional

development. PADRI is coordinated with the IMF programme. The measures relating to regional

development and decentralization have been discussed with JICA and the European Union, and the

PADRI matrix has been shared with the other partners so as to establish a thematic group on the issues

of decentralization and the most disadvantaged regions. Furthermore, the Government, through the

Ministry of Development, Investment and International Cooperation (MDICI), is establishing a

platform hub for exchanges and sharing of ideas with all donors involved in regional development.

Meetings have already been held, and the process will intensify over the coming months.

4.4. Linkages with Other Bank Operations and Lessons Learned

4.4.1. In the first half of 2016, the Bank’s active portfolio in Tunisia amounted to UA 1.213

billion in commitments, comprising forty-three (43) operations, twenty-six (26) of which were

technical assistance operations representing a cumulative amount of UA 21.4 million (see

Technical Annex No. 8). Public sector operations accounted for 82.32% of the total value of ongoing

operations, the private sector 15.91%, and technical assistance operations 1.76%. The portfolio’s sector

breakdown shows the predominance of infrastructure (77%), followed by the multi-sector (14.4%),

agriculture (5.2%), and the financing of businesses (3.5%). As at 20 July 2016, the disbursement rate

8

for lending operations (excluding the private sector) stood at 27.82%, and the portfolio’s performance

is deemed satisfactory. The Bank monitors the portfolio in compliance with the Directives in force.

4.4.2. By complementing the Financial Sector Modernization Support Programme

(PAMSFI) and consolidating the achievements of the previous budget support operations focused

on regional development, (PARDI, PAGDI and PADRCE4), PADRI provides an umbrella

framework for the Bank’s operations in Tunisia. Table 3 below highlights the complementarities of

this programme support with the previous budget support operations:

Table 3

Complementarity with GBS operations financed by the Bank PAGDI 2011 PARDI 2012 PADRCE 2015 PAMSFI 2016 PADRI (2016-17)

Adoption of the investment

allocation key for regional

development

Contribution to the creation of 53,643 jobs in 2012,

including employment of

12,895 higher education graduates.

Adoption of the new law on microfinance for over 300

000 people to benefit from

micro-credit

Improvement of citizen

participation and control

Support for reform

of local taxation

Establishment of an

information system for social protection

programmes.

Promotion of

inclusive growth,

employability and competitiveness

Acceleration of

implementation of public

investment in the regions and

reduction of disparities in

access to basic services. Skills development and

improvement of the quality of

labour Calming of the social

environment

Improvement of the method of targeting beneficiaries of social

assistance

Streamlining of the institutional framework of

regional economic

development Decline in unemployment rate

from 18.3% in 2011 to 15.3%

in 2015

Financial inclusion of

vulnerable groups

Financing the projects

of young promoters

Development of

appropriate financing services for women

and VSMEs

Acceleration of

Government efforts in the

implementation of social

and economic reforms to

support its recovery, employment and social

equity policy

Focus on the 16 priority

governorates so as to

upgrade them at the economic and social

levels

Capacity building for

services in the priority

governorates

4.4.3. PADRI mainly builds on three lessons learned from the previous operations

presented in Table 4 below and Technical Annex 9(a):

Table 4

Main Lessons Learned from the Bank’s Previous Operations in the Country Main Lessons Learned Measures taken to incorporate the Lessons into the Programme

The need to reduce the quantitative indicators of

the logical framework given the difficulty in

obtaining some near-term data and focusing on

the poorest segments and regions

The quantitative indicators selected for the programme mainly concern

the outcomes and impacts, as well as a few outputs for which basic data

are available. It was also decided to focus on the 16 priority

governorates.

Ownership and regular monitoring of reforms by

the Government are essential to the programme’s

success.

The appointment of focal points in each Department for monitoring

reforms and reporting to MDICI was retained under the PADRI. In

addition, MDICI will operationalize the unit responsible for monitoring

reforms under the SDP.

The need to adopt a new programme-based

approach with phase triggers in order to

implement the commitment measures.

Based on the lessons learned from the PADRCE concerning the

monitoring of engagement measures, triggers have been introduced in

this programme to facilitate real time monitoring of key PADRI

activities.

4.5. Analytical Work Underpinning PADRI

4.5.1. Prior to this operation, the Bank conducted a diagnostic review of regional

development in Tunisia, the synthetic note of which is presented in Technical Annex 6.

The programme’s preparation was also informed by the results of analytical work carried out by the

Bank over the past five years in Tunisia. These include: (i) a new budget allocation formula for regional

4 PARDI: Economic Recovery and Inclusive Development Support Programme; PAGDI: Governance and Inclusive Development Support

Programme; PADRCE: Regional Development and Job Creation Support Programme.

9

development in Tunisia (2014); (ii) performance evaluation of social assistance programmes in Tunisia

– to improve the targeting of poor people, (iii) job creation and growth through the development of

MSME (2013); (iv) growth diagnosis for Tunisia: towards a new Economic Model (2013) and two

policy notes on regional development and job creation (2014). Furthermore, the diagnosis on regional

development (Technical Annex 6) highlighted the need to upgrade the governorates and the regional

development coordination framework, which as key policy dialogue points. Furthermore, the Bank

intends to consider two (2) technical assistance operations on women’s economic empowerment in

priority governorates and on social and supportive economy as a job creation vector

V. THE PROPOSED PROGRAMME

5.1. Programme Goal and Objective

5.1.1. The goal of PADRI is to contribute to the achievement of strong and inclusive growth

by reducing regional disparities. Its main objective is to support the major reforms initiated by the

Government in order to boost regional and local development through increased investment, social

inclusion and the promotion of local governance. PADRI, which is fully consistent with the PADRCE,

PARDI and PAGDI and consolidates their achievements, aims specifically to: (i) improve economic

inclusion in the sixteen (16) priority governorates; (ii) strengthen social inclusion at local and regional

levels; and (iii) improve local governance.

5.1.2. PADRI, which supports the main thrusts of the 2016-2021 Strategic Plan, mainly seeks

to: (i) improve the attractiveness of the governorates in the interior of the country by reviving public

investment and its implementation; (ii) promote employment and facilitate access to investment

resources in the priority governorates (iii) improve the living environment of the population through the

development of human capital; and (v) lay the foundations of the institutional framework for local

communities and provide them with adequate resources.

5.2. Programme Components

5.2.1. PADRI is focused on three complementary and integrated components: (i)

improvement of the economic inclusion of the sixteen (16) priority governorates; (ii) strengthening of

social inclusion at local and regional levels; and (iii) improvement of local governance. The first

component aims to increase public and private investment in the 16 priority governorates and build the

governorates’ implementation capacities. The second component contributes to the provision of

inclusive access to local health, education and social protection services, and the third lays the

foundations of the institutional framework for local communities and provides them with adequate

resources. PADRI will be implemented over a two-year period using a programme-based approach.

The various reform measures supported are set out in the measures matrix (Annex 2) and Technical

Annex 7.

COMPONENT I: IMPROVEMENT OF THE ECONOMIC INCLUSION OF THE 16 PRIORITY GOVERNORATES

Sub-Component 1.1: Improvement of the attractiveness of the priority governorates by

scaling up the level of public investment and accelerating its implementation

5.2.2. Problems and Constraints

An analysis of public investment flows reveals wide disparities between the coastal areas and the

governorates of the interior. Indeed, public investment flows from 1992 to 2010 show a distribution

which is hard to distinguish in terms of strategy: while, on average, they would appear to have benefited

the governorates of the interior more, a closer analysis shows that in the case of some governorates such

10

as Sidi Bouzid or Kairouan the flows have been fairly

low. An analysis of public investment over the 2011-

2015 period shows that the Governorates lagging

farthest behind according to the regional

development index (RDI) (Jendouba, Kasserine,

Kairouan, Seliana, Sidi Bouzid, Kef, Tataouine and

Béja) benefitted from investments (25%) compared

to 27% for the second group and 48% for the 8

highest–ranked governorates (which account for half

of Tunisia’s population). In the priority governorates, which received more substantial public

investments, the efforts made were unable to reverse the cumulative spiral of delays incurred since the

1970s.

5.2.3. Recent Measures adopted by the Government. In 2012, the Government made

exceptional but insufficient efforts in increasing the investment budget allocated to the priority

governorates by 20%. This proactive policy of the Government was also hampered by the

governorates’ weak capacity for

implementing investment projects. Thus, in

2012, the implementation rate for regional

projects following the increase in resources

was only 45.78% at national level and 37.49%

for the 16 priority governorates. To reverse

this trend, the Government is currently

working on an ambitious action plan for

upgrading human resources in priority areas,

in addition to the option of using a delegated

project owner for complex projects.

5.2.4. Programme Activities: In the first phase of the programme support, PADRI supports actions

that seek to remove constraints that hamper the economic inclusion of the priority Governorates.

Adopting the principle of positive discrimination in favour of the priority Governorates under the 2016-

2021 SDP, the programme’s first reform measure aims to enhance the attractiveness of these areas by

scaling up the level of public investment and accelerating its implementation rate. The PADRI thus

supports the allocation of 70% of investments to the 16 priority governorates in which half of Tunisia’s

population is now concentrated. This reform will be synergized by the Government’s current efforts

regarding the civil service reform (control of the wage bill and redeployment of human resources with

IMF support) and PADRI’s immediate actions regarding the project management capacities local

authorities as well as the ongoing implementation of the procurement training programme for

municipalities and regions. This is in compliance with the Agreement between the High Authority for

Public Procurement (HAICOP) and the Training and Decentralization Support Centre (CFAD)

supported by the PADRCE in 2015.

5.2.5. Expected Outcomes: PADRI will help to reduce economic inequalities between

Governorates by raising the investment rate in the 16 priority Governorates in the total public investment

from 64.4% over the 2011-2015 period to 70% over the 2016-2020 period. To that end, the

establishment of a consolidated budget monitoring system for each governorate will provide public

policymakers with relevant data relating to project implementation to help them take remedial measures

in real time. Support for building the institutional implementation capacities of local authorities by

training 462 officials (with at least 40% women) in project ownership and public procurement will help

to improve project implementation rates in the 16 Governorates from 39.51% in 2015 to 65% in 2020.

25%

27%

48%

Figure 2: Breakdown of investments made 2011-

2015

Group 1 accordingto RDI



11

Sub-Component 1.2: Revival of private investment in order to promote employment and

facilitate access to resources in the priority governorates

5.2.6. Problems and Constraints: Over the past few decades, the bulk of private investments

have been channeled towards the most favoured governorates such as Tunis, Nabeul, Sfax, Sousse

and Monastir. This distribution reveals the extent to which private actors have turned towards those

territories benefitting most from opportunities, particularly in terms of intake infrastructure, the business

environment, and as a result of an Investment Code which does little to foster regional development:

only 7.5% (86 million dinars) out of total fiscal expenditure and 10.2% (34 million dinars) out of all the

financial benefits are allocated to regional development (source: MDCI and Ministry of Finance-2015).

For example, 64% of all tax incentives were intended to promote exports resulting in activities and jobs

mainly located in the coastal governorates. This imbalance is also to be found in the case of foreign

direct investment: of the 653 projects that made investments in 2013, only 13% were located in regional

development areas, with an amount not exceeding 6%5 of the total investments. A high concentration

of private investments was also observed, given that 7 of the 24 governorates account for an average

private investment ratio above 50% of the highest ratio. The combination of public and private trends

shows that the two flows have often converged, thereby widening regional disparities. Furthermore, the

national industrial policy has been of little benefit to the priority regions. It has not helped to extend the

fabric and provide stable employment for the people. In this configuration, the already limited industrial

activity, with an undiversified structure in the interior regions, has been mostly of low technological

intensity and based on unskilled labour6.

5.2.7. Recent measures adopted by the Government: Since September 2012, the Government

has been working on a comprehensive study on reform of the current investment framework and

establishment of a new generation industrial platform so as to attract more investors. The reform aims

to adapt the Code to current requirements for the country’s development, tackle all the dimensions of

investment, simplify administrative procedures and shorten timeframes, as well as establish and put in

place new investment governance mechanisms.

5.2.8. With regard to employment, the main mechanisms developed by the Government are

focused on three instruments, which is not sufficient. These are: (i) promotion of professional

integration of young people into businesses through monthly government allowances and social

coverage for internship or contract; (ii) business start-up incentives and promotion of entrepreneurship

(Programme to support small enterprise developers, programmes to set up small and medium-sized

enterprises); and (iii) the creation of direct jobs through labour-intensive projects. The projects have

been created for public interest activities and in public administrative services in most of the country’s

governorates, especially in rural areas. The jobs have led to integration into the civil service, and

regularly give rise to staff confirmation demands.

5.2.9. Programme Activities: In order to revive private investment and promote employment in the

priority governorates, the programme supports: (i) the adoption of a new Investment Code that will more

clearly present tax incentives for regional development and establish a single SME private investment

fund; (ii) support for youth entrepreneurship by incorporating into the road infrastructure and capital

budget a dedicated line for enterprises run by young graduates, as well as public procurement incentives

for young developers; and (iii) the creation of a new generation of industrial infrastructure7 in the priority

governorates. Furthermore, the expected employment policies will be included in the national

employment strategy (PADRCE engagement measure) under preparation. This strategy will provide

5 FDI 2013 report and outlook for 2014, FIPA-Tunisia 6 Industrial policy for balanced territorial development in Tunisia, AfDB, Economic Note, 2014. 7 The objective of this new infrastructure is to reposition the governorates from an industrial standpoint by restructuring 120 existing

industrial zones to be focused on the textile, agri-food, electronics, automobile/aeronautic, ICT and outsourcing sector.

12

strategic directions in terms of the development of less segmented service delivery (support,

entrepreneurship, and employment funding).

5.2.10. Expected Outcomes: The new Code is expected to foster fair and inclusive regional

development by enhancing the potential for wealth and job creation in the priority governorates and

attracting investors. It will also help to increase private investment in these governorates by facilitating

access to agricultural land ownership for companies of Tunisian nationality, foster the development of

new financing mechanisms, and ensure fair and equitable treatment of Tunisian and foreign investors

regarding investment-related rights and obligations. The reforms will help to increase DFI contribution

to GDP to 24% by 2020. By providing support for the creation of a new generation of industrial

infrastructure in the priority governorates and SME access to the market, PADRI will help to generate

skilled jobs for young people and create business opportunities. These activities will be supported in the

second year of the programme support.

COMPOMENT II: IMPROVEMENT OF SOCIAL INCLUSION AT LOCAL AND REGIONAL LEVELS

Sub-component 2.1: Facilitate inclusive access to specific health care and education services


5.2.12. In spite of considerable efforts made to invest in human capital, there are still wide

disparities in the priority governorates. Although health services are highly structured throughout

the country, the vulnerable population nevertheless encounter difficulties in accessing health care

services in the priority areas. The physician density is much lower in the hinterland regions (between 47

and 66 physicians per 100 000 inhabitants in Kasserine, Kairouan, Tataouine, Kebili, Sidi Bouzid,

Jendouba governorates) than in the best-endowed regions (with averages between 106 and 388/100 000

inhabitants in the governorates of the first quartile). Furthermore, vulnerability to addiction has increased

since 2011 with 55% of young 15 to 19 year olds taking drugs (Ministry of Health, 2016). According

to the Tunisian Association fighting against sexually transmitted diseases and AIDS, almost

30% of declared infections between 1985 and 2009 were through the use of injectable drugs.

5.2.13. The massive spread of education hampered by problems of efficiency and quality

in the governorates of the South and the interior. The enrolment rate for the 12 to 18 age group

is 78.8% at national level. However, it conceals very wide inter-regional disparities: Kairouan (66.5%),

Kasserine (66.8%), Sidi Bouzid (70.6%), Mahdia (71.7%), Siliana (74.9%) and Jendouba (77.6%)

recording the lowest rates. Dropping out of school is also a phenomenon affecting particularly the

governorates of Kairouan (2.6%), Kasserine (2.2%), Sidi Bouzid (1.6%), and Siliana (1.6%) which have

recorded the highest drop-out rates in primary education compared to the national average of 1%. Three

main discriminating factors account for these disparities: insufficient school welfare8 in the priority

governorates, vacant positions, and young inexperienced teachers.

5.2.14. Similarly, the challenge posed by the efficiency and quality of higher education in the

regions of the South and interior persists. Despite wide territorial coverage, higher education in the

priority Governorates suffers from a severe lack of adaptation to the local needs of the economic fabric.

The preferred option has been to introduce in the governorates disciplines that tend to be oriented

towards human sciences for cost reasons but which are ill-adapted to the knowledge required in the

private sector. Establishments were opened with streams that bore little relation to regional economic

specificities and which had no research unit/laboratory. Nor has the issue of education counselling been

resolved, since 98% of businesses are SME/VSME employing few HE graduates.

8 Social service packages mainly provided in schools for reception, transportation, catering and recreational activities of school life in

order to maintain and ensure the success of disadvantaged pupils.

13

5.2.15. Recent measures adopted by the Government: There are five main areas of health reform:

(i) prevention of chronic diseases and care of drug addiction, in particular; (ii) facilitation of high quality

access to local health care services and upgrading of all the lines of regional hospitals; (iii) innovation

and research; (iv) sector governance; and (v) strengthening of the public health system. Under its HE

Strategic Action Plan, the Government is planning to implement reforms in the counselling system and

reposition entrepreneurship at the forefront of its education programmes. In the education sector, the

Government has, under its 2016-2020 sector strategy, undertaken to incorporate the principles of

positive discrimination, equity and equal opportunities.

5.2.16. Programme Activities: The measures supported under this sub-component mainly concern

the narrowing of the “medical desert” in the priority governorates primarily through the roll-out of

health-care facilities to optimize the health map and facilitate access to health care in all the governorates,

the establishment of 16 centres for “rehabilitation into daily life” and 32 prevention and monitoring

centres in the priority regions for victims of addiction and access to education in the priority

governorates. Special emphasis will be laid on educational welfare in priority areas given its impact on

access and reduction of the repeat and drop-out rate, as well as on the widespread introduction of the

preparatory year. Implementation of these specific measures will protect rural girls from dropping out

of school.

5.2.17. Expected Outcomes: Through the proposed reforms, the PADR will help to expand access

to priority medical resources in the least endowed governorates, reduce medical resource disparities,

reduce the number of students covering 4 km each day to reach their schools from 130,000 to 80 000 in

2018, and reduce the school drop-out rates in these governorates. The programme will also help to

diversify HE streams with an increase in the number of research units or laboratories in the new faculties

of universities in the priority Governorates by establishing 4 research units and 6 laboratories in the

universities.

5.2.18. Sub-Component 2.2. Improving Job-Seeker Employability

5.2.19. Problems and Constraints: The employability of higher education and vocational training

graduates remains a challenge for these young people, and has created a disconnect between the training

system and economic activities which continues to exist in the governorates even though the gross

enrolment rate in HE rose from 18.83% in 2000 to 34% in 2014. Furthermore, the number of projects

in business incubators, research centres and technology parks only rose from 60 in 2010 to 84 in 2014

(ITSEQ, 2016). Vocational training (VT) still holds little attraction for young people due to the lack of

incentive for students to move to this sub-sector and the rigidity of the system exacerbated by the non-

existence of an effective counselling system.

5.2.20. Recent measures adopted by the Government: The current strategic options are focused

on strengthening the supervisory framework for job seekers and optimization of continuing and work-

linked training programmes. The Government has also introduced entrepreneurship training into the

curricula into HE and VT. However, the starting a business aspect must be strengthened and skills in

the area of empowerment and assumption of responsibility built up among students.

5.2.21. Programme Activities: PADRI also aims to: (i) improve conditions for organizing

internships in businesses; (ii) institutionalize the Career and Skill Certification Centres; and (iii) establish

a public structure responsible for vocational counselling and introduction of the preparatory cycle for

initial vocational training.

5.2.22. Expected Outcomes: Revision of the Decree on conditions for organizing internships

in companies will allow at least one annual intake of almost 3,000 interns, while

institutionalization of the 4C will provide skill certification for 60,000 students per year. Similarly,

14

the establishment of the national Vocational Information and Counselling Agency and the introduction

of the initial VT preparatory cycle will encourage students to changeover to VT streams and help interns

to find niches for their integration.

5.2.23. Sub-Component 2.3. Strengthening social safety nets and the mechanism for

women’s empowerment in the priority governorates


The allocation process and effectiveness of social assistance programmes requires fine-tuning. The Government has established the following two major programmes: the Programme for Assistance

to Needy Families (PNAFN) and access to a free or reduced rate health card. In 2015, 235,000

households benefited from the PNAFN. The system’s main weak points concern: errors of inclusion

and exclusion, which are now considered to be the result of imprecise eligibility criteria, an award

process which needs to be fine-tuned, and a complex architecture with many types of assistance.

According to the MAS, 52.5% of families benefiting from the PNAFN have a woman household head,

and single women are particularly vulnerable. As regards women’s empowerment, despite the positive

discrimination adopted, women have difficulty in accessing credit and are still the victims of violence

and discrimination in equitable access to economic opportunities. According to the findings of the

National Survey on Violence against Women (2014 Gender Profile), 47.6% of women aged 18 to 64

years old declare they have been subjected to at least one of the many forms of violence in their lives

and the South-West Region is the worst affected with a violence prevalence rate of 72.2%

5.2.25. Recent measures adopted by the Government: The previous budget support operations

focused on improving the programme’s targeting in order to strengthen its impact on the most

vulnerable segments of the population. To that end, the MAS recently initiated the comprehensive

survey which will provide a reliable database and build knowledge of the mechanism to be reformed.

This should result in the adoption of a targeting formula, while managing the potential “losers” of the

application of the new targeting formula due to exclusion errors. This measure is linked to other potential

reforms relating to the social security base and the updating of new poverty figures. As regards women’s

empowerment, the Ministry of Women and Family Affairs is pursuing its Women’s Entrepreneurship

Support Programme. However, rural women are still faced with mobility challenges in difficult and

outlying areas which have now become insecure. They have limited mobility in terms of reaching

markets and support services, thereby restricting their business prospects.

5.2.26. Programme Activities: The measures proposed under PADRI focus on the establishment of

the social assistance programme grouping together all the social assistance programmes managed by

the MAS and intended for vulnerable families and low-income households, as well as measures to

enhance women’s empowerment. These concern, in particular, the establishment of a special transport

system dedicated to rural women, the opening of a dedicated line of credit for women’s

entrepreneurship and the adoption of the law on violence against women, which will contribute

to the prevention and punishment of violence committed against women/girls and ensure

support for them.

5.2.27. Expected Outcomes: The measures adopted under PDRI will impact directly on the

optimization of direct transfers to 242,000 needy families selected on the basis of new selection criteria,

and will thereby help to reduce poverty among the population of the priority governorates. Nearly 2/3

of the beneficiaries live in the 16 priority governorates. The actions supported for rural women’s

mobility and access to credit will also help to facilitate increased access to business opportunities and

the market for women entrepreneurs.

15

COMPONENT III: IMPROVEMENT OF LOCAL AND REGIONAL GOVERNANCE

5.2.28. Problems and Constraints: Until now, Tunisia has been marked by a hybrid local and

regional governance system with a mix of deconcentration and decentralization: limited deconcentration

with government services that have little leeway, most of the policy and arbitration prerogatives being

decided at the central level; and embryonic decentralization with highly limited decision-making powers

and competences of local authorities. Local authorities’ own resources are constrained by various

factors. Local authorities’ tax powers therefore remain residual. As illustrated by the yield on the local

tax system which, in comparison with the Government system only represents, for all municipalities

2.4% of State tax revenue (compared to rates of about 4.8% in Morocco, 15.2% in France, and 48% in

Germany). Furthermore, the proportion of women councilors is 32.8 % (most recent municipal elections

in 2009), and there were only five women Mayors of municipalities. Since 2011, no women has been

appointed to head a governorate.

5.2.29. Highly concentrated management of decentralization and little development of

reflection on State repositioning: The decentralization road map adopted in 2015 made provision

for the establishment of thematic technical committees aimed at involving all the Ministries concerned

by decentralization. Reflection on and design of reforms fall mainly within the remit of the Ministry of

Local Affairs with periodic dialogue with the Ministry of Finance regarding the development of the

local finance framework. Work with the other Ministries is limited. This type of organization hampers

identification of the required strategic alignment in terms of: (i) allocation and status of human resources,

(ii) responsibilities in urban management and (iii) overall regional development strategy. Adoption of

the Local Authorities Code and its implementing decrees is expected to increase the visibility of the

decentralization process.

5.2.30. There are major constraints where human resources constitute the key factor to the

success of the new decentralization phase and on the expected improvement of the quality of

public services. Indeed, the lack of human resources can, in principle, be resolved only by redeployment

since it has been decided to suspend recruitments. The creation of a local civil service that can fulfill

the principle of free administration of local authorities remains wide open without any clear view of the

preferred options for doing so. The new municipalities which lack personnel are faced with a specific

situation. Thus, four (4) key functions have been identified in the organizational structure to provide

support to newly elected officials and the running of the municipality: the Secretary-General, Director

of Finance, Director of Legal Affairs, and an Engineer. Measures have already been taken to attract

applicants, who will be prioritized for appropriate training.

5.2.31. Lastly, structural debt has hampered the development of some municipalities, and

constitutes a serious impediment to the future exercise of their powers, particularly as regards

rules governing the new investment system. The total debt, which stood at TND 144 million in June

2016, varies greatly from one municipality to another. The average debt-to-ordinary revenue ratio of

18% conceals the disparities: 80% of the debt is concentrated in 32 municipalities.

5.2.32. Recent Measures adopted by the Government: The Organic Bill on the Local

Authorities Code was published at the beginning of 2016. It comprises nearly 350 Sections and poses

the major principles enshrined in the Constitution, particularly the various types of local authorities, free

administration of local authorities (and the principle of absence of supervision of local authorities),

participation, and administrative and financial autonomy. Intense regulatory activity needs to

accompany the process given that major issues need to be resolved upon adoption of the Code by

decrees. Accordingly, seventeen (17) priority decrees have been identified, four (4) of which are

essential for 2017: the financial framework for local authorities, the property regulations, public service

management methods (contracting and public-private partnerships, in particular), human resources of

16

local authorities, and the establishment of decentralization governance bodies. PADRI thus supports the

adoption of this law and the key implementing decrees.

5.2.33. Programme Activities: PADRI actions will consolidate PADRCE’s achievements, provide

support for the decentralization process, and lay the foundations for sound local and regional

governance. They are linked to the following reform activities: establishment of the institutional and

regulatory framework for local development with, in particular, the communalization of the territory

and adoption of the Local Authorities Code, upgrading of regional administrations, and the processing

of municipalities’ structural debt.

5.2.34. Expected Outcomes: The measures adopted under this component will in time help to narrow

the social divide, as well as reduce regional inequalities and excessive centralization. Indeed, by

improving services and working more closely with the citizens, PADRI will help to promote

participatory democracy, consolidate security and stability in the border governorates, as well as the

stabilization of inhabitants and institutional presence.

5.3. Policy Dialogue

5.3.1. Since 2011, the Bank has maintained sustained policy dialogue on regional development

and employment with the Tunisian Authorities. Indeed, issues of employment, particularly for young

graduates and women, local governance as well as inclusive access to high quality services in the priority

governorates were the main focus areas of the dialogue. To date, the Bank’s support has resulted in the

launching of the White Paper on Regional Development, technical assistance on local governance and

the identification of regional potential. The dialogue will be strengthened during PADRI’s

implementation, particularly on the theme of upgrading local authorities as regards human resources

and investment. Policy dialogue is conducted in efforts to enhance coordination with the other

multilateral and bilateral partners. The most frequently discussed themes concern inter-Ministerial

coordination, inclusion of regions, upgrading of municipalities, and the decentralization implementation

process.

5.4. Loan Conditions

5.4.1. Conditions Precedent: In accordance with the discussions held with the Government,

implementation of the following measures, which is essential for PADRI’s success, is a

prerequisite for the Programme’s presentation to the Bank’s Board of Directors for the first

phase of this programme support. The measures have been implemented.

Table 4

Conditions Precedent Component Prior Measures

Component I : Improvement of economic inclusion of the 16 priority governorates

Measure 1 Adoption of the 2016-2020 Strategic Plan by the Government

Measure 2 Adoption, by the Finance Commission in the ARP, of the bill on the Investment Code

Component II. Strengthening of Social Inclusion at Local and Regional Levels

Measure 3 Adoption of the decree establishing the Student Welfare Office in order to improve coverage of students’ needs in

the priority governorates

Component III. Improvement of Local Governance and the Decentralization Process

Measure 4 Consideration, by the Select Inter-Ministerial Council (CMR), of the draft Local Authorities Code

Measure 5 Adoption of the Decrees establishing and expanding municipalities

5.4.2 Phase 2 Triggers: Implementation of the following triggering measures is a

prerequisite for the second phase of the programme budget support:

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Table 6

Prior Measures and Triggers for Phase II Components

and

Measures

Phase 2-related Triggers

Component I : Improvement of the economic inclusion of the 16 priority Governorates

Measure 1 Establishment of investment governance bodies

Measure 2 Revision of implementing decrees (Decree no.1935-1994, Decree No. 1635-1994, Order of 22 October on

the management of regional industrial zones

Component 2: Component II. Strengthening of social inclusion at local and regional levels

Measure 3 : Adoption, by the CMR, of the implementing decrees for the Social Assistance Programme grouping

together all the assistance programmes managed by MAS

Measure 4 Opening of a dedicated line of credit for women’s entrepreneurship in the governorates with more flexible

conditions.

Component III. Improvement of Local Governance and the Decentralization Process

Measure 5 : Adoption, by the CMR, of mandatory application decrees relating to the Local Authorities Code

5.5. Good Practice Principles for the Application of Conditionality

5.5.1. PADRI is consistent with good practice principles for the application of conditionality

relating to programme-based operations. The programme is anchored on the 2016-2021

Development Plan and is in line with Tunisia’s budget cycle corresponding to the fiscal year. The

principle of ownership is also observed: Most of the reform measures are linked to the programme of

major reforms announced by the Government, the most important of which are set out in the SDP.

Furthermore, Government experts were closely involved in the preparation of the PADRI and there was

effective coordination with the other donors (WB and EU). Lastly, the principles of selectivity and

realism were applied in defining the key conditions.

5.6. Financing Needs and Mechanisms

5.6.1. According to the Medium-Term Expenditure Framework (MTEF) prepared by the Ministry

of Finance, Tunisia’s financing needs for 2016 and 2017 are TND 7 billion and TND 8.033 billion

respectively. On the basis of the assumptions used to prepare the MTEF, these needs are expected to

peak in 2017 before falling. The drop will be dependent on the achievement of the growth objectives set

by the 2016 to 2020 SDP, which assumes a 4% growth rate over the 2017-2018 period and 5% over the

2019-2020 period.

Table 7 : Projected Financing Needs (in million Dinars)

2016 2017 2018 2019

Forecast Projected Projected Projected

A Total revenue and grants 22.74 23.618 25.703 27.691

Of which: grants (excluding budget support)

B Total Expenditure and Net Loans 29.949 31.651 33.862 35.228

Of which: interest payments 1.825 2.001 2.128 2.28

Of which capital spending 3.248 4.408 4.453 4.562

C Overall balance (settlement basis) (A + B) 6.999 8.033 7.979 7.537

D Cumulative arears

E Overall Balance (commitment basis) (-C + D) 6.999 8.033 7.979 7.537

F External financing (net minus Bank’s contribution) 3.699 5.063

G Domestic financing (net) 2.3 2.45

H Bank’s contribution (*) 1.023 0.52 - -

I Financing (F + G+H) 7.022 8.033 7.979 7.537

J Financing Gap (E - H), financed by: 5.976 7.513 7.979 7.537

K IMF 0.629 1.306

L World Bank 1.126 0.52

18

M EU/AMF 0.225 1.135

N Financial markets 1.016 1.04

O Loans granted 0.62 0.707

P Others 0.0341 0.355

Q External total sub-total 3.6501 5.063

R Residual financing gap 0.0 0

Source: 2010-2020 MTEF

VI. IMPLEMENTATION OF THE OPERATION

6.1. Programme Beneficiaries

PADRI’s direct beneficiaries mainly comprise 5,689,000 inhabitants of the priority governorates,

including 2,844,813 women. More specifically, the programme will benefit 13,000 higher education

and training graduates 66% of whom will be girls and pupils benefiting from student welfare in the 16

priority governorates. The programme will also have an impact on the 242,000 households that will

benefit from the Consolidated Social Assistance Programme to be established by the MAS. The indirect

beneficiaries are the VSME, SME, as well as national and foreign investors who will benefit from the

improved business climate and enhanced quality of human capital.

6.2. Impact on Gender, the Poor, and Vulnerable Groups

In addition to the reform actions in health and education which will benefit women more, three specific

measures will have a significant impact on gender relations, namely: (i) the laws on violence against

women, including economic violence; (ii) the opening of a dedicated line of credit for women which

will benefit 800 women project sponsors; and (ii) support for rural women’s mobility, which will affect

about 85,000 beneficiaries. In addition, the implementation of the works relating to student welfare and

university laboratories will have different impacts on girls and women and will help to reduce gender

disparities in access in the priority governorates. The measure on psychological care for young victims

of drug addiction will impact on vulnerable social groups, in particular women and young people in

these governorates. Finally, the PADRI will help to reduce poverty through the Consolidated Social

Assistance Programme, which will cover at least 242 000 families including 15,500 women household

heads in 2018.

6.3. Impact on the Environment and Climate Change

6.3.1. The PADRI has been classified in Category 3 in accordance with the Bank’s environmental

and social procedures. Potential challenges and opportunities relating to climate change that could arise

as a result of the reform measures both on regional development and on skill building will, nevertheless,

be monitored with the sector ministries concerned.

6.3.2. Impact on Other Areas

By promoting social inclusion, skills building and local governance, the PADRI will contribute to

more equitable wealth redistribution and tap the potential of the priority governorates. Increased

public investment will generate business opportunities for the private sector, which will benefit from the

tax and financial incentives stemming from the reform of the Investment Code. Similarly, regional

SMEs and VSMEs will benefit from the human resource training in these governorates.

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6.4. Implementation, Monitoring and Evaluation

6.4.1. The Ministry of Development, Investment and International Cooperation (MDICI) will

be the PADRI executing agency. The operational unit established under the PADRCE and placed

under the responsibility of the Director of Regional Cooperation will be responsible for the programme’s

routine management. This unit will be supported by focal points responsible for the regular monitoring

of reform measures in each sector Ministry. The other Departments concerned by the programme’s

management are: the Ministry of Local Affairs, the Ministry of Industry, ME, MFPE, MESRS, MFFE,

and MEF. These various actors meet regularly to assess the progress made in measures concerning them

through quarterly monitoring meetings held by MDICI, which is responsible for the overall programme

coordination, as well as harmonization with the operations of other partners.

6.4.2. The PADRI results monitoring-evaluation framework will be focused on the

programme logical framework and matrix of reform measures mutually agreed upon with

the Tunisian Government. To that end, the monitoring-evaluation mechanism established by

MDICI under the PADRCE will be maintained and strengthened. This mechanism will facilitate the

preparation of spreadsheets and semi-annual reports on the status of reforms based on the recovery and

consolidation of data transmitted by the Sector Departments. Supervision missions will be organized on

a semi-annual basis to review the performance indicators. The Bank’s Office in Tunisia will conduct

continuous monitoring of the implementation of the programme’s reforms and maintain close policy

dialogue with the Ministries concerned. The Bank will continue to participate actively in the budget

support group along with the EU, WB, GIZ and other partners, and prepare a completion report when

the operation is closed. The MDICI will be responsible for data collection and coordination of

monitoring-evaluation, and provide the Bank with information.

6.5. Financial Management, Disbursement and Procurement

6.5.1. Country Fiduciary Risk Assessment (CFRA) :

6.5.1.1 The assessment of Tunisia’s fiduciary risk conducted under the interim CSP concluded that

the risk level was moderate, based on the most recent diagnostic reviews (Technical Annex 2) of public

finance management (2010 PEFA, OECD Integrity Scan in October 2013). Some aspects of the

fiduciary risk were updated during the PADRI appraisal mission. This revealed that the Tunisian

Public Finance Management System allows for acceptable preparation and execution of the annual

budget, and has an adequate mechanism for internal control and audit of expenditure (see Technical

Annex 1). Multi-year budget planning was consolidated in 2015 by the preparation of a 2016-2020 plan

accompanied by a Medium-Term Expenditure Framework. However, the following priority areas of

intervention remain: (i) streamlining of internal control bodies, (ii) modernization of the accounting

system and its convergence towards international standards, (iii) reduction in the time taken to present

accounts, and (iv) strengthening of external judicial review.

6.5.1.2 To that end, Tunisia has embarked upon comprehensive PFM reforms supported by its main

technical and financial partners, in particular the EU and WB; the reforms include: (i) the ambitious

medium-term programme of Budget Management by Objectives (BMBO) which is expected to lead to

the adoption in 2016 of a new Organic Finance Law and simplification of ex ante control and

strengthening of ex post control; (ii) public accounting reform will contribute to the adoption of double-

entry accounting and operationalization of the National Public Standards Committee. These reforms

also include: (iii) expansion of the status and role of the Court of Auditors by the January 2014

Constitution, which authorized the full publication of its annual reports; (iv) strengthening of budget

management transparency with the publication of a citizen’s budget since 2014. In order to complete

these reforms, the country should also improve the integration of its budget and accounting systems and

20

adhere to the official deadline for the production of accounts. Special attention should be paid to external

judicial review by introducing sessions dedicated to the review of Court of Auditor reports by the ARP.

6.5.2. Financial Management and Disbursement Mechanisms

6.5.2.1. In light of the type of operation (general budget support), the use of financial resources will be

subject to national public finance regulations including the procurement system. The entire public

expenditure circuit will be used and related internal control rules applied. This budget support operation

will contribute, through its single tranche disbursement in 2016, to the financing of the 2016 fiscal deficit

estimated at 3.9% of GDP. The initial finance law was prepared on the assumption of a total AfDB

budget support envelope of US$ 200 million already used up by the PAMSFI. Consequently, a

Supplementary Finance Law is scheduled for the 4th quarter of 2016 to reflect the total amount of AfDB

support covering PAMSFI and PADRI.

6.5.2.2. The EUR 180 million loan, representing the first phase of this programme-based budget

support operation, will be disbursed in a single tranche subject to fulfilment by the Borrower of

the general and specific conditions of the operation. The amount for the second phase will be

determined in 2017 following an evaluation of the implementation of the 2016 measures and the

proposed triggers for 2017. At the Borrower’s request, the Bank will disburse the funds of the foreign

currency loan into a special account opened at the CBT. The Borrower will ensure that once the deposit

is made into the account, the equivalent amount in local currency will be transferred to the Treasury

Current Account. The MoF will provide the Bank, within 30 days of the disbursement, with a letter

confirming the transfer indicating the total loan amount received, converted and repaid into the Treasury

Current Account accompanied by a transaction notice issued by the CBT.

6.5.2.3. Given the moderate level of overall fiduciary risk, this programme will be subject to one

annual fiduciary supervision. The monthly budget execution reports, published under the title

“Provisional Reports on Government Budget Execution” will be consulted. Furthermore, (i) the Budget

Review Law linked to the Finance Law, and (ii) the related Court of Auditors report for 2016 and 2017,

will be consulted by the Bank under its programme monitoring. The implementation status of the public

finance reforms will be closely and regularly monitored, particularly regarding the presentation of

accounts and the time required to prepare Finance Bills.

6.5.2.4. The internal auditing of the PADRI will be based on the national ex-post internal audit

system used by the General Finance Control (CGF), which will perform a specific audit of

financial flows and an audit of the implementation performance of the measures. The deadline

for submission of the specific audit on flows and performance by CGF to the Bank will be six months

after the closing of the Programme.

6.5.3. Procurement

Since this is a budget support operation, it will be implemented using the national public procurement

system. It was necessary to assess the state of the system and the degree of risk associated with its use.

The new public procurement system in force since June 2014 provides a positive response to most of

the weaknesses and concerns identified by the different evaluations of the previous system, and is

generally compliant with international requirements. An update of the Bank’s most recent evaluation

was made using a new methodology adopted in 2016. This update, which took into account the latest

major advances made, concluded that the risk level for the procurement component was moderate with

some recommendations for improvement described in Annex. In light of the foregoing, the use of the

national public procurement system provides adequate guarantees to ensure that the loan resources are

used transparently, economically and effectively.

21

VII. LEGAL DOCUMENTATION AND AUTHORITY

7.1. Legal Documentation

7.1.1. The Loan Agreement will be used with the Republic of Tunisia for the implementation

of PADRI for an amount of EUR 180 million to be disbursed in a single tranche. The parties to this

Agreement are the African Development Bank and the Government of Tunisia.

7.1.2. Conditions precedent to loan effectiveness: Loan effectiveness shall be subject to fulfilment

of the conditions stipulated in Section 12.1 of the General Conditions Applicable to Loan Agreements.

7.2. Conditions for Bank Intervention

7.2.1. Conditions precedent to Board presentation of the PADRI: Presentation of the programme

to the Bank’s Board of Directors shall be subject to implementation of the measures set out in Table 4,

Section 5.4.1.

7.2.2. Conditions precedent to the first disbursement: Disbursement of the annual loan

tranche in the amount of 180 million Euros will be subject to fulfilment of the following condition:

Notification to the Bank of evidence of the opening of a special Treasury account at the Central Bank

of Tunisia, into which the loan resources will be paid.

7.2.3. Conditions precedent to the second disbursement: Since PADRI is a programme-based

operation, the disbursement measures for 2017 shall be specified in the Simplified Appraisal Report

(SAR) on the subsequent operation.

7.3. Compliance with Bank Group Policies

7.3.1. The PADRI was prepared in compliance with the existing Bank Group guidelines.

Consequently, no waiver has been requested of these Guidelines in this report.

VIII. RISK MANAGEMENT

8.1. The main risks which could affect the achievement of PADRI’s outcomes would occur

as a result of the following factors: the deepening of fiscal deficits as a result of pressing social

demands, the local non-existence of qualified human resources assigned to the priority governorates and

a resurgence of social unrest and security problems in the regions, which could compromise the

government’s efforts.

8.2. The Government is already working to mitigate these risks by undertaking, in

particular: (i) to pursue the IMF-supported recovery programme; (ii) to prepare a human resource

management action plan, including an incentive package for officials, as well as to increase investments

so as to improve the governorates’ attractiveness; and (iii) bolster the social and security system in order

to anticipate upsurges in violence (see Technical Annex 3).

IX. RECOMMENDATION

In light of the expected significant impact of the programme on the lives of the population of

the sixteen priority governorates, it is recommended that the Board of Directors should approve, for

of the Republic of Tunisia and the African Development Bank, a programme-based loan, not exceeding

EUR 180 million, to implement the Inclusive Regional Development Support Programme, for the

purposes of, and subject to the conditions set forth in this report.

ANNEX 1. Letter of Development Policy

8 September 2016

Ministry of Development, Investment and

International Cooperation

No. 2174

The Minister

Mr. Akinwumi ADESINA

President of the African Development Bank Group

Abidjan International Trade Centre Building -CCIA

Avenue Jean-Paul II

P.O. Box 1387

Abidjan 01, Côte d’Ivoire

Letter of Development Policy Inclusive Regional Development Support Programme (PADRI)

(2016-2017)

The President of the African Development Bank Group,

Dear Sir,

I. Country Context

Having successfully completed its political transition and defined strategic guidelines for

the period ahead, Tunisia is preparing to realize its new development vision through the

preparation of the 2016 to 2020 Strategic Plan aimed at putting the country back on the

path to economic recovery and development.

These guidelines and priorities were consolidated by the "Carthage Document" marking

out the route of the new Government of National Unity formed on the initiative of the

President of the Republic and consultations with political parties, national organizations

and civil society.

More concretely, the priorities of the next stage focus on:

the fight against terrorism,

accelerating the pace of development,

the fight against corruption and establishment of the qualities of good

governance,

preservation of financial balances and continued implementation of

effective social policies,

development of a policy on cities and local authorities,

II

strengthening of Government action and installation of all State

institutions.

Furthermore, the country still faces major economic, social and security challenges.

Within this context, the Government has remained resolute in its determination to restore

confidence and security, improve the business climate, accelerate the pace of structural

reforms, as well as ease pressure on the main balances and mobilize appropriate financing

for the economy.

Indeed, the Government is looking at how to closely monitor the status of public

investments in difficulty in order to accelerate their pace, the impact of which will be felt

in the areas of economic development, employment and living conditions in the country’s

disadvantaged regions.

Special attention has also been paid to management of the security situation. Indeed, the

Governments’ anti-terrorist and smuggling actions have been proactive and prompt.

As regards structural reforms, the Government has selected a Major Reforms Programme

(PRM) mainly aimed at deepening and accelerating the reform process and introducing

economic and social policy changes resulting in new rules and practices to improve the

functioning of the economy and which generate inclusive growth and sustainable

development. This programme focuses on five main pillars, namely improvements in

financing the economy, strengthening the fiscal balances, human resource development,

overhaul of the social safety nets and, lastly, strengthening of the institutional and

regulatory framework. Thus, the Inclusive Regional Development Support Programme

(PADRI) helps to accelerate these reforms, particularly those relating to reduction of

economic and social disparities in the 16 priority governorates.

A number of reforms have already been adopted, namely, adoption of the Law on Public-

Private Partnerships, the Law on Competition and Pricing, the status of the Central Bank

of Tunisia, and the Banking Law.

Furthermore, the bill on the Investment Code will be considered in plenary session at the

ARP and adopted before the end of 2016; the objective of this reform is to further improve

the business environment, reduce obstacles to market access, and establish good

governance linked to the institutional framework. In addition, considerable strides have

been made regarding the implementation of fiscal and customs reforms the main thrusts

of which concern improvement of access to markets, protection of investors and the

establishment of governance. In addition, significant progress have been made in the

implementation of tax and customs reform. The tax incentives law will also be considered

in plenary session at the ARP and adopted before the end of 2016. The main areas of the

reform are improvement of access to markets, protection of investors and the institution

of governance, as well as the enshrinement of fiscal equity, simplification of tax

procedures, and modernization of the tax administration.

As regards macroeconomic prospects, projections for 2016 concern economic growth of

2% compared to 0.8% in 2015. This rate is mainly due to resumption of activity in

manufacturing industries. However, the performance of the tourism sector remains fragile

because of security risks.

III

With respect to demand, projections for 2016 are based on more balanced sources of

growth along with a positive contribution of investment, in particular private investment

and external trade.

In light of the foregoing, the country’s financing gap remains high at about TND 11331

million for 2016.

The new Financial Sector Modernization Support Programme, which is consistent with

this context, is another of a series of technical and financial assistance operations which

the African Development Bank has contributed to the national development efforts.

This reform programme is consistent with the policy framework of the 2016-2020

Strategic Plan aimed at enhancing good governance and combating corruption,

restructuring of the Tunisian economy, as well as ensuring human development, social

inclusion, regional development and transition to a green economy.

II. Policies and Reforms in the 2016-2020 Strategic Plan

The 2016-2020 Strategic Plan is the first development plan of the Second Republic. It

enshrines Tunisia’s new vision and improves the visibility of economic operators, as well

as the different foreign partners. It should be noted that the Plan, like the Strategic

Guidance Note, was prepared using a participatory process.

This development plan has been labelled as a reform plan and will pay special attention

to the enshrinement of good governance, reforming the administration, and

combatting corruption. To that end, a national integrity system will be established, and

the principles of good governance at sector and local levels will be strengthened. The

Government will see to the production and dissemination of statistical information in

accordance with international standards, as well as guarantee access to information.

Moreover, good governance rules will be applied to public institutions and enterprises.

Furthermore, to ensure that the administration is more efficient and in the service of its

citizens and development, the administration reform will seek establish a special status

for the senior civil service, build administrative skills and digitize government services.

The next plan is also based on the transformation of the economy into an economic

hub. The objective is to diversify the economic fabric to achieve high export potential and

boost job creation through the design of appropriate sector policies and strategies, the

improvement of infrastructure and logistics, optimization of resources allocated to the

national research and innovation system, thus contributing to the improvement of

productivity, as well as by moving up the global value chain and establishing a conducive

framework for innovation and creativity.

The digital economy will also be of special interest. Efforts will be made to spread the

digital culture and digitize teaching aids, as well as migration to e-government in the

service of the citizens and businesses, developing the “Smart Tunisia”

off-shoring project in the digital sector and the building of digital infrastructure.

It is also important to note that transformation of the economy will depend on an

improvement in the business climate and reform of taxation, customs, the banking system,

the foreign exchange code, the financial market and insurance, as well as land reforms.

IV

The 2016-2020 Strategic Plan places human development and social inclusion at the

forefront of future priorities. The Government will, on the one hand, endeavour to

enhance the performance of the educational system and improve employability. It will

also pay special attention to policies for women, the family and children, as well as support

vulnerable social categories. In addition, reform of the social transfer system will be

focused on the targeting of beneficiaries. Promotion of the culture and strengthening of

health coverage will also be amongst the concerns of the social component of the next

plan.

The next plan will also focus on the realization of the ambitions of the regions through

the development of decentralization, laying the foundations of local democracy,

interconnection of the regions and enhancement of their attractiveness.

Lastly, the Strategic Plan will be based on promotion of the green economy as a pillar

of sustainable development, strengthening of balanced and equitable regional

development and rationalization of the use of natural resources.

III. Measures of the Inclusive Regional Development Support Programme

(PADRI)

The PADRI’s goal is to contribute to the achievement of strong and inclusive

growth by reducing regional disparities. Its main objective is to support the

major reforms initiated by the Government to boost regional and local development

through the revitalization of investment and social inclusion, as well as promotion

of local governance. The PDRI, which is fully consistent with the PADRCE and is

a continuation of the operation, whose achievements it consolidates, aims

specifically to: (i) improve the economic inclusion of the sixteen (16) priority

governorates; (ii) strengthen social inclusion at local and regional levels; and (iii)

improve local governance.

The PADRI, which supports the focus areas of the 2016-2021 Strategic Plan

will mainly help to: (i) enhance the attractiveness of the governorates in the

country’s interior by reviving and implementing public investment; (ii) promote

employment and facilitate access to investment resources in the priority

governorates ; (iii) improve the living environment of the population through

human capital development; and (v) lay the foundations of the institutional

framework for local authorities and provide them with adequate resources.

COMPONENT I: IMPROVEMENT OF THE ECONOMIC INCLUSION OF

THE REGIONS OF THE INTERIOR

This first component dedicated to the economic inclusion of the least developed

governorates seeks to create conditions required for the economic recovery of these

areas, as well as remove constraints on the inclusion of young people, women and

small rural entrepreneurs. This Programme component will be structured around:

Enhancement of the attractiveness of the priority governorates by increasing the

level of investment and accelerating its implementation. This objective will be

achieved by increasing public investment in the priority governorates particularly

V

through the adoption of the principle of positive discrimination in favour of the

priority governorates.

Access to investment resources for all small businesses and SMEs, and

improvement of the business climate in the priority governorates. Support in this

area will be provided through the adoption of a series of measures aimed at: (i)

encouraging the private sector to establish itself in the governorates and recruiting

young graduates through the new Investment Code; and (iv) facilitate VSME and

SME access to markets and reduce the intermediation chains.

COMPONENT II: IMPROVEMENT OF SOCIAL INCLUSION AT LOCAL

AND REGIONAL LEVELS

The Programme’s second component aims to contribute to human capital

development and the reduction of social inequalities in the priority governorates. It

will be structured around: (i) inclusive access to high quality, local proximity,

health, education and social protection services; (ii) improved effectiveness of the

supervision arrangements for young job seekers, and (iii) the reinforcement of

social safety nets and systems for the empowerment of rural women in the priority

governorates.

Inclusive access to high quality and local proximity health, education and social

protection services: The measures to be supported under this sub-component

mainly concern narrowing of the “medical desert” in the priority governorates

through territorial poles, coverage of addiction costs, and enhancement of equity in

access to education in the priority governorates. Special emphasis will be laid on

measures concerning school canteens, widespread introduction of the preparatory

year, and compensatory education in the governorates of the interior.

Enhanced effectiveness of supervisory mechanisms for young job seekers: The

reform measures under this focus area concern strengthening of the supervisory

mechanisms for young job seekers and optimization of the continuing and work-

related training system.

Strengthening social safety nets and the mechanism for women’s empowerment in the

priority governorates. This concerns strengthening of transparency, equity and

efficiency in the identification of beneficiaries of social assistance programmes, as

well as the promotion of rural women’s mobility.

COMPONENT III: IMPROVEMENT OF LOCAL AND REGIONAL

GOVERNANCE

This component will consolidate the PADRCE achievements and provide support

for the decentralization process, as well as lay the foundations of local and regional

governance. It will focus on the following reform actions: establishment of the

institutional and regulatory framework for local development, support for the

upgrading of local and regional administrations, and processing of municipality

debt as well as reinforcement of transparency and accountability mechanisms.

VI

* * *

The scale of the reform actions proposed under this programme portrays the strong

determination of Tunisia to embark upon a new development and construction

process that will entrench the spirit of democracy and ensure economic prosperity

and social progress in line with the aspirations of the revolution.

Technical assistance and financial support for this initiative is a prerequisite for

addressing present and future challenges. The Government of Tunisia has therefore

resolved to implement all the reforms planned under this programme in order to

ensure successful economic transition, and hereby requests for appropriate

financial support from the African Development Bank.

ANNEX II: TUNISIA – MATRIX OF REFORM MEASURES OF THE 2016-2017 INCLUSIVE REGIONAL DEVELOPMENT

SUPPORT PROGRAMME

Reforms 2016 Measures 2017 Measures Implementation Indicators Expected Outcomes Institutions

Responsible

COMPONENT I : IMPROVEMENT OF ECONOMIC INCLUSION OF THE 16 PRIORITY GOVERNORATES

Objective 1.1. Promote development in the Governorates and improve their attractiveness by increasing the level of investment and accelerating its implementation

1

Increased public

investment in the

16 priority

Governorates

Adoption of the principle of

positive discrimination so as to

allocate 70% of public

investments to the 16 priority

Governorates in the Five-Year

Plan*9

Develop a model

information system for

consolidated monitoring of

investment in the

governorates.

Letter transmitting the Bill to

Parliament (2016)

Submission of a report on the

model information system for

monitoring regional

investment and the plan for

implementing the model in

the other governorates (2017)

The share of public

investment in the 16

governorates of total

investment rises from 64.4%

over the 2011-2015 period to

70% over the 2016-2020

period.

Economic inequalities

between the governorates are

reduced

MDICI

2

Project

management

capacity building

for local

authorities in the

priority

governorates

Design of a public contracting

training programme for local

authority officers and officials

Implementation of the

training programme for

462 participants.

Online publication of

public procurement training

modules on the distance

learning platform

Submission of a copy of the

validated training

programme (2016)

Report on training

programme implementation

(2017).

Contracting capacities of

local authorities are

strengthened.

More effective public

procurement management

CFAD

Objective 1.2. Revive private investment so as to promote employment and access to resources in the priority governorates

3

Revival of

private

investment in the

Adoption, by the Finance

Commission of the ARP, of the

bill on the Investment Code.*

Establishment of

investment governance

bodies**

- Copy of the report of the

Finance Commission of

the ARP adopting the

The number of Delegations

benefiting from investment

MDICI

9 * Indicates the measures precedent to PADRI’s presentation to the Board in 2016 and ** measures precedent to Phase II in 2017.

VIII


Responsible

priority

governorates

bill on the Investment

Code (2016)

- Decrees establishing

governance bodies

(2017)

incentives increases from 161

to 138 in 2018.

Increase in the number of

jobs created in the priority

governorates

4

Promotion of the

employment of

young graduates

in the

governorates

Adoption, by the CMR, of a

decree authorizing the award of

contracts (below TND 200,000)

by direct negotiation with

microenterprises

Incorporation in the road

infrastructure and capital

budget of a dedicated line

for businesses headed by

young graduates

- Publication of decree in

JORT(2016)

- Extract from the 2017

Finance Law

Increase in employment

opportunities for graduates in

the Governorates

Ministry of

Equipment

5

Facilitation of

SME access to

public

procurement

contracts

Revision of the 2009 Decree no.

2861 relating to the conditions

for the award of public contracts

in the governorates and in

support of spin-off projects

Adoption, by the CMR of

revised Bill No. 99/57 of 28

June 1999 on registered

appellations of origin and

indications of source of

agricultural products.

Publication of revised texts

in 2016 JORT

Extract from CMR minutes

adopting revised Decree-Law

no. 99/57 in 2017

Facilitation of SME access to

markets

% of public contracts

awarded to SMEs

Ministry of

Agriculture

Ministry of

Industry

6

Creation of a new

generation of

industrial

infrastructure in

the priority

governorates

Revision of Law No. 16-94

governing the organization and

management of industrial zones.

Revision of implementing

decrees (Decree No. 1935-

1994, Decree No. 1635-

1994, Order of 22 October

2008)**

Letter transmitting the

revised Bill to the ARP

(2016)

Publication in JORT of

revised implementing

decrees

Facilitation of industrial

development in the priority

governorates

Ministry of

Industry

Ministry of

Equipment

COMPONENT II: IMPROVEMENT OF SOCIAL INCLUSION AT LOCAL AND REGIONAL LEVELS

Objective: Improve the populations’ living environment through human capital development in the priority governorates

Objective 2.1. Facilitate inclusive access to specific high quality and proximity health and education services

7

Global, equitable

and efficient

health coverage

Adoption of a road map for the

psychological management of

young people with addictive

behaviour and the establishment

of treatment centres.

Establishment of 4

“Rehabilitation to Daily

Life” centres and 16

regional listening and

counselling units.

Copy of validated road map

(2016)

Report on establishment of

the regional units in the 16


Reduction in the number

of young drug addicts and

of the risks related to drug

use.

Ministry of

Health

IX


Responsible

Adoption of a road map for the

establishment of a pilot

territorial health care centre in

the North-West Region.

Implementation of the pilot

territorial pole in the North-

West (2017)

Transmission of the validated

road map in 2016

Implementation report on

pilot territorial pole in the

North-West (2017)

Expansion of access to

priority medical resources in

the least well-endowed

governorates.

Reduction of disparities in

medical resources between

the governorates.

8

Reduction of

inequalities in

access to

education in the

priority

governorates

Adoption of the Decree on the

establishment of the student

welfare office in order to

provide better coverage of

students’ needs in the priority

governorates*

Action plan for the

widespread introduction of

preparatory classes in the 16


Publication in JORT of the

decree establishing the

student welfare office (2016)

Copy of the action plan for

widespread introduction of

preparatory classes by 2020

(2017)

Reduction in school drop-out

rates in the priority

governorates


students with access to

student welfare

Reduction in the time

required to reach school

(indicator to be included)

Ministry of

Education

Creation and establishment of 4

research units and 1 laboratory in

universities in the priority

governorates

Creation and establishment

of 5 research units and 1

laboratory in universities in


Copy of the Order

establishing research units

and laboratory in 2016 and

2017


research units or laboratories

established in the universities

of the interior

MESRS

9

Enhancement of

the quality of

education in the

priority

governorates

Approval and launching of

training for educational science

degrees to train primary school

teachers.

Approval of vocational master’s

degrees for training higher

education lecturers

Launching of vocational

master’s degrees for

training higher education

lecturers

Extract from the Council of

Universities’ report

approving vocational

master’s degrees for training

higher education lecturers

(2016)

Publication of approval of

applied degrees in the 2016-

2017 and 2017-2018

academic orientation guides

Capacity building for

teachers in disadvantaged

governorates


highly qualified teachers in

in the Governorates of the

interior

MESRS

X


Responsible

Objective 2.2. Improve the employability of young job seekers

10

Preparation and

integration of

graduates and non-

graduates into the

labour market

Adoption, by the CMR, of a Decree

on the modalities for organizing

internships in businesses

Adoption of an Order on the

institutionalization of the Career

and Skills Certification Centres

(4C)

Adoption of a Decree

establishing a National

Vocational Information and

Guidance Agency

Copy of the CMR report

approving the Decree on the

organization of internships

(2016)

Copy of order institutionalizing

the 4C in 2017

Publication, in the JORT, of the

Decree on the National

Vocational Information and

Guidance Agency (2017)

Improvement of employability

of higher education graduates

Stronger synergy between the

university and professional

circles

Increase from 30 to 50 4C with

at least 15 of the 20 new centres

established in the priority

governorates

MESRS

MFPE

Establishment of a public

structure in charge of the

preparatory cycle for initial

vocational training


law establishing the structure in

2017

Objective 2.3. Reinforcement of social safety nets and mechanism for women’s empowerment in the priority governorates

11

Consolidation and

enhanced

effectiveness of

social assistance

programmes

Adoption, by the CMR, of a Bill on

the establishment of the ‘Amen’

Social Assistance Programme

grouping together all the assistance

programmes managed by MAS for

the intention of vulnerable families

and low-income families.

Adoption of implementing

decrees by the CMR**

Copy of the letter transmitting

the Bill to the ARP in 2016

Publication of implementing

decrees in the JORT in 2017

- Optimization of direct

transfers

- Reduction of poverty

among the population of


Ministry of

Social Affairs

(MAS)

12

Women’s

empowerment

Signing of an authorization to

support the establishment of a

dedicated transport system for rural

women in accordance with an

agreement with the Ministry of

agriculture (CRDA)

Copy of the authorization (2016) - Rural women’s

mobility

- Increased access of

women to economic

resources

-Ministry of

Women’s

Affairs, Family

and Children-

Ministry of

Agriculture

XI


Responsible

Adoption, by the CMR, of the Bill on

combating violence against women

Opening of a dedicated Line of

Credit for women’s

entrepreneurship in the

governorates with more

flexible conditions. **

Copy of the report of the

Cabinet Meeting approving the

Bill (2016)

Copy of the agreement with the

Ministry of Finance on women’s

entrepreneurship in 2017

Increase in the number of women

benefiting from microcredit

Increase in outstanding credits

allocated to rural areas

Ministry of

Women’s

Affairs

Ministry of

Finance

COMPONENT III: IMPROVEMENT OF LOCAL GOVERNANCE AND THE DECENTRALIZATION PROCESS

Objective: Lay the foundations of the institutional framework for local authorities and provide them with adequate resources

13

Establishment of

the institutional

and regulatory

framework for

local authorities

development

Consideration, by the Select Inter-

Ministerial Council (CMR), of the

Draft Local Authorities Code.*

Adoption, by the CMR, of

mandatory implementing

decrees for the Local

Authorities Code

Copy of the report of the CMR

meeting considering the Draft

Local Authorities Code (2016)


mandatory implementing

decrees (2017) of the Local

Authorities Code

Local proximity administration

introduced for citizens.

Ministry of

Local Affairs

and the

Environment

Adoption of the Decrees establishing

and expanding municipalities.*

Feasibility and cost assessment

studies for infrastructure and

equipment.

Publication of JORT decrees

2016

Multi-year Installation Plan for

operation, investment and technical

assistance in the 86 new

municipalities.

Letter from Ministry of Local

Affairs transmitting the list of

studies conducted in the new

municipalities (2017).

Extract from the 2017 Budget

Law

14

Improvement of

the financial

situation of

municipalities

Adoption of a two-year debt

clearance action plan for

municipalities on the basis of an

updated diagnosis of the situation of

priority municipalities.

Gradual transfer of funds to the

municipalities concerned in

accordance with the validated

action plan (2017-2018).

Copy of validated action plan

(2016)

Letter from Ministry of Finance

on the allocation of funds (2017

and 2018 Finance Laws).

Improvement in the financial

situation of the municipalities

concerned in anticipation of the

municipal elections slated for

2017.

Ministry of

Local Affairs

Ministry of

Finance.

XII

ANNEX 3 – IMF NOTE

Press Release No.16/168

15 April 2016

IMF Reaches Staff-Level Agreement with Tunisia on a Four-Year US$2.8 Billion Extended

Fund Facility

Mr. Amine Mati, Mission Chief for Tunisia at the International Monetary Fund (IMF), issued

the following statement in Washington today:

“I am pleased to announce that, in support of the government’s comprehensive economic reform

agenda, the Tunisian authorities and IMF staff have reached a staff-level agreement on a 48-

month Extended Fund Facility (EFF) for 375 percent of Tunisia’s quota in the IMF (about $2.8

billion). This agreement will be subject to approval by the IMF’s Executive Board, which is

expected to consider Tunisia's request next month.

“The EFF supports the authorities’ economic vision and reform priorities spelled out in the

forthcoming Five-Year Development Plan. The government’s economic program recognizes

the importance of accelerating the pace of economic reforms for Tunisia to reduce

vulnerabilities, boost growth, and foster sustainable job creation. Preserving macroeconomic

stability, modernizing public institutions, boosting private sector activity, and reinforcing the

stability and efficiency of the financial sector are essential to achieve higher inclusive growth

and make a significant dent in unemployment, particularly for the youth.

“To this end, the Fund-supported program focuses on boosting public investment, making the

tax system more equitable and fair, and improving access to finance for small businesses.

Building on the achievements of the previous program, the EFF seeks to re-orient public

expenditure towards priority investments and to improve public service delivery through a

comprehensive civil service reform that also contains the wage bill.

“Near-term priorities include the approval of draft legislation aimed at strengthening central

bank independence and banking sector stability; the completion of the restructuring of the three

public sector banks to ensure that they operate on a sustainable footing; and the adoption of an

equity-enhancing tax strategy.

“With the implementation of these policies, Tunisia will be better placed to address economic

challenges and mitigate risks that could arise from a worsening international economic

environment or rising regional security tensions. Overall, the EFF will help the Tunisian

authorities achieve their objectives of generating faster and more inclusive growth, reduce

regional inequalities, and raise the living standards of all Tunisians.”

XIII

ANNEX 4: KEY INDICATORS AND MACROECONOMIC OUTLOOK

Indicators Unit 2000 2011 2012 2013 2014 2015 (e) 2016 (p)

National Accounts

GNI at Current Prices Million US $ 22 405 43 573 45 376 46 334 ... ... ...

GNI per Capita US$ 2 310 4 050 4 170 4 210 ... ... ...

GDP at Current Prices Million US $ 19 443 45 811 45 044 46 257 47 604 41 280 42 572

GDP at 2000 Constant prices Million US $ 19 443 29 442 30 591 31 337 32 045 32 216 32 857

Real GDP Growth Rate % 4,3 -1,9 3,9 2,4 2,3 0,5 2,0

Real per Capita GDP Growth Rate % 3,3 -3,0 2,7 1,3 1,1 -0,6 0,9

Gross Domestic Investment % GDP 27,3 23,1 24,4 22,7 23,2 21,7 21,0

Public Investment % GDP 4,4 8,8 9,3 8,6 8,8 8,3 8,0

Private Investment % GDP 22,9 14,3 15,2 14,1 14,4 13,5 13,0

Gross National Savings % GDP 22,3 16,2 16,1 13,6 13,1 16,7 19,3

Prices and Money

Inflation (CPI) % 3,0 3,5 5,6 6,1 5,5 5,0 4,0

Exchange Rate (Annual Average) local currency/US$ 1,4 1,4 1,6 1,6 1,7 2,0 2,0

Monetary Growth (M2) % 85,8 6,7 8,8 7,3 7,7 5,5 ...

Money and Quasi Money as % of GDP % 90,1 111,2 110,9 111,3 111,5 117,4 ...

Government Finance

Total Revenue and Grants % GDP 23,0 26,0 26,3 26,6 26,0 21,3 20,2

Total Expenditure and Net Lending % GDP 25,2 28,4 29,0 31,2 30,5 25,0 23,4

Overall Deficit (-) / Surplus (+) % GDP -2,4 -2,4 -2,7 -4,6 -4,4 -4,2 -3,9

External Sector

Exports Volume Growth (Goods) % 7,3 -0,2 1,4 4,7 1,4 4,8 3,7

Imports Volume Growth (Goods) % 6,5 3,8 8,5 5,1 2,4 2,0 2,1

Terms of Trade Growth % -2,2 69,9 -6,0 -4,2 -3,3 -15,4 1,3

Current Account Balance Million US $ -821 -3 386 -3 721 -3 879 -4 302 -3 136 -2 497

Current Account Balance % GDP -4,2 -7,4 -8,3 -8,4 -9,0 -7,6 -5,9

External Reserves months of imports 2,4 3,5 3,8 3,3 3,2 3,8 ...

Debt and Financial Flows

Debt Service % exports 55,7 55,5 57,7 65,4 70,4 86,1 71,0

External Debt % GDP 52,9 48,1 54,0 55,0 59,3 60,2 58,8

Net Total Financial Flows Million US $ 660 881 2 467 1 326 1 961 ... ...

Net Official Development Assistance Million US $ 222 922 1 017 710 921 ... ...

Net Foreign Direct Investment Million US $ 779 1 148 1 603 1 117 1 060 ... ...

Source : AfDB Statistics Department; IMF: World Economic Outlook, October 2015 and International Financial Statistics, October 2015;

AfDB Statistics Department: Development Data Portal Database, March 2016. United Nations: OECD, Reporting System Division.

Notes: … Data Not Available ( e ) Estimations ( p ) Projections Last Update: April 2016

TunisiaSelected Macroeconomic Indicators

-3,0

-2,0

-1,0

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

%

Real GDP Growth Rate, 2004-2016

0

1

2

3

4

5

6

7

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Inflation (CPI),

2004-2016

-10,0

-9,0

-8,0

-7,0

-6,0

-5,0

-4,0

-3,0

-2,0

-1,0

0,0

2 004

2 005

2 006

2 007

2 008

2 009

2 010

2 011

2 012

2 013

2 014

2 015

2 016

Current Account Balance as % of GDP,

2004-2016

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