VZCZCXYZ0000
PP RUEHWEB

DE RUEHTU #1255/01 3651525
ZNY CCCCC ZZH
P 301525Z DEC 08
FM AMEMBASSY TUNIS
TO RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 5851
RUCNMGH/MAGHREB COLLECTIVE

C O N F I D E N T I A L TUNIS 001255 
 
SIPDIS 
 
STATE FOR NEA/MAG (NARDI,PATTERSON AND HAYES) 
STATE PASS USTR (BURKHEAD) AND USAID (MCCLOUD) 
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR 
(TABINE), AND CLDP (TEJTEL AND MCMANUS) 
USDOC PASS USPTO (ADAMS, BROWN AND MARSHALL) 
CASABLANCA FOR FCS (ORTIZ) 
AMMAN FOR ESTH HUB (BHALLA) 
RABAT FOR FAS (HASSAN) 
CAIRO FOR FINANCIAL ATTACHE (SEVERENS) 
LONDON AND PARIS FOR NEA WATCHER 
OES (SENSENEY AND LAWRENCE), 
 
E.O. 12958: DECL: 12/24/2009 
TAGS: ECON EFIN EXIM FAO TS
SUBJECT: TUNISIA'S 2009 BUDGET FAVORS EDUCATION AND JOB 
CREATION 
 
REF: TUNIS 1011 
 
Classified By: Ambassador Robert F. Godec for reasons 1.4 (b) and (d). 
 
------- 
Summary 
------- 
 
¶1.  (C)  The Tunisian government has approved a 2009 budget 
that focuses on supporting business and investment in the 
wake of the world financial crisis.  The GOT projects a three 
percent budget deficit for 2009, and is targeting five 
percent real GDP growth despite worsening economic conditions 
both abroad and domestically.  Businesses will continue to 
benefit from tax relief and government ministries have been 
directed to implement policies to encourage growth and 
attract foreign direct investment.  Education received the 
largest budget allocation totaling close to US $3 billion. 
Despite an all-around reduction in customs tariffs, the GOT 
projects 12 percent growth in revenue without increasing 
taxes for corporations or private individuals.  On the 
surface this budget sends all the right messages, but GOT 
expectations seem unrealistic given the (economic realities 
in light of the) international financial crisis. End Summary. 
 
------------------ 
Credits and Debits 
------------------ 
 
¶2. (U) On December 22, the GOT approved a 2009 budget of TND 
17.2 billion (US $13.2 billion) and set the targeted budget 
deficit at three percent (the same target as 2008) despite 
the effect the global financial crisis is having on Tunisia's 
economy.  (NOTE: For both 2008 and 2009 figures, the current 
exchange rate of TND 1.3 to US $1 is used.)  Total government 
revenue is expected to reach TND 13.25 billion (US $10.3 
billion), an increase of 12 percent over 2008 revenue 
projections.  This estimated growth is consistent with the 
previous year's collections increase and reflects the GOT's 
optimistic outlook for 2009. 
 
¶3. (SBU) In a statement to the press, the Prime Minister 
emphasized the streamlining of the Tunisian tax code and the 
modernization of collections. Over the last five years, total 
revenue receipts maintained consistent growth rates ranging 
between seven and nine percent, despite the dismantling of 
import tariffs on imported European manufactured goods.  2009 
income and corporate tax receipts are expected to increase 12 
percent to TND 11.2 billion (US $8.6 billion).  Non-tax 
income is expected to grow 14 percent to TND 1.9 billion (US 
$1.4 billion), because of planned privatizations, natural 
resource revenues, and the sale of a third fixed/mobile 
telephone license.  The GOT expects to borrow TND 3.9 billion 
(US $3.28 billion) of which 78 percent will be domestic and 
the remaining foreign.  Foreign loans will be directly 
applied in the following way: 75 percent will go to public 
infrastructure projects, 11 percent to state-owned companies, 
12 percent to economic integration projects and two percent 
from donor sources will be used for the acquisition of 
agricultural products. 
 
--------------------------------------------- -------- 
The Future's So Bright, Tunisians have to Wear Shades 
--------------------------------------------- -------- 
 
¶4. (U) Setting five percent as the targeted GDP growth rate 
is proof of the GOT's optimism for 2009, despite the real 
impact the financial crisis is having on the private sector. 
In late third quarter 2008, the GOT ratcheted down the 
projected 2008 GDP growth rate from 6.1 percent to 5.1 
percent.  Forecasted GDP growth for 2009 reflects GOT 
confidence that exports, tourism revenues and foreign direct 
investment will remain strong.  The Economist Intelligence 
Unit, among others, is projecting a lower GDP growth rate for 
Tunisia at around 3.9 percent for the coming year.  Tunisia 
has enjoyed relatively high average GDP growth rates of five 
percent during the last ten years, allowing the economy to 
out pace the world average.  The GOT projects growth rates in 
the agricultural sector, the manufacturing sector and 
 
 
hydrocarbons of 2.5 percent, 2.3 percent 12 percent, 
respectively. 
 
----------- 
Men At Work 
----------- 
 
¶5. (U) The Ministry of Employment's 2009 budget, TND 99 
million (US $83.11 million) increased 14 percent over last 
year's allocation of TND 86 million (US $72 million).  The 
primary focus, as in years past, will be job creation to 
decrease the official 14 percent unemployment rate.  The GOT 
2009 goals are consistent with the target set in the 11th 
Economic Development Plan of reducing unemployment to 11 
percent by 2011.  The present unemployment rate of 14 percent 
remained largely unmoved in 2008, and experts express concern 
over the likelihood of progress given the current global 
economic situation.  Aside from the Ministry's budget, a 
total of US TND 257 million ($198.1 million) is destined for 
job creation, which is a slight increase over the 2008 
allocation of TND 247 million (US $198 million).  Another TND 
100,000 (US $98,000) will be set aside for the national 
employment fund.  The GOT's goal is to create a total of 
77,000 new jobs in 2009, 43,000 of which are intended for the 
estimated 50,000 graduates that will be entering the job 
market. 
 
----------------- 
Show me the Money 
----------------- 
 
¶6. (U) The GOT talks about focusing resources on education, 
and for 2009 follows through on this promise.  The largest 
budget allocation went to the Ministry of Education totaling 
US $2 billion (TND 2.7 billion), the Ministry of Higher 
Education is a close second with an allocation of TND 1.03 
billion (US $790 million).  Per capita education spending in 
2009 will increase slightly over the 2008 allocation to $638 
in 2009. 
 
¶7. (U) The Ministry of Commerce is slated to receive TND 872 
million (US $726 million).  The Prime Minister said that TND 
19 million (US $15.8 million) will be used to support 
exports, the handicraft industry and upgrade distribution 
channels for agricultural products and fisheries.  This 
export support fund is an increase from the previous year,s 
allocation of TND 17.2 million (US $14.3 million). 
Information Communication Technology will also receive 
increased project support funds of TND 84 million (US $69 
million), an increase of five percent over the 2008 budget 
allotment. 
 
¶8. (U) Other ministries will receive the following 
allocations: 
 
- Interior TND 1.03 billion (US $793 million) 
- Industry and Energy TND 993 million (US $764 million) 
- Public Health TND 834 million (US $695 million) 
- Agriculture TND 776 million (US $596 million) 
- Defense TND 720 million (US $553 million) 
- Foreign Affairs TND 115 million (US $88 million) 
- Tourism TND 114 million (US $87 million) 
- Transportation TND 459 million (US $353 million) 
 
-------------------------- 
Welfare, Government Cheese 
-------------------------- 
 
¶9. (U) The GOT will set aside TND 1.6 million (US $1.2 
million) for the public welfare system that will be bolstered 
by an additional TND 650 million (US $500 million) for fuel 
subsidies.  The GOT based this allocation on the assumption 
that oil prices will increase to US $90/barrel during the 
course of the year.  131 items are subsidized under the 
public welfare system with the bulk, 36 percent, going to 
subsidize staple food items.  Among the food items the GOT 
subsidizes are cereals, dairy products, cooking oil and 
sugar. 
 
--------------------- 
What is in it for Me? 
--------------------- 
 
¶10. (U) The budget law also sets forth the GOT's vision for 
supporting business development.  Companies currently 
benefiting from tax relief that are purchased will be able to 
convey the tax benefit to the new owners.  The Small and 
Medium-sized Bank (BFPME) will receive a TND 30 million (US 
$23 million) injection of capital to increase lending to 
small businesses.  Customs tariffs on raw materials, 
semi-processed goods and remaining imports will decrease to 
15 percent, 36 percent, and 36 percent respectively, from the 
current rates of 17 percent, 43 percent and 60 percent. 
 
------- 
Comment 
------- 
 
¶11. (C) This budget reflects consistency in the GOT's vision 
for Tunisia, but probably does not adequately take into 
account the financial crisis.  Revenues from corporate and 
individual taxes are not likely to hold steady if exports and 
tourism decline, bringing into question the GOT's ability to 
maintain the targeted three percent budget deficit. 
Moreover, a downturn in these key economic sectors could have 
a negative impact on government revenues, and as a secondary 
effect, increase private citizen dependence on public 
assistance.  On the upside, if oil prices remain at current 
levels, the GOT may be able to offset lower revenues from 
taxes with lower expenditures on subsidies. 
 
¶12. (C) We continue to follow closely the effects of the 
financial crisis on Tunisia (reftel).  Here as elsewhere, 
what happens in the crisis will have a significant impact on 
the viability of the government's budget.  The good news in 
the GOT budget is that the focus is where it should be: on 
delivering services to its citizens.  For that, at least, the 
GOT deserves a pat on the back. 
 
Please visit Embassy Tunis' Classified Website at: 
http://www.state.sgov.gov/p/nea/tunis/index.c fm 
Godec