Tunisia banking on US guarantees to secure 2013 borrowing

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Tunisian dinar. Photo – Tunisia-live.net

Tunisia’s investment and international cooperation minister said on Thursday he expected the US government to guarantee around a fifth of the $2.5 billion the North African state will need to borrow next year.

Reuters quoted Riadh Bettaib as saying that Washington has pledged to guarantee a loan worth more than $500 million in order to “help us tap international debt markets at a low interest rate in the limits of 1.68%”.

The minister did not explicitly say if that meant Tunisia would use the guarantee as it did in July when it raised $485 million from an international bond issue.

The issue, its first since 2007, aimed to help democratic transition and economic recovery after a revolt ousted longtime President Zine al-Abidine Ben Ali from power last year.

Bettaib disclosed that Japan and the World Bank would also contribute in helping the government raise the debt it needs in 2013 without giving further information.

Tunisia’s public debt has risen to 51% of GDP by the end of 2011, from 48% a year earlier, and the International Monetary Fund (IMF) expects it to increase to close to 56% of GDP by the end of next year.

The government plans to borrow 4.3 billion dinars ($2.73 billion) in 2012. It forecasts economic growth of 3.5%, after a 1.8% contraction last year.

The IMF report said last month that Tunisia’s weak economy is having a severe impact on the country’s financial wellbeing. It urged the central bank to implement reforms targeting the country’s failing banking sector in a bid to increase loan provisions and kickstart the economy.

The Paris-based monetary agency also urged the central bank regulators to develop crisis-management arrangements for struggling banks and review its exposure to these organisations by winding back its liquidity support.

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