Tunisia government and labour union sign deal on economic reforms

Agreement includes a plan to start reforms for seven state-owned companies, including Tunisair

Tunisia is dealing with unprecedented financial problems, and the deal could pave the way for an agreement with the International Monetary Fund. EPA

Tunisia's government and the powerful UGTT labour union signed an economic reform package on Wednesday that tackles subsidies, taxes and state firms, Prime Minister Hichem Mechichi said.

The country is dealing with unprecedented financial problems, and the deal could pave the way for an agreement with the International Monetary Fund.

"It is a historic agreement on important battles in our country," Mr Mechichi said.

The agreement includes a plan to start reforms for seven state companies, including Tunisair and the STEG electricity and gas company.

Details of the reform plan are still to be released.

The IMF urged Tunisia to cut its wage bill and limit energy subsidies to reduce a fiscal deficit, putting more pressure on the government amid a severe financial and political crisis.

"A very good step that shows that we are the ones who choose our reforms and agree on them without anyone dictating them to Tunisia," Finance Minister Ali Kooli told Reuters.

Mr Kooli said a Tunisian delegation would start discussions with the IMF over a financing programme in two weeks, adding that reaching a deal with the Fund would improve Tunisia's credibility and allow it to mobilise foreign loans.

Tunisia’s 2021 budget forecasts borrowing needs of $7.2 billion, including about $5bn in foreign loans.

The budget puts debt repayments due this year at 16 billion dinars ($5.75bn), up from 11 billion dinars in 2020.