Chapter 1

was actually higher than that for the early part of the 1980s. surpluses of 0.7 percent and 0.8 percent of GDP, respec-
Expenditures on goods and services were maintained at tively, were achieved.
about 3.5 percent of GDP during 1988-93. Within this cat- For a complete analysis of the sustainability of the fiscal
egory, more emphasis was given to operation and mainte- deficit, not only information on the central-government
nance outlays, especially for infrastructure. Subsidies and deficit is required but also information on the consolidated
transfers have declined from 7.5 percent of GDP in 1986 to nonfinancial public sector (which consolidates the central
5.7 percent of GDP in 1993, with temporary increases in government with local government, social security, and non-
1989-90 to compensate for two years of drought and high financial public enterprises) and on the consolidated total
international cereal prices. Transfers to public enterprises to public sector (which adds to the first consolidation the Central
cover their operating losses have declined but seem to be Bank and public banks). Unfortunately, relevant data on pubstill
large (although more detailed data on the breakdown of lic enterprises and banks are not readily available. However,
current transfers to public enterprises is needed for an there are some indications that the public enterprise, public
unequivocal conclusion). bank sector is potentially a source of fiscal disequilibrium.
It is encouraging that government direct investment saw Data for 121 of the estimated 200-250 public enterprises,
its share in GDP, after a significant decline in 1987-88, in 1992, show a deficit of 6.8 percent of GDP out of total revrecover
to an average of 4.4 percent in the early 1990s. This enue of 34.6 percent of GDP (see chapter 2, section on pubis
important because the provision of public infrastructure lic sector activity and table 2.1). Regarding the public sector
is vital to ensure high productivity of capital, which in turn banks, the 1993 audits show that they have a significantly
produces high rates of economic growth. Capital transfers higher proportion of non performing loans as a share of their
and net lending declined sharply from 1986 to the present, portfolio than the private banks. To a large extent, the diffrom
5.9 percent to 1.8 percent of GDP If this means that ference in nonperforming loans can be explained by the pubpublic
enterprises are becoming less dependent on govern- lic banks' exposure to loss-making public enterprises and
ment support and are seeking to finance their investments because of the public sector banks' efforts (and obligation)
on competitive domestic and foreign financial markets, then to follow/implement government development programs
the fall of capital transfers and net lending is a very healthy over the past three decades. The situation is improving, as the
development. However, if some of these transfers and lend- share of nonperforming loans as a percentage of assets
ing are now provided by commercial banks or if public decreased in 1993 over 1992 and is anticipated to improve
enterprises are deteriorating as result of low replenishing again in 1994 (the latter will be confirmed when all the 1994
investment, the current fall of capital transfers and net lend- audits are completed and analyzed.
ing may only represent a fiscal burden for the Government Deficit financing has changed considerably since 1986.
in the future. The share of the budget deficit financed from foreign
sources fell from an average of about 55 percent in the first
Fiscal deficit half of the 1980s to about 30 percent in 1987-93 (table
SA.2). Correspondingly, the share of domestic financing of
In the period from 1986 to 1993, the central government FIGURE 1.6
deficit has ranged from 2.4 percent to 5.5 percent of GDP Fiscal balance
(figure 1.6 and table SA.2). The budget deficit was highest Percent of GDP
in the years 1989, 1990, and 1991. In 1989, this was due to 45 1 I"f bQicel,.
the 1988-89 drought (the deterioration of the budget bal- 40 ,.° .
ance was attenuated by drought-related grants); and in 1990 :' '- -
and 1991, to the Government's attempt to mitigate the ,3
adverse economic impact of the Gulf crisis. Because of the
appropriate management of the fiscal balance by the
30
1
* '-- 4-5
-5
_
/
-6 "a0 bbnce
Tunisian authorities, these increases in the budget deficit 5 Ta rerenum -7 Vr-d )
remained transitory. As a matter of fact, since 1991 the bud- 1980 1985 1990 1980 1985 1990
get deficit has been declining, and in 1992 and 1993 primary Source
Wbrd Bank caulation; data from Minisby of Economic Devekpment.
MACOECONOMIC POLICY 11