Lamia Boujnah Zribi, Former Minister of Finance: Interview

Interview: Lamia Boujnah Zribi

What will be the role of private investment in Tunisia’s economic recovery?

LAMIA BOUJNAH ZRIBI: Tunisia needs to be aiming for an investment rate of close to 30% of GDP if it is going to speed up the recovery of the economy. However, the government has little budgetary leeway to make investments in the development of the country. The government budget is already constrained by a high public-sector wage bill, debt service burden and subsidies. Thus, government spending will not be able to surpass TD5.5bn (€2.4bn).

Private investment, however, should represent at least 60% of total investment. Indeed, it must be the private sector that leads Tunisia’s economic recovery. To ensure that the government leads the way to recovery, it has undertaken reforms to make a business climate that is more suitable for private investment. Among these reforms are the 2016 investment law, the 2015 public-private partnership law, and other specific measures that the Ministry of Finance has submitted for the Parliament’s review. Private initiative is essential not only to investment but also to job creation. Tunisia suffers from an overall unemployment rate of about 15%, and 30% for university graduates. The challenge is to foster a sense of entrepreneurship among these graduates, and to change the perception that the public sector is the guarantor of employment.

How will Tunisia address its public sector wage bill?

ZRIBI: After the 2011 revolution, Tunisia adopted a policy aimed at helping the needy through public sector employment and salary increases. Nevertheless, the government fully recognises that the size of the current wage bill is unsustainable. In particular, it drastically reduces the government’s margin of manoeuvre in terms of making investments for development. The government’s goal is therefore to reduce the size of the wage bill from 14% to 12% of GDP by 2020.

Tunisia will work to implement measures aimed at promoting growth and better control of the wage bill through staff reductions. The government will reduce staff by not replacing retirees and abstaining from new recruitment. In addition, the government is in preliminary discussions with union leaders regarding the possibility of overtime and performance bonuses.

How can tax reform stimulate investment and increase tax revenue at the same time?

ZRIBI: Creating a fiscal policy that both incentivises investment and increases tax revenue is difficult. However, making Tunisia’s tax policy more fair would make it easier to balance these objectives. Both companies and workers must share the burden of creating a more inclusive economy. Though the government is negotiating with unions to postpone salary increases, it is also negotiating with companies and the professional class so that they pay their fair share of taxes. All the economy’s stakeholders – from companies and blue-collar workers to professionals and so on – must come together in solidarity for the good of the country. The main objectives of the 2016 finance law were to stimulate investment, encourage entrepreneurship and foster job creation. However, it also aimed to make taxation fairer and reduce fiscal evasion.

To what degree will the government allow foreign investors to hold shares in Tunisian companies?

ZRIBI: The 2016 law granting financial advantages and the bill providing tax incentives aim to facilitate foreign investment. For example, the law allows foreign investors to hold over 49% of a Tunisian company’s capital, provided they receive approval from the Higher Council for Investment. Nevertheless, some sectors of the Tunisian economy will remain closed to foreign investment for now, notably agricultural real estate. However, once the government implements its shortterm priorities, it will discuss creating a negative list that only details the sectors that are closed to foreign investment, thereby facilitating foreign investment.