Country Governance

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According to the Tunisian constitution, the Chamber of Deputies votes on bills regarding financial laws and budget regulation. If the budget has not been approved by December 31, the national budget’s provisions may be implemented by decree in quarterly installments. Moreover, the national development plan must be in accordance with the budget. A tax code passed in 2002 clarified the rights and obligations of tax payers, but Tunisia still fell short of the IMF’s standards of financial transparency with respect to comprehensive fiscal reporting. An IMF mission urged that the state budget and information about local government be more widely disseminated and that ad hoc extra-budgetary taxes and fees either be enshrined in legislation or abolished. Tax revenues declined as a percentage of GDP from 24% in 2001 to an estimated 20.4% in 2004, and the authorities were taking measures to improve tax collection, keep the fiscal deficit below 3% of GDP, and gradually reduce government debt from 60 to below 50% of GDP. A mission of the IMF’s Fiscal Administration Department advised the government in 2005 on ways to simplify the tax code by eliminating various multiple exemptions and special regimes.

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Public Audit

The Audit Court of the Republic of Tunisia was established by Law 8 of 8 March 1968 in accordance with the Constitution of 1959. It is administratively placed under the Council of State, whose head is the president. The prime minister, however, is the vice president of the Council of State and is administratively charged with oversight for the council. The Audit Office has broad powers to audit those organizations for which it has responsibility. A list of public enterprises and offices to be audited is issued by presidential decree. After an audit, the office declares the subject of the audit either to be at quits, in advance, or in debit to the Treasury. In the case of a debit, the audited organization has a specified time period within which it must deposit the missing funds into the Treasury.

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Public Procurement

Regulations were thoroughly revised by a 2002 decree that applies to all state and local government, state enterprises, and other public bodies. The Commission Supérieure des Marchés (High Commission for Markets) supervises all tenders, and Tunisian suppliers enjoy a 10% price preferential over other bidders. The World Bank carried out a Country Procurement Assessment Review and an Independent Procurement Review in 2003. Tunisia was also working with Italy in 2005 to develop standard electronic (“e-procurement”) procedures for the North African countries.

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The Banque Centrale de Tunisie (Central Bank, or BCT), founded in 1958, has played a major role in Tunisia's economic reform efforts since 1987. It developed a market mechanism to fix interest rates, and it supervises the commercial banking system and has the power to approve new banking institutions. A series of banking laws has given these institutions a measure of autonomy, although the largest of them are state owned, and has brought them more into accordance with international standards. In mid-2003, the government privatized the Union Internationale des Banques, and it completed the privatization of the Banque du Sud with the help of a Spanish partner in 2005.

Law No. 2003-75 passed on December 10, 2003, introduces tough measures against money laundering, but human rights observers claim that some of its provisions can also be used against websites that receive money from foreign organizations that the authorities have deemed illegal. The law establishes a Financial Intelligence Unit that supplements the other supervisory organs of the central bank. These have also been reinforced to cope with the commercial banking system’s mounting portfolio of nonperforming loans.

After steady progress in the late 1990s toward reducing the proportion of nonperforming loans, they increased from 2001 to 2003 from 19.2 to 24 per cent of gross assets, a level that had not been surpassed since 1996. The non-performing loans were disproportionately held by the state-owned banks.

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Although some privatization has taken place, notably in the cement and tourist industries, progress in banking and telecommunications has been slower because finance and communications are viewed as strategic by Tunisian decision-makers. Tunisia’s two largest banks remain state-owned. The government, however, was seeking a strategic investor in 2006 to take a 35% share of the state-owned Tunis Telecommunications Company. The company owns all fixed-line telephones in the country, as well as 60% of the mobile or cellular network.

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Stock Exchange

The banking system controls over two-thirds of the country’s stock exchange capitalization and 90 percent of the securities on the exchange. The exchange was transferred to a private company in October 1995 and updated to an electronic system by the end of 1996. In early 1998, the Tunis Stock Exchange launched a new index based on market capitalization (TUNIDEX) and began to release Reuters’ stock quotations. Of a total of 3000 limited liability companies only 44 were listed on the stock exchange in 2004.

Membership of the index is open, but companies must have liquidity of at least 80 percent. The existing Tunis index is characterized by a lack of liquidity, a fact which has been a concern of potential investors. Movements in stock prices on the new index are not constrained by one day fluctuation limits, and foreign investment is allowed. Trading on the exchange has previously been hindered by limits on the single day fluctuations of individual stocks. The new index is dominated by financial companies such as Banque de L'Habitat, Amen Bank and Biat.

Market capitalization in 2004 was $2.6 billion, or about 10% of GDP. Turnover ratio of traded stocks as a percentage of capitalization was 9.2%.

Planned reforms include allowing enterprises to buy back their own shares on the market. The Institut Arabe des Chefs d’Entreprise lobbied the government to introduce requirements of greater transparency and accountability for Tunisian companies in legislation under discussion in 2005.

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Financial Institutes

The Institut Arabe des Chefs d’Entreprise (IACE) was created in 1984 by a group of Tunisian business leaders and has grown since then to include about 500 members from the business community. It is an independent policy and advocacy organization concerned with the issues of the private sector. AIBL organizes its activities into three main areas: seminars and conferences which provide a forum for business and government leaders to share ideas; research and publications which focus on economic and political issues affecting the private sector; and training of business executives.

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International Transparency Standards

Tunisia qualified in June 2002 to participate in the Special Data Dissemination Standard of the IMF, which reflects international best practice in the area of economic and financial statistics. Tunisia has also engaged with the IMF and World Bank in publishing Reports on the Observance of Standards and Codes (ROSC) for monetary and financial policy transparency, fiscal transparency, banking supervision, securities regulation, and insurance supervision.

Both Moody’s and Standard & Poor have rated the country.

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