UPDATE 1-Tunisia seeks EU credit, will impose fiscal measures - state news agency

Sun Sep 15, 2013 1:55pm BST

* Tunisia negotiating with EU over credit

* Seeking to narrow deficit to 6.5 pct of GDP (Adds details throughout from minister)

By Tarek Amara

TUNIS, Sept 15 (Reuters) - Tunisia is negotiating to borrow up to 500 million euros from the European Union and the United States has also expressed willingness to guarantee loans in 2014, the finance minister told the state news agency.

Tunisia's budget deficit should narrow to 6.5 percent next year from 7.4 percent of GDP expected in 2013, as the Islamist-led government seeks to impose strict new fiscal measures, Finance Minister Elyess Fakhfakh said.

The assassination of two opposition figures has prompted Tunisia's worst political crisis since autocratic leader Zine al-Abidine Ben Ali was toppled more than two years ago in the first of the Arab Spring uprisings.

The Islamist-led government is negotiating with the European Union for the granting of credit of up to 500 million euros, the minister said, adding that the United States has "voiced readiness to grant a loan guarantee to Tunisia in 2014".

The minister also suggested Tunisia could seek more guarantees from European countries if required.

"We will request a guarantee from the French market in case of need of additional resources," he said, according to the TAP state news agency website on Sunday.

The small North African country needs to further reduce its deficit, which worsened after the revolution and upheaval that cut into Tunisia's foreign currency reserves, exports and foreign investments.

Tunisia's economy will expand less quickly than hoped this year, with GDP growth forecast at 3.6 percent compared to 4 percent previously, the minister said last month, putting partial blame on slower growth in Europe.

The state budget for 2014 will reach 28.3 billion Tunisian dinars ($17.07 billion) with a rise of 2.2 percent compared to 2013 (26.7 billion), Fakhfakh said.

Among the new fiscal measures in 2014 will be the imposition of a tax of 10 percent on exporting companies which were exempt from taxes in the past, the minister said.

Tunisia, which has signed a $1.7 billion standby loan agreement with the International Monetary fund (IMF), is struggling with rising inflation and a large external deficit as well as its uncertain political outlook.

Standard & Poor's Ratings agency lowered its long-term foreign and local currency sovereign credit ratings on Tunisia to B from BB- and said the outlook was still negative.

The secular opposition, angered by the killings of the two left-wing politicians and emboldened by Egypt's army-backed ousting of an Islamist president, has held mass protests and insisted the government must resign and allow new elections.

Tunisia's parliament last June passed a law to allow the state to issue a sovereign sukuk bond to raise $700 million, a move that could help narrow the budget deficit. ($1 = 1.6577 Tunisian dinars) (Editing by Patrick Markey and Alison Williams)

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