AFRICAN DEVELOPMENT BANK · (SDP) 2016-2021 Lack of a national multi-year strategy SDP adopted...
Transcript of 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.
Transaction costs shall be paid.
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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.
Transaction costs shall be paid.
Time Frame – Main Milestones (expected)
Appraisal June 2016
Programme Approval September 2016
Effectiveness October 2016
Completion December 2017
Last Disbursement December 2017
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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
Ou
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
priority governorates
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
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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
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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
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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
Group 2 accordingto RDI
Group 3 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
5.2.11. Problems and Constraints
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,
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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
5.2.24. Problems and Constraints
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.
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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
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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
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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
Reforms 2016 Measures 2017 Measures Implementation Indicators Expected Outcomes Institutions
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
priority governorates
Reduction in the number
of young drug addicts and
of the risks related to drug
use.
Ministry of
Health
IX
Reforms 2016 Measures 2017 Measures Implementation Indicators Expected Outcomes Institutions
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
priority governorates
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
Increase in the number of
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
the priority governorates
Copy of the Order
establishing research units
and laboratory in 2016 and
2017
Increase in the number of
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
Increase in the number of
highly qualified teachers in
in the Governorates of the
interior
MESRS
X
Reforms 2016 Measures 2017 Measures Implementation Indicators Expected Outcomes Institutions
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
Publication, in the JORT, of the
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
the priority governorates
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
Reforms 2016 Measures 2017 Measures Implementation Indicators Expected Outcomes Institutions
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)
Publication, in the JORT, of the
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