October 20, 2014 / 10:17 AM / 3 years ago

Tunisia to lift retirement age two years to ease fiscal plight

Tunisia's Minister for Economic Affairs Nidhal Ouerfelli speaks during an interview with Reuters in Tunis October 17, 2014.Zoubeir Souissi

TUNIS (Reuters) - Tunisia will raise the normal retirement age by two years in 2015 to reduce the deficit in its social security funds, as part of economic reforms designed to stabilize state finances, minister for economic affairs Nidhal Ouerfelli said.

The North African country is reorganizing its economy as it nears the completion of a difficult transition to democracy over three years after the 2011 revolution that ousted autocrat Zine El-Abidine Ben Ali. Parliamentary elections are to be held on Oct. 26 and a presidential ballot in November.

"Today, social funds suffer a large deficit and we are studying how to fix it effectively...We are going to raise the retirement age two years from 2015," Ouerfelli said in an interview for the Reuters Middle East Investment Summit.

He said the retirement age would rise to 62, and that the reform was justified since Tunisia was one of the few countries in the region where the age was currently still 60.

The reform is not certain to go ahead, since the new post-election government will reshuffle the cabinet and may have different priorities. Ouerfelli said the initial months of 2015 would be very hard for the new government as it tackled painful reforms to increase tax revenues and cut energy subsidies.

But he said the current government had prepared a clear reform strategy for coming years, which would help the next government. Politicians in key parties contesting the election, including the secular interests led by the Nida Tounes party and the Islamist Ennahda, have expressed support for economic reforms in principle.

Tunisia hopes to reduce its state budget deficit to 5.0 percent of gross domestic product in 2015 from 5.8 percent projected for 2014.

While the country's powerful 800,000-member UGTT labor union has urged the government to start immediate negotiations on raising public sector salaries, Ouerfelli said the critical financial situation would not allow talks to start this year.

Officials in the UGTT have threatened to stage protests and even declare a general strike to pressure the government to accept immediate negotiations.

However, Ouerfelli said the government was now finding it difficult to persuade the International Monetary Fund to disburse the final tranche of a two-year, $1.78 billion loan program because of the slow pace of some reforms. Tunisia is under pressure from its international lenders to restrain public sector spending.

BUDGET

Ouerfelli revealed that Tunisia's state budget for next year would total about 29 billion dinars ($16.1 billion), up from 28 billion dinars in 2014, and that public sector wages would rise by about 800 million dinars.

Total state spending on wages in 2015 will reach 11 billion dinars, more than one-third of the budget, he added.

"We cannot continue in this way if we want to revive the economy and create growth by financing development projects and infrastructure."

To fill next year's budget gap, Tunisia is again assembling a complex series of external financing plans.

"We will issue, probably in the first half of 2015, bonds worth $600 million," Ouerfelli said without giving details.

In addition, Tunisia aims to borrow about $450 million from the IMF next year, $500 million from the World Bank, $380 million from the European Union and $200 million from the African Development Bank.

Editing by Andrew Torchia

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