VZCZCXRO8754
PP RUEHTRO
DE RUEHTU #2861/01 3410908
ZNR UUUUU ZZH
P 070908Z DEC 06
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 2307
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0823
RUEHAS/AMEMBASSY ALGIERS PRIORITY 7359
RUEHLO/AMEMBASSY LONDON PRIORITY 1220
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0811
RUEHFR/AMEMBASSY PARIS PRIORITY 1673
RUEHRB/AMEMBASSY RABAT PRIORITY 8282
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0016
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4029
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 002861 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/MAG (HARRIS) AND EB/CIP 
STATE PASS USTR (BELL), USPTO (ADLIN AND ADAMS), USAID (MCCLOUD) 
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR (JAMES), AND CLDP 
(TEJTEL) 
CASABLANCA FOR FCS (ORTIZ) 
LONDON AND PARIS FOR NEA WATCHER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EFIN ENRG EAID EPET TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS: Nov. 1 - Nov. 30 
 
REF: A. TUNIS 2848 
¶B. TUNIS 2749 
¶C. TUNIS 2303 
¶D. TUNIS 629 
¶E. 2005 TUNIS 2433 
 
¶1. (U) This cable contains highlights of recent economic 
developments in Tunisia on the following topics: 
 
¶A. Tunisia Plans to Build Nuclear Power Plant by 2020 
¶B. Tunisie Telecom Privatization Receipts To Reduce 
   External Debt 
¶C. Central Bank Intervenes in Bank Lending 
¶D. GOT Subsidies Reach 0.7 Percent of GDP in 2006 
¶E. Central Bank Raises Reserve Requirements 
 
--------------------------------------------- ----- 
Tunisia Plans to Build Nuclear Power Plant by 2020 
--------------------------------------------- ----- 
 
¶2. (U) On November 22, Mr. Othman Ben Arfa, head of state-owned 
power utility Societe d'Electricite et de Gaz (STEG), announced 
Tunisia's decision to develop nuclear energy for power generation by 
¶2020.  Ben Arfa stated that the project will begin with four years 
of feasibility studies that will explore technical, logistical, 
safety, and financial aspects.  The GOT expects to finish the 
project in 2020, with seven years to build the nuclear power plant. 
The plant will produce 900 megawatts, or nearly 20 percent of the 
country's current production capacity.  By 2020, national power 
consumption is expected to reach 22 million megawatts, necessitating 
a doubling of current energy production. 
 
¶3. (SBU) Comment: Soaring oil prices and growing power consumption 
have made nuclear energy an attractive alternative for the GOT (Ref 
E).  According to GOT statistics, each one USD increase in oil 
prices, beyond the level of 50 USD per barrel, increases GOT 
expenditures by 40 million USD per year.  Oil imports have also 
contributed to growth in Tunisia's trade deficit and to lowered 
expectations for 2006 GDP growth (Ref B).  End Comment. 
 
-------------------------------------- 
Tunisie Telecom Privatization Receipts 
To Reduce External Debt 
-------------------------------------- 
 
¶4. (U) Several local publications have recently reported that the 
GOT plans to use a portion of the hard currency receipts from the 
privatization of Tunisie Telecom to reduce external debt.  Tunisian 
weekly magazine Ralits reports that 426.5 million dinars (330 
million USD) will be applied, while state-run Tunis-Afrique Presse 
reports that two-thirds of the receipts (approximately 1.53 billion 
USD) will go towards external debt repayment.  The March 2006 
privatization of a 35 percent stake in Tunisie Telecom is Tunisia's 
largest privatization to date and earned 2.3 billion USD (projected 
to represent about 7.5 percent of GDP for 2006) (Ref D).  According 
to the June 2006 IMF Article IV Report, external debt represents a 
sum equal to 68 percent of Tunisia's GDP. 
 
--------------------------------------- 
Central Bank Intervenes in Bank Lending 
--------------------------------------- 
 
¶5. (U) On November 27, the online business magazine African Manager 
reported that the GOT directed state-owned Socit Tunisienne de 
Banques (STB) to deal with the debts and losses of the state-owned 
electromechanical construction company, SACEM, so that the company 
can be privatized with a clean balance sheet.  The company 
registered roughly 11.75 million USD in debt and 3.13 million USD 
losses in 2005.  This decision comes on the heels of a recent 
Central Bank directive for banks to reschedule approximately 250 
million dinar (roughly 194 million USD) in loans held by Tunisian 
olive oil producers and exporters.  Tunisian olive oil exports fell 
below expectations in 2006, leaving many producers and exporters 
with unsold stocks (Ref C). The Central Bank's decision will allow 
local producers to borrow additional funds for the 2006-2007 
 
TUNIS 00002861  002 OF 002 
 
 
agricultural season and postpone repayment until October 2007. 
 
¶6. (SBU) Comment: Non-performing loans (Ref A) continue to represent 
nearly 21 percent of assets in the banking sector.  Despite the 
Central Bank's stated desire to reduce the level of non-performing 
assets, continued intervention in bank lending practices adds to 
this burden and perpetuates the cycle of poor credit risk analysis 
that created the high levels of non-performing loans in the first 
place.  End Comment. 
 
--------------------------------------------- - 
GOT Subsidies Reach 0.7 Percent of GDP in 2006 
--------------------------------------------- - 
 
¶7. (U) During parliamentary budget debates, Mr. Mondher Zenaidi, 
Minister of Commerce and Handicrafts, announced that the "Caisse de 
Compensation", the GOT subsidy fund, disbursed 284 million dinars 
(218 million USD) in 2006, remaining steady at 0.7 percent of GDP. 
In 2005, the fund disbursed 259 million dinars (200 million USD), 
also 0.7 percent of GDP.  The fund is primarily used to subsidize 
cereals, vegetable oil, milk, cooking gas and pharmaceuticals, but 
notably does not include fuel and energy subsidies.  Zenaidi 
projected that the fund would disburse 348 million TND (267.63 
million USD) in 2007 if prices increase according to GOT 
expectations.  The subsidy fund was created in the 1960s keep basic 
products as food and pharmaceuticals at affordable prices. 
 
---------------------------------------- 
Central Bank Raises Reserve Requirements 
---------------------------------------- 
 
¶8. (U) On November 29, the Central Bank raised banks' obligatory 
reserves on demand deposits, deposit certificates and other amounts 
owed to clients whose terms do not exceed three months to 3.5 
percent from 1.5 percent. Wire reports quote a Central Bank manager 
as attributing the raise as an effort to reduce the excess liquidity 
in the market. 
BALLARD