Letter of introduction to the 46th Annual Report
of the Central Bank of Tunisia
on Tunisia’s economic, monetary and financial
activity in 2004
presented to
His Excellency the President of the Republic of Tunisia
on behalf of the Board of Directors of the Central Bank of Tunisia
by
Taoufik BACCAR
Governor of the Central Bank of Tunisia Your Excellency the President of the Republic,
I have the honour of presenting to you the 46th annual report of the Central Bank of Tunisia. This report outlines trends in the international environment and analyses national economic and financial situation. It also reviews Central Bank management in 2004 on the basis of financial statements, which for the first time include on the methodological level a statement regarding off balance sheet commitments as well as notes relating to the financial statements. This is in line with the resolve to conform to international norms in this area. Mr. President, The world economy grew in 2004 at a sustained 5.1% rate in real terms, up from 4% in 2003, thanks in particular to recovery in industrial production and investment and faster growth in international trade. This was achieved despite ongoing geopolitical tension, soaring oil prices and strong fluctuations in exchange rates. But the pace of world economic growth varied by both region and country. The United States enjoyed a 4.4% growth rate in 2004, up from 3% in 2003, with all the components of global demand contributing to this trend. Higher income and lower unemployment stimulated household consumption, the main motor for growth. Investment bounced back, on the strength of an increase in corporate profits, while exports grew, stimulated by stronger foreign demand and greater economic competitiveness, helped by depreciation of the dollar. GDP in the Euro Zone was up 2% compared to 0.5% the year before, with exports being the key factor for growth. In Japan, economic growth was led by both foreign demand, stimulated in particular by dynamic economies in the US and China, and household consumption, boosted mainly by the II drop in unemployment. Thus GDP was up 2.6% compared to 1.4% in 2003. China, taking advantage of the faster pace of its integration in the world economy, continued to record one of the highest growth rates, 9.5%. This was made possible by strong domestic demand, especially in the area of investment, along with strong exports thanks to higher foreign demand and a yuan that was kept at undervalued levels. Trade in goods and services grew at a faster pace in line with strong world demand sustained in particular by the higher volume of imports by the United States and China. Thus world trade in goods was up by 10.7% compared to 5.3% the year before, while exports of services took advantage of renewed activity in transport and tourism. Foreign direct investment flows were up 5.5% to 612 billion dollars, almost half of which went to emerging countries, especially China. Exchange rates underwent sizeable fluctuations. The single European currency reached a historical record high of $1.36 to the euro, influenced by worsening financial imbalances in the American economy. This is reflected in the high deficits in the balance of both current payments and public finances. In line with a significant increase in the price of com- modities and high world demand, certain inflationary pressure flared up once again. In the United States the inflation rate increased from 2.3% in 2003 to 2.7% in 2004, influenced in particular by rising oil prices and a falling dollar. Faced with a resurgence of inflationary pressure, the Federal Reserve, after having followed an accommodating monetary policy since 2001, raised its principal key rate five times by 25 basis points, bringing it to 2.25% at the end of 2004. In the Euro Zone, the average inflation rate more or less stabilised at the same level as the year before: 2.2%, very near
III the objective set by the European Central Bank. In this context, the ECB maintained an unchanged key rate of 2%. In Japan, the general consumer price level stabilised in 2004, following a drop of 0.2% the year before, after the deflationary spiral in evidence since 1999. This development was due mainly to the increase in household consumption and higher prices for commodities. Mr. President, Despite the impact of the considerable increase in hydrocarbon prices and greater international competition, Tunisia’s economy grew in virtually all sectors in 2004. Indeed, the economic growth rate rose to 6% up from 5.6% in 2003. This is more than five times the demographic growth rate and it reflects significantly higher per capita income which came in at 3,572 dinars, up by 8.7% in current price. The higher level of economic activity and various programmes and mechanisms to back up employment have contributed to an increase in the volume of created jobs. National savings, stimulated by stronger economic growth, were up 10.5%. This gives a savings rate of 22.1% of gross national available income. Investments on the other hand grew by just 4%, which is less than the GDP growth rate. This yielded a drop in the investment rate, falling from 23.4% in 2003 to 22.3% in 2004. Following a certain acceleration in the first half, under the effect of inflation carried from the second half of 2003, the inflation rate has henceforth posted a markedly slower pace, ending up the year at 3.6% compared to 2.7% in 2003. This inflection of the inflation rate is attributable mainly to better market supply and appropriate monetary policy reinforced in 2004 by revival of open market transactions and adoption of the multiple rate method for calls for bids.
IV As for external payments, trade recorded faster growth in both exports and imports, as detailed in this report. Given the higher level of income from tourism and worker remittances, the current deficit continued to narrow, down to 2% of GDP. In the area of public finances, the budget deficit exclusive of income from privatisation came to just 2.6% of GDP, com- pared to 3.2% the year before, and the tax burden came to 20.6%. Mr. President, Thanks to structural reforms and greater reactivity, the Tunisian economy managed in 2004 to stand up to pressure from outside sources, which has multiplied and become recurrent, and to adapt to new demands from an international environment that is constantly changing. Economic and social indicators have continued to evolve favourably, as can be seen in the 2004 general census of population and housing, marking the move of the country to higher levels of development and well being. Such good performance, achieved in an unstable international context, has led international rating agencies to confirm Tunisia’s sovereign risk rating. This has helped the country to strengthen its position on international capital markets, as seen in the conditions surrounding the June 2005 bond issue. Still, frantic globalisation of economies and ongoing instability in the international environment are creating ever more difficult challenges that Tunisia must meet. This calls for more in-depth and faster-paced structural reforms to improve economic competitiveness and boost growth. One of the foremost challenges is soaring hydrocarbon prices, which seems to be here to stay. In these new circumstances, the national programme currently under implementation to conserve energy will need to move forward at a faster pace, calling for a concerted effort by all parties to set the energy economy up as a culture and
V anchor it in the behaviour of both households and the enterprise. More research and investment in renewable energies, the connection of as many households as possible to the natural gas network and substitution of fuel by gas as a source of energy production are all important actions that must be pursued and strengthened if energy costs are to be reduced. At the same time, price adjustments for a number of energy products along with a broad-based campaign to build awareness should help stimulate more rational consumption. Over the longer term, efforts to modernise urban transport, particularly by extending the railway and light metro system to as many outlaying urban areas as possible will undoubtedly contribute effectively to the energy conservation programme. In another area, dismantling of tariffs as foreseen in the Association Agreement with the European Union, which will be completed by the end of 2007, requires unrestricted commitment from all economic operators if the industrial sector is to rapidly upgrade to meet international norms. Optimising of the upgrading programme, reinforced by the programme to modernise Tunisian industry, requires the full adhesion of businessmen to carry out action plans that will modernise the production base and to adopt management and commercialisation methods that are in line with international standards. Moreover, final phasing out of the multifibre agreements has totally opened the textile market to Asian suppliers, especially China, subjecting the sector to tough competition and thereby requiring faster implementation of the strategy set up for this purpose. More particularly the textile/clothing industries need to make a qualitative jump in the shortest possible time and to climb to the required level of efficiency and competitiveness by investing in high added value niches.
VI Modernisation of production processes and the move from simple subcontracting, which currently dominates, to co- contracting and active participation in finished products are among the main factors contributing to success of this strategy. These actions must accompany the ongoing intensification of a diversified economy to improve its positioning in promising sectors in which Tunisia enjoys competitive advantages as shown through recommendations of strategic studies. In this same train of thought, new information and commu- nication technologies as well as financial/engineering/higher education/health services, should be the new levers for the economy throughout the next stage of development in considering their potential for growth and jobs creation notably for graduates of higher education. Tourism, which still has high potential, needs to take advantage of the promising prospects of renewed growth to ensure a sizeable improvement in the quality of services and greater diversification of its product line. In this regard the new upgrading programme for the sector and the many measures introduced in cooperation with all operators, including the banking system, which was a determining factor in helping tourism through the difficult 2002-2003 period, should be further strengthened and provided with support through the effective commitment of professionals. The goal is to clear up the financial structure of their units and to rethink commercial methods, by regrouping and unifying means in order to strengthen negotiation and sales capacity. Mr. President, Tunisia’s ambition to accede to a new level of development requires high growth based on a knowledge-based economy and significant expansion of service activities. This is a strategic choice, necessary to meet the imperatives of efficiency and competitiveness that will be necessary for successful integration in the world economy as
VII well as the need to meet the twin challenges of employment : to satisfy additional demand and to create enough jobs for graduates of higher education. The national strategy to boost growth and create jobs focuses on higher investment and private initiative in order to set up more businesses and projects. The adopted approach addresses the various factors of investment, first by strengthening the country’s capacity to generate investment in targeted sectors, then by pursuing efforts to improve the business environment and fostering a new generation of promoters. To this end, the participation of businessmen who have proved their capacity to identify projects and who are known for the quality of their management, can be an effective input to boost investment and private initiative. The opening of new areas of activity to the private sector, the promulgation of new legislation governing initiative and ongoing simplification of procedures as well as stronger competition should give concrete form to the priority goals of more flexibility and visibility in promoting initiative and providing support to private investment. Furthermore, various mechanisms and techniques introduced over the last few years and currently being implemented, such as company’s expansion, business incubators, technology poles and business centres, will provide appropriate solutions for identifying innovative and high added value projects. Finally, various available financing mechanisms, enriched by the launching of start-up funds and by more flexible conditions to tap the Fund for Industrial Promotion and Decentralisation and the Tunisian Guarantee Company, will allow for adequate financing at the various stages of projects. The recent creation on your initiative of a bank to finance small and medium businesses is in heart of the strategy to create new companies. Acting as a federative element, the new bank will favour promotion of new innovative projects in
VIII promising areas that display high added value, thanks in particular to considerable support to promoters, efficient evaluation and monitoring of project implementation. Mr. President, At a time when the country is trying to diversify and modernise its economy, a sound modern banking system is a necessity. The ongoing process to build up a modern banking and financial system and the process towards total convertibility of the dinar are essential components of your programme of the Tunisia of tomorrow. Thanks to your support, Mr. President, 2004 posted indicators that were far better than in 2002 and 2003. Banks recorded an improvement in parameters relating to financial soundness, as seen in the drop in the share of non performing loans, consolidation of capital stock equity and a higher rate of coverage of risk by provisions. It was possible to obtain these results, favourable situation being helpful, thanks to a more rigorous approach in assignment of results, giving priority to a stronger financial base and durable lending institutions. The next stage will require a new generation of reforms the outlines of which are defined in your electoral programme. These reforms seek to put Tunisia in conformity with banking legislation in effect in the European Union, substantial improvement in the quality of banking services to reach international norms, along with development of monetics, electronic payments and e-banking. Modernisation of the information system, a prere- quisite to reaching the targeted goal, will provide banks with the means necessary to meet the challenge of quality. In particular, the relationship between banks and their customers will be clarified so as to ensure minimum quality in basic banking services and greater transparency by establishing a charter that defines the rights and obligations of each party. Thus, the legal framework governing banking activity will be revamped to better meet the requirements of Tunisia’s
IX economy as it widens the degree of openness to the outside world and to help banks establish new prudential management rules as per the norms of Basel II. Current legislative reforms on financial security and civil and commercial procedures will help to further consolidate the culture of transparency and good governance and facilitate conditions for legal collection of claims. On another front, restructuring of the banking sector will continue, in the form of alliances and privatisation so as to make banks big enough to meet the banking needs of an environment that is increasingly open to competition and the imperatives of competitiveness. Recent measures relating to external financial liberalisation constitute notable progress on the road to total convertibility of the dinar, a development that must be continued and further enhanced as a mechanism of support to foreign direct investment. Worth of note that the move toward total convertibility of the dinar requires a qualitative change in monetary policy which must first put in place advanced indicators concerning evolving conditions, finer-tuned instruments to regulate liquidity and a more active role for indirect instruments, especially open market transactions and interest rates. Mr. President, Foreign direct investment is a major stake for the country’s future development, especially in light of the widespread tendency to move operations to far-off locations, influenced by deep-seated changes on the international scene. The faster pace for the privatisation programme and the revival of stock market activity that you have ordered will have positive effects in attracting foreign investors. In a context of political, economic and social stability, the opening of new areas of activity to investors, especially
X services, promising, high added value activities and more flexible procedures are determining advantages in meeting the challenge of international competition for foreign investment. Promotion of foreign investment, should henceforth be the responsibility of all public and private operators. To this end, banks should play a key role, especially since they maintain privileged relations with several correspondents. More particularly, joint venture banks and those integrated in an international network should serve as a go-between for foreign direct investments from new areas. Being a mark of the esteem in which the country is held and a sign of recognition of its efforts over the past decade to develop a knowledge-based economy, Tunisia’s hosting of the second phase of the World Summit on the Information Society is an opportunity for business community to create new partnerships, promote new technologies, and attract more foreign investors in a field which still has significant potentials for development. Mr. President, The next phase of Tunisia’s development will be different from those already experienced. It will be full of pitfalls but also full of opportunities to mark a decisive turning point and to place Tunisia in position to join the ranks of more developed countries. Important progress in developing infrastructure, telecom- munications, higher education, scientific research, as well as ambitious reforms announced in your “Tunisia of Tomorrow” programme, all constitute an objective platform for acceding to a new level of progress and ensuring that Tunisia’s development process is moving ahead. The Governor
Taoufik BACCAR
THE INTERNATIONAL ENVIRONMENT
I. THE INTERNATIONAL ENVIRONMENT
The world economy grew in 2004 at the highest rate in almost three decades: 5.1% in real terms vs. 4% in 2003. Industrial production in particular bounced back in industrialised countries, leading thus to faster growth in international trade, while favourable financing conditions boosted investment for production as well as confidence on the part of economic operators. Such performance was made possible despite huge imbalances in international payments, higher key interest rates in a number of industrialised countries like the United States, sizeable fluctuations in exchange rates for the main currencies (including a sharp drop in the value of the dollar against the euro), soaring oil prices, and ongoing geopolitical tension. The pace of world economic growth, however, varied from region to region and country to country, due to structural growth gaps and the uneven distribution of improvements in the international environment. Growth in the United States was much higher than in other G7 countries, while Japan managed to break out of its cycle of economic slowdown or even recession and European countries posted a moderate growth (though better than in 2002 et 2003). Many emerging economies and developing countries recorded fairly sustained growth, thanks notably to vigorous trade abroad, foreign direct investment flows, and added value from higher prices for commodities, especially crude oil. China, India and Russia did especially well, consolidating their ranking on the world economic scene. World demand was high, especially from China, which became the number one consumer of commodities in 2004, a decisive factor for soaring prices, especially oil. Indeed oil prices followed a rising pattern virtually throughout the year, with record highs posted at the end of October : about $51 for a barrel of Brent and $55 per barrel of light American crude. This trend was amplified by the weak performance of stocks in industrialised countries and the higher level of speculation. World Trade of goods further strengthened in 2004, up 10.7% vs. 5.3% the previous year ; while employment got better on the whole thanks to economic activity pace improvement on international level. However, the appearance of inflationary pressure notably in industrialised countries lessened the extent of these results. Stock market indexes recorded a decrease compared to their 2003 levels mainly over the last months of the year. Foreign direct investment flows recovered worldwide, increasing by 5.5% in 2004 after falling by 14.8% a year earlier, rising to $612 billion. Almost half of this amount went to emerging economies and developing countries, about two-thirds in Asian and Pacific nations. Portfolio investments in 2004 were highly volatile and open to the disparate trends inherent in the negative impact of higher crude oil prices on business earnings and world economic prospects. The exchange rates for the main currencies fluctuated markedly and not always in line with predominant economic and financial fundamentals. The single currency 6 which reached a record high of $1.36 to the euro toward the end of 2004, appreciated significantly compared to the year before, due to ongoing financial imbalances in the US economy, especially huge trade and budget deficits. The yen was left to fend for itself when the Bank of Japan stopped intervening on exchange markets after spending almost $140 billion over the first quarter of 2004 and a record of about $193 billion in 2003.
TRENDS IN CERTAIN WORLD SITUATION INDICATORS (in %) 14 14 12 12
10 10 8 8 6 6 4 4
2 2 0 0 -2 -2 2000 2001 2002 2003 2004 World growth Worldwide inflation World trade of goods in volume
1. Economic growth worldwide Despite the slower pace of growth starting in the second half of the year in industrialised countries, world economic growth improved in 2004 in developed countries as well as emerging economies and developing countries. The economic growth rate in the United States increased from 3% in 2003 to 4.4% in 2004 in real terms, with all components of global demand contributing to this trend. Higher income and lower unemployment stimulated household consumption, the main motor for growth. Investments peaked on the strength of higher business profits, while exports increased thanks to higher foreign demand and the greater economic edge brought on by depreciation of the dollar. In the Euro Zone, exports constituted the main impetus for growth, with domestic demand up only slightly overall. Household consumption remained weak in the wake of the low number of new jobs created and the modest level of salary increases. Thus real GDP for the region increased by 2% in 2004 vs. 0.5% the previous year. Although the trend was positive overall, there were differences in the factors contributing to economic growth from one member country to another. Growth was stimulated by dynamic domestic demand in a number of countries, including France, Spain and Belgium, but in a number of other countries it was sustained rather by foreign demand. This is the case in particular for Germany, where household consumption remained flat, due to weak salary hikes and an increase in savings as concern spread about the reform of retirement benefits.
7 In Japan, contrary to past years when it was supported mainly by public investment, economic growth in 2004 was led by foreign demand, stimulated in particular by the booming US and Chinese economies as well as by higher household consumption as unemployment fell. Corporate investments performed well, following progress in restructuring at companies and banks. Japan’s GDP increased by 2.6% in real terms, compared to 1.4% in 2003. TRENDS IN THE MAIN ECONOMIC AND FINANCIAL INDICATORS OF THE DEVELOPED COUNTRIES Inflation Budget Unemployment Growth in GDP (Variation in Interest rate balance (% of working Description (volume & %) consumer (%)2 (% of GDP) population) prices %)1 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 All developed countries 2.0 3.4 -3.9 -3.5 1.8 2.0 6.6 6.3 Of which : United States 3.0 4.4 -4.6 -4.3 2.3 2.7 0.98 2.16 6.0 5.5 Japan 1.4 2.6 -7.8 -7.1 -0.2 0.0 0.0 0.0 5.3 4.7 Canada 2.0 2.8 0.6 1.4 2.7 1.8 2.75 2.50 7.6 7.2 European Union 0.8 2.2 -2.6 .. 2.0 2.0 8.1 8.1 Of which : -Euro Zone 0.5 2.0 -2.8 -2.7 2.1 2.2 2.09 2.17 8.7 8.8 Of which : *Germany -0.1 1.7 -3.8 -3.7 1.0 1.8 2.01 2.05 9.6 9.2 *France 0.5 2.3 -4.2 -3.7 2.2 2.3 2.25 2.25 9.5 9.7 *Italy 0.3 1.2 -2.9 -3.0 2.8 2.3 2.14 2.16 8.7 8.3 -United Kingdom 2.2 3.1 -3.3 -3.0 1.4 1.3 3.31 4.75 5.0 4.8 Source : World Economic Outlook and International Financial Statistics of the IMF and Eurostat Southeast Asian countries (aside from Thailand : 6.1% vs. 6.9% in 2003) enjoyed sustained economic expansion in 2004. Positive feedback from structural reforms these past few years and further opening of markets were contributing factors, along with vigorous demand, both foreign and domestic. Exports were favourably influenced by strong demand, especially from the United States and China, while domestic demand was boosted by higher salaries, accommodating monetary policies over the first half of the year, and major inflows of capital in the form of investment. South Korea, which had not benefited from such situation, had to adopt expansionary monetary and budgetary policies to support domestic demand, especially the private consumption that was kept down by the lower volume of loan money. These measures boosted the country’s growth rate to 4.6% in real terms for 2004 vs. 3.1% the year before. China, benefiting greatly from its ongoing integration in the world economy, continued to record one of the highest growth rates: 9.5% in 2004 vs. 9.3% the year before. This performance was made possible by strong domestic demand, especially investments (up 25.8% vs. 26.7% in 2003) and strong exports, up 35.4% in the wake of stronger foreign demand and an undervalued yuan. Faced with fears of an
1 Base 100 in 2000. 2 Money market rate for December of each year, except for France (Deposits interest rate). 8 overheated economy and with an eye to bringing growth down to sustainable levels, Chinese authorities took measures of an administrative nature and proceeded to raise the key interest rate for the first time in nine years. These measures were meant to slow the granting of loans and to avoid over-investment in a number of sectors. TRENDS IN SELECTED ECONOMIC AND FINANCIAL INDICATORS IN CERTAIN EMERGING AND DEVELOPING COUNTRIES AND THE EUROPEAN UNION COUNTRIES Growth in GDP Inflation (Variation in Budget balance (volume & %) consumer prices %)1 (% of GDP) 2003 2004 2003 2004 2003 2004 Countries of the EU 0.8 2.2 2.0 2.0 - 2.6 .. of which : Spain 2.5 2.7 3.1 3.1 0.3 -0.3 Portugal - 1.2 1.0 3.3 2.5 - 2.8 -2.9 Greece 4.7 4.2 3.4 3.0 - 5.2 -6.1 Emerging & developing countries 6.4 7.2 6.0 5.7 - 3.8 -2.6 of which : Tunisia 5.6 6.0 2.7 3.6 - 3.2 - 2.1 Morocco 5.5 4.2 1.2 2.0 .. .. Algeria 6.9 5.3 2.6 5.4 .. .. Egypt 3.1 4.1 4.5 11.3 .. .. South Africa 2.8 3.7 5.9 1.4 .. .. Turkey 5.9 8.0 25.3 8.6 .. .. Argentina 8.8 9.0 13.4 4.4 .. .. Chile 3.3 6.0 2.8 1.1 .. .. Sources : World Economic Outlook and International Financial Statistics of the IMF, Eurostat and Ministry of Development and International Cooperation and National Statistics Institute for Tunisia Latin America recorded higher overall economic growth in 2004 for all the countries in the region, particularly marked in Brazil (5.2% vs. -0.5% the year before) and Venezuela (17.3% vs. -7.7%). These trends were favoured in particular by a promising international environment, high price levels for commodities and a massive influx of foreign capital. Thus real GDP for the region was up 5.7% in 2004 vs. 2.2% the year before. Economic expansion was also slightly better in Africa2, thanks to a more stable macro-economic situation, good harvests and higher prices for raw materials, notably crude oil. Growth in Africa reached 5.1% in 2004, compared to 4.6% the year before. The countries of the Arab Maghreb Union experienced slower economic growth, aside from Tunisia where the growth rate remained strong, up 5.6% in 2003 and 6% in 2004, thanks to high agricultural production in the wake of good weather, high industrial turnout, and strong tourism and foreign trade. Algeria’s economic growth rate fell from 6.9% in 2003 to 5.3% in 2004, despite a sharp increase in the export of hydrocarbons. In this context, the Algerian Government had to adopt a plan in August to boost economic growth, which consisted in launching major infrastructure
1 Base 100 in 2000. 2 Exclusive of Egypt and Libya, which in IMF’s classification are in the Middle East region. 9 projects over the next five years. Morocco too suffered from slower growth, down from 5.5% in 2003 to 4.2% in 2004, mainly due to a mediocre agricultural season. On the other hand, the countries of central and eastern Europe for the most part enjoyed higher economic growth, up from 4.6% in 2003 to 6.1% in 2004. This was fostered by robust domestic demand, especially higher investment, as a number of countries in the region joined the European Union. Russia, number two world producer of crude oil, benefited from soaring prices along with dynamic domestic demand and an expansionary budget policy and thus was able to keep up its high growth rate (7.1% vs. 7.3% in 2003). 2. World trade International trade of goods and services grew in 2004 as world demand rose, stimulated in particular by greater imports by the US, where domestic demand was far greater than production, and by China, where investments as well as consumption continued to rise rapidly. The volume of world trade of goods continued to grew at a steady pace: 10.7% vs. 5.3% the year before. The ongoing increase in the price of commodities, especially crude oil, along with depreciation of the dollar, the main unit of account, meant a stronger net increase in the value of world export of goods expressed in dollars, for the second straight year : up 21.1% in 2004 vs. 16.6% a year earlier, amounting to 8,902 billion dollars. The terms of trade for world trade in goods stabilised for developed countries (following 1.3% increase in 2003, while they improved by 4% for emerging economies and developing countries, compared to 0.9% a year earlier. World export of services also continued to grow in 2004, with a nominal increase of 16.3% vs. 14.2% the previous year, amounting to 2.167 billion dollars. One of the reasons for this major increase is greater international activity in the sectors of transport and tourism as well as higher fees for freight. 3. Inflation World demand grew in the wake of greater economic activity, leading to higher commodities prices and the ensuing appearance of inflationary pressure in 2004. However, the average rate of inflation worldwide remained at almost the same level as the year before : 3.5% vs. 3.6%. The higher pace of economic growth in developed countries over the first half of 2004, notably soaring energy prices starting that summer, brought about faster growth in consumer prices for this group of countries, up 2% vs. 1.8% in 2003. In the United States the inflation rate rose from 2.3% in 2003 to 2.7% in 2004, influenced not only by rising oil prices but also a weaker dollar, which meant higher production costs and lower gains in productivity. This took place in a context of low interest rates and expansionary budgetary policy. In the Euro Zone, the average inflation rate in 2004 remained at almost the same level as the year before : 2.2% vs. 2.1%, going beyond the goal of 2% set by the 10 European Central Bank (ECB) as the final objective of its monetary policy. This situation was certainly favoured by slower increases in the price of food thanks to good weather and the higher value of the euro, which partially offset imported inflation. In Japan, the general level of consumer prices remained stable in 2004, after a drop of 0.2% the year before and the deflationary spiral in effect since 1999. This reversed trend is due to higher household consumption and higher prices for commodities along with the faster pace of economic growth. The inflation rate in emerging economies and developing countries dropped slightly in 2004: 5.7% vs. 6% the year before, despite the faster pace of economic growth and the impact of imported inflation. 4. Budgetary and monetary policies Faster economic growth in industrialised countries overall and its impact on tax revenue helped to reduce the global budget deficit in 2004 compared to the year before (3.5% of GDP vs. 3.9%), despite the adoption in a number of countries of expansionary fiscal policies meant to boost economic activity. In the United States the public deficit regressed in 2004 to 4.3% of GDP vs. 4.6% the previous year, as higher fiscal revenue and vigorous economic expansion more than offset the ongoing drop in taxation and increased military spending. In the Euro Zone, the budget deficit over this same period was down slightly, from 2.8% to 2.7% of GDP, despite the low evolution of tax revenue under the influence of flat domestic demand. But in several Euro Zone countries (especially a number of big economies like France and especially Germany) the public deficit remained higher than the 3% set by the stability and growth pact. In this context, the European Commission at the 10 September 2004 meeting of Finance Ministers had to adopt new measures to amend regulations in effect. Thus in the future State debt and medium and long-term viability of public finances will be the key parameters, with each country defining its own budgetary objectives. Furthermore, longer periods of time will be given to countries with exceptionally low growth rates to get back to a balanced budget in line with established standards. In Japan, public finances improved markedly in 2004, with a lower ratio between the budget deficit and GDP : 7.1% vs. 7.8% the year before, thanks to higher tax revenue from sustained economic growth and lower expenditure, especially for public works (-3.5%) and international aid (-4.8%). Tighter monetary policy was phased in over 2004 in a number of industrialised countries, meant to counter inflationary pressure and to keep macro-economic factors in balance. In the United States, the Federal Reserve, after holding to soft monetary policy since 2001, introduced five 25 base point increases in 2004, bringing the main key rate to 2.25%.
11 FED FUNDS RATE IN THE UNITED STATES (IN %) 3.50 3.25 3.00 3.00 2.75 2.75 2.50 2.50 2.25 2.25 2.00 2.00 1.75 1.75 1.50 1.50 1.25 1.25 1.25 1.00 1.00 0.75
2 3 4 4 4 4 4 5 5 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 / / / / / / / / / / 1 6 6 8 9 1 2 2 3 5 1 0 0 0 0 1 1 0 0 0 / / / / / / / / / / 6 5 0 0 1 0 4 2 2 3 0 2 3 1 2 1 1 0 2 0 The European Central Bank kept its key rate at 2%, its level since June 2003, given that inflation is under control and that support is needed to boost economic growth.
REFINANCING RATE (REFI) IN THE EURO ZONE (IN%)
3.00 2.75 2.75
2.50 2.50 2.25 2.00 2.00
1.75
1.50
2 3 3 0 0 0 0 0 0 2 2 2 / / / 2 3 6 1 0 0 / / / 5 6 5 0 0 0
The Bank of Japan on 20 January 2004 raised the upper limit of reserves in banks’ current accounts from 32 to 35 billion yen. This decision was meant to provide massive liquidity at zero interest to the banking system to help them grant more loans to the economy and thus support economic activity, putting an end to deflation and an anticipated increase in domestic demand. Long-term interest rates remained for the most part very low in 2004, reflecting in particular lack of confidence on the part of investors who continued to prefer bond markets, which they perceive as being a safer investment. Such behaviour is due mainly to ongoing geopolitical tension, soaring oil prices, and tighter monetary policy in a number of developed countries, all factors likely to weaken the world economy outlook.
12 5. Employment Higher economic growth worldwide in 2004 led to a drop in the overall unemployment rate, which came in at an average 6.1% vs. 6.3% the year before. It fell from 6.6% to 6.3% in developed countries, most of which enjoyed sustained economic growth. Enhanced activity in the United States translated into 2.2 million new jobs, contributing to a lower 5.5% unemployment rate compared to 6% in 2003. In Japan too the unemployment rate fell from 5.3% to 4.7%, helped by better finances at businesses as profits grew, by recovery in bank loans, and by the reduced number of bankruptcies (-16.8% vs. -14.6% in 2003). In the Euro Zone, the unemployment rate remained virtually unchanged at 8.8% on average. This is because European companies have regularly hesitated about taking on new staff, concerned about keeping production costs down in order to remain competitive, particularly on external markets, in a context of higher energy costs and a strong euro. For emerging economies and developing countries, unemployment rates, while generally lower, did remain high in 2004, particularly for the Middle East and North Africa (11.7%) and sub-Saharan Africa (10.1%). 6. International cooperation Taking advantage of the better world economy, the international community continued to pay close attention to strengthening cooperation with a view to higher and better balanced growth world wide, greater employment and income and implementation of anti-poverty measures. It showed its willingness to support the efforts of developing countries to promote sound macro-economic policies and better governance, to contain indebtedness, and to ensure the opening of markets and the reduction of poverty. The International Monetary Funds (IMF) continued to work with member states with these goals in mind, encompassing surveillance and advice, various financing mechanisms to support stabilisation programmes, structural reforms and poverty reduction, and technical assistance to draw up sound macro-economic policies and set up supportive frameworks. New commitments by the Fund amounted to just $21 billion in 2004, compared to $42.7 billion the year before, since overall economic conditions had improved in several emerging economies. Most of the allotted amount, about 90%, went to Brazil and Argentina. The outstanding balance of loans was more than $90 billion by the end of 2004, about $5 billion less than the previous year, following major net repayment by Brazil and, to a lesser degree, Russia and Turkey. The IMF also committed $2.6 billion in grants in 2004 and disbursed $1.7 billion to poor countries in the framework of the initiative to lighten the burden for highly indebted poor countries (HIPC), which it has supported with the World Bank since 13 1999. The two relevant institutions decided in September 2004 to extend this initiative for a further two years, until the end of 2006. This decision will allow poor countries to have more time to implement the reforms needed to become eligible for debt reduction under the terms of this support mechanism and thus avoid a situation in which several eligible countries would be burdened with excessive debt. IMF also continues to work with the World Trade Organization (WTO) in providing strong support for the Doha Round of trade negotiations, seeking to establish an open and non-discriminatory multilateral trade system, a basic factor for growth and economic development throughout the world, particularly in developing countries. To this end, the Fund in April 2004 established a new financing instrument called the «trade integration mechanism», which will help countries overcome the temporary balance-of-payment difficulties inherent in liberalised foreign trade. 2004 was also marked by the strengthening of a number of regional groups. This was the case in particular for the European Union, which grew from 15 to 25 members. Mercosur in Latin America also expanded, with integration of three new members : Ecuador, Colombia and Venezuela. And the South American Community of Nations was founded by 12 countries. On the microeconomic front, there was a plethora of merger-acquisition transactions in 2004, with the establishment of large business groups, notably in the financial and new technologies sectors. Such transactions amounted to about $840 billion in the United States and $680 billion in Europe.
14 II. INTERNATIONAL FOREIGN EXCHANGE AND GOLD MARKETS
2004 saw a return to tighter policy by the Federal Reserve for the first time in four years with regard to key rates and the ongoing downward trend of the dollar against the other main currencies. Rates fluctuated throughout the year for the euro/dollar (between 1.1759 and 1.3667) and the dollar/yen (between 101.81 and 114.88). The currencies of emerging economies were for the most part under pressure from gains against the US dollar, in line with the overall weakening of the US currency, as well as improvement of their foreign accounts thanks notably to recovery of world trade.
THE EXTENT OF VARIATION IN THE MAIN EXCHANGE RATES Y E A R 2 0 0 3 2 0 0 4 EXCHANGE LOWEST HIGHEST LOWEST HIGHEST RATE $1.0332 $1.2647 $1.1759 $1.0332 EUR/USD (02/01/03) (31/12/03) (26/04/04) (02/01/03) ¥106.75 ¥121.87 ¥101.81 ¥106.75 USD/JPY (9/12/03) (21/03/03) (02/12/04) (9/12/03) ¥124.03 ¥140.91 ¥125.77 ¥124.03 EUR/JPY (02/01/03) (30/05/03) (05/04/04) (02/01/03) On another front, the gold market continued in 2004 on the upward trend that had began in 2001. Aside from rather favourable fundamentals, this precious metal benefited from a weaker dollar, with speculative funds and institutional investors seeing it as a safe placement that also contributes to a diversified portfolio. A. FOREIGN EXCHANGE MARKETS 1. Industrialised countries In general, foreign exchange markets were characterised in 2004 by the ongoing decline of the US dollar against the other main currencies for the third year in a row, due to further deterioration of US external imbalances. a- Trends in the EUR/USD and USD/JPY At the beginning of 2004 the American currency continued to decline against the European currency, a trend that began the middle of 2001. The US job market report issued on 9 January, which showed that the number of jobs had not increased as much as expected, deepened concern about the solidity of economic recovery in the United States. Statements by some members of the Federal Reserve’s Monetary Policy Committee confirmed the idea that soft monetary policy would be maintained. The dollar thus fell from 1.2541 USD to the euro at the start of January to 1.2898 USD on 12 January. There was then a break in depreciation of the dollar, with investors concentrating more on officials’ position on exchange rates. The President of the ECB criticized the excessive volatility and sudden shifts in rates on foreign exchange markets and operators interpreted this as a sign that the ECB would no longer stand by and watch the euro appreciate but would take measures to contain its increase. Furthermore, positive US economic indicators and a change in attitude about economic prospects
15 by the Federal Reserve’s Monetary Policy Committee at its 28 January meeting gave operators on these markets to understand that an increase in US key rates would be announced earlier than expected. Thus the dollar fluctuated between 1.2331 and 1.2927 to the euro from the beginning of the year until 18 February. The dollar depreciated more moderately against the yen. Upward pressure on the Japanese currency in a context of stronger inflows of foreign capital on the Tokyo Stock Exchange and speculative buying of yen were attenuated by official Japanese intervention on the foreign exchange market. The Bank of Japan in effect sold 7.15 trillion yen in January, a record high for the last ten days of this month. After starting the year at 107.43 JPY, the dollar was trading at 106 JPY in mid-February. By the end of February the dollar had appreciated considerably against both the euro and the yen. The communiqué issued by the G7 after its 7 February meeting gave no new indication of the position of member countries on exchange rates and the market remained convinced that the Japanese Ministry of Finance would remain committed to preventing any further appreciation of its currency. This pushed a number of operators to reconsider the advisability of maintaining long positions on the yen, leading to a sharp depreciation of Japan’s currency against the dollar, despite economic indicators showing signs of recovery in Japan. The dollar evolved from 105.14 JPY on 11 February to 112.32 on 8 March. European economic indicators over this period seemed to show that economic recovery in Europe was weaker than in the United States, leading operators to reconsider the probability of further appreciation of the euro against the US currency. The dollar rose to 1.21 to the euro in mid-March.
EUR / USD IN 2004
1.4000 1.4000 1.3500 1.3500
te 1.3000 1.3000 a r
ge
an 1.2500 1.2500 h Exc 1.2000 1.2000
1.1500 1.1500 01 January 31 March 30 June 28 September 31 December
By the end of the quarter there was a parting of the ways in dollar rates against the euro and the yen, with the dollar gaining more value against the euro but depreciating against the yen. Expectations of a narrowing of the interest rate differential in favour of the dollar went against the euro, which finished for the quarter at 1.2313 USD. But the dollar closed at the end of the first quarter with lower value against the Japanese currency. Indeed, the Japanese economy continued to show signs
16 of improvement and monetary authorities decided against intervening on the foreign exchange market to depreciate the yen. The Japanese currency was also propped up by inflows of foreign capital. The USD/JPY rate closed at 104.26 for the quarter. Over the second quarter the dollar initially rose against both the euro and the yen thanks to strong economic indicators and higher long-term yields in the US. Good progress on the job market in March and April and the higher-than-expected increase in consumer prices in March fed speculation about US monetary authorities introducing a significant increase in interest rates. This contrasted with flat economic recovery in Europe and the low probability of higher key rates in the euro zone. It was on 26 April that the dollar reached its highest level of the year: 1.1759 to the euro, compared to 1.2300 USD at the beginning of the month. In the same way, despite positive economic indicators in Japan, the yen dipped against the dollar, down from 104 JPY at the beginning of April to 114.88 JPY on 14 May, its lowest level of the year against the dollar. Japan’s currency was affected mainly by the net outflows of capital that are generally recorded at the start of the Japanese fiscal year as well as by the risks to the archipelago’s economic growth brought on by higher oil prices. But the dollar was unable to maintain these gains through the end of the quarter. Fears of an aggressive tightening of US monetary policy died down after a fairly moderate increase in the consumer price index in April and May. Furthermore, the figure for the trade deficit made public in June was a record-high 145 billion dollars for the first quarter of 2004, reviving the debate on the need to depreciate the dollar in order to move toward more balanced external accounts in the US. Geopolitical tension erupted anew toward the end of May and the ensuing hike in oil prices were additional factors working against the dollar. The Fed’s decision to increase the federal fund rate by 25 basis points (to 1.25%) on 30 June for the first time in four years was largely anticipated by the market and it did not have a significant impact on exchange rates. The dollar closed for the second quarter at 1.2185 to the euro. The yen benefited from Japan’s brighter economic prospects, illustrated by revision of GDP growth for the first quarter at a 6.1% annual pace, and non-intervention of Japanese monetary authorities on the foreign exchange market. The dollar closed for the second quarter at 108.86 JPY.
USD / JPY IN 2004
115 .00 115 .00
112 .00 112 .00
e t 109 .00 109 .00 a
r ge 106 .00 106 .00 an h
c x
E 103 .00 103 .00
100 .00 100 .00 01 January 31 March 30 June 29 September 31 December
17 During the third quarter the dollar traded with little variation against the euro and the yen, in line with a market that could not make up its mind about the long-term prospects of the US currency. It traded between 1.1967 and 1.2461 to the euro, while the USD/JPY rate ranged between 112.48 and 107.53 to the dollar. Despite ongoing expectations of further long-term depreciation of the dollar in the wake of concern about the US current account deficit (especially after a higher-than-expected trade deficit was announced on 13 August), the dollar suffered only a slight decrease in value, with operators fearing further tightening of US monetary policy. After the 25 basis point increase on 10 August, the Federal Reserve announced a further 25 basis point increase on 21 September, bringing the federal fund rate up to 1.75% at the end of the third quarter. For the third quarter as a whole the dollar lost value overall, moving from 1.2186 on 1 July to 1.2431 to the euro on 30 September. But it gained value overall against the yen, mainly due to publication of indicators announcing a tapering off of economic activity in Japan. Although the GDP had recorded a marked increase over the first quarter, it went up just 1.3% in the second quarter. Industrial production in particular was lower than expected in July. Operators acted on the assumption there would be a drop in speculative demand for the yen and that international investors would be somewhat less interested in Japanese stocks, mainly because of poor prospects for the technology sector and higher oil prices. In this context the dollar evolved over the third quarter from 108.81 JPY to 110 JPY. In the fourth quarter the dollar depreciated considerably against both the euro and the yen and the US current deficit was once again a major concern for operators on foreign exchange markets. The dollar lost value more rapidly after publication on 15 December of the figure on net foreign capital flows tied to long-term American securities. Amounting to $48.1 billion, this figure was at its lowest level since October 2003. The added problem of the United States’ current deficit kept the dollar from taking advantage of the last two federal fund rate increases of 25 basis points each introduced on 10 November and 14 December, bringing it to 2.25%. Thus the dollar closed for the year at 1.3558 to the euro, very near its lowest level in 2004: 1.3667 and 102.45 JPY, having depreciated for the year as a whole by 7.5% against the euro and 4.6% against the yen. b. Trends in GBP/USD At the start of the year the pound sterling was still attractive to operators because of the intrinsically weak dollar, favourable interest differentials compared to the other main currencies and expectations that these differentials would be further accentuated by an overheated British economy, and ensuing fears of inflation. On 5 February the Bank of England announced the first increase of its main key rate, from 3.75% to 4%. Between the beginning of the year and 18 February, the value of the pound sterling increased from 1.7827 USD to 1.914 USD. From mid February to mid May the pound sterling lost value against the dollar as the American currency appreciated against the other main currencies, on the strength of expectations of higher interest rates in the US. The pound sterling traded 18 for 1.7477 USD on 14 May, its lowest level for the year, despite a further 25 basis point hike in Britain’s key interest rates on 6 May. The publication of economic indicators announcing brisker economic growth in Great Britain along with the risk of pressure on the job market revived fears of inflationary pressure, leading the Bank of England to react with another increase of its key rate, going to 4.50% on 10 June. This helped the pound sterling to bounce back, reaching 1.8765 USD on 19 July. In August the Bank of England increased its main key rate for the last time in 2004, to 4.75%, with a view to keeping the inflation rate near the goal of 2%. But the market took this increase to be the end of the cycle of tighter monetary policy by the Bank of England, given the moderate pace of economic growth, the dying down of activity on the real estate market, and especially the low inflation rate. The pound sterling thus fell to 1.7705 USD on 7 September. At the end of the year the sharp drop in the value of the dollar following further deterioration of the American trade deficit was beneficial to the British currency, which reached 1.9550 on 16 December, its highest level in 2004, before closing for the year at 1.9184 USD, having appreciated by 7.07% for the year as a whole.
GBP / USD IN 2004
2.0000 2.0000 1.9500 1.9500 te a 1.9000 1.9000 r
ge 1.8500 1.8500
an h 1.8000 1.8000 Exc 1.7500 1.7500
1.7000 1.7000 01 January 30 March 01 July 28 September 31 December c. Trends in USD/CHF: Economic conditions continued to improve in Switzerland over the first quarter, with GDP up 1.5% over the figure for the same period the year before. Led by vigorous exports, there had not been such high growth since 2001. But this did not benefit the Swiss franc, which weakened from 1.2443 to the dollar at the beginning of the year to 1.3225 on 26 April, its lowest level in 2004, as the Swiss currency suffered from strengthening of the dollar at that time. When the dollar later weakened, the Swiss franc again gained value and climbed back to early-year levels, trading at about 1.2400 to the dollar at the end of June. From July to October the Swiss franc evolved in a narrow margin between 1.2200 and 1.2800 to the dollar before starting off on a new upward trend against the dollar as the latter plummeted at yearend,
19 notably because of the worsening American current deficit. The Swiss franc closed for the year at 1.1380 to the dollar after reaching 1.128 just prior to that, the highest level for the year, for yearly appreciation of 8.5% against the dollar. As for key interest rates, the Swiss National Bank decided to tighten monetary policy on two occasions (June and September 2004) by 25 basis points each time, bringing the three-month fluctuation band on the LIBOR to 0.25%-1.25%.
USD / CHF IN 2004
1.3500 1.3500
1.3000 1.3000 te a r 1.2500 1.2500 ge an h 1.2000 1.2000
Exc 1.1500 1.1500
1.1000 1.1000
1 January 2004 31 March 2004 30 June 2004 28 September 31 December
2. Emerging countries 2004 stood out as a time of very sustained growth for most emerging economies, which contributed to strong recovery in the world economy. In China, the considerable trade surplus with the United States and abundant foreign direct investment and portfolio investment flows fostered by expectations of future appreciation of the Chinese currency drove the yuan up. The Popular Bank of China then had to extend its massive intervention on the foreign exchange market, which it was able to do thanks to substantial reserves ($89.9 billion in 2004), succeeding in keeping its anchor value at about 8.28 yuan to the dollar. The other main currencies in the region followed diverging trends against the US dollar. Malaysia, like China, managed to maintain its anchor value, while the South Korean currency appreciated sharply and Thailand on the other hand suffered strong downward pressure on the baht. South Korea had to intervene on the foreign exchange market several times to hold back a higher-valued won in the wake of overall weakening of the US dollar. Despite efforts made to this end, the Korean won went up by more than 15% for the year against the dollar, from 1195 to 1035. In Eastern Europe, 2004 remained not only the year of enlargement of the zone1 by eight new European Union members (on 1 May 2004), but also a year of cyclical rebound, with average growth of about 5% for these eight countries, their best performance since 1997.
1 Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic and Slovenia. 20 Cyclical upturn in business in the three main countries of the region (Poland, the Czech Republic and Hungary) and their membership in the EU helped to attract foreign investors, contributing to higher value for their currencies, which also benefited from the strong increase in the euro’s value against the other main international currencies. In Russia, economic growth continued in 2004 at more than 7%, compared to 7.3% in 2003. The country’s healthy economy was based on high growth in exports, which continued to benefit from high prices for oil and other raw materials. The significantly better balance of trade brought the current surplus to a record level of about 10% of GDP. The ensuing massive inflows of foreign currency were however subject to pressure from a more highly valued Russian rouble. But problems in the banking sector and higher demand for dollars helped keep it down so that over the first nine months of the year it traded between 29 and 28 to the dollar. Since then it continued on its upward trend, boosted by the sharp drop in the US dollar over the last quarter of 2004, finishing for the year at 27.71 to the dollar, an increase of more than 5% over the figure at the start of 2004. The Turkish pound, after beginning the year by gaining about 6% against the dollar in the first quarter, then lost more than 16% in value, dropping to 1,555,500 TRL to the dollar, largely due to the dollar’s strength at that time against the other main international currencies. But then the greenback depreciated in the second semester and this, along with a higher level of capital flows to Turkey, helped the pound recover more than 15% of losses to close for the year at 1,345,000 to the dollar. It should be noted that Turkey adopted a new monetary unit at the beginning of 2005, corresponding to 1 millionth of the former Turkish pound. Thus the new pound started trading at 1.3450 to the dollar. The Egyptian pound lost value throughout the year, though in a narrower margin, between 6.16 and 6.21 to the dollar. The Moroccan dirham depreciated in the first half of the year by more than 6% against the dollar, ranging from 8.65 to 9.23. It however appreciated by 1.8% against the euro during this same period, rising from 11.10 to 10.90. The second half of the year, marked by the dollar’s steep decline against the euro, meant a strong increase for the dirham against the USD: 12% more than its lowest level of 8.23 MAD posted at the end of the first semester. Concurrently, the dirham fell by more than 2.5% against the euro, to 11.19. B. THE GOLD MARKET Price trends for gold in 2004 reflected its enhanced status as an investment option as well as the growing influence of speculative funds on the price of this precious metal. Overall, fundamentals progressed favourably in 2004, much like other determining factors. Demand for gold in 2004 increased quantitatively by 8.2% to 3484 tons (compared to 3221 tons in 2003), while supply was down over this same period by
21 13.3%, from 3875 tons in 2003 to 3360 tons in 2004, leaving net demand of 124 tons in 2004, compared to net supply of 653 tons in 2003. As for trading, 2004 began on a positive note, with increased purchases by speculative funds. Thus the price of gold reached USD 430.5 per ounce on 6 January. Aside from stronger demand, it continued to be influenced by the performance of the dollar on the foreign exchange market. During the first half of March, the gold market improved, with relatively low volume and stable prices attracting higher demand. This progress was further boosted by speculation on whether or not the Federal Reserve would maintain the status quo. The American currency’s plunge against the yen in the second half of March, uncertainty about economic recovery in the United States and the lack of conviction on the part of investors about better performance on American stock markets encouraged speculative funds and institutional investors to reposition themselves on the gold market as a means to diversify. Prices thus went up to USD 430.39 per ounce on 1 April. It should be noted in this respect that the market barely reacted to the announcement in March of the renewal of the 1999 agreement between European Central Banks (due to expire in September 2004), stipulating limits on sales of gold by the signatory institutions. Under the terms of the new agreement, the relevant Central Banks have committed to limit sales of gold to 500 tons a year between September 2004 and September 2009, just 100 tons over the level stipulated in the former agreement. The market had largely anticipated this increase.
GOLD PRICES IN 2004
470 .00 470 .00
450 .00 450 .00 430 .00 430 .00 ces i
r 410 .00 410 .00
P 390 .00 390 .00
370 .00 370 .00
350 .00 350 .00 01 January 31 March 30 June 29 September 31 December
The upward trend in effect for gold suddenly reversed starting 2 April, after a better- than- expected US jobs figure was announced along with higher inflation, factors that favoured a stronger dollar, also supported by an increase in US interest rates earlier than expected. This brought on a wave of selling off of gold by speculative funds, bringing prices down to USD 371 per ounce on 10 May, its lowest level of the year. The gold market then stabilised, on the strength of escalating geopolitical events in the Middle East, which pushed oil prices up. Starting in June, gold prices, though 22 somewhat volatile, climbed steadily until the end of the year, boosted by the weak dollar, renewed concern about the strength of the business upturn in the United States in the wake of weak economic indicators, ongoing deterioration of US deficits, and soaring oil prices. Prices for gold reached a 16-year high in December: USD 456.75 per ounce. The brief surge in dollar values starting 8 December brought on a selling spurt, with prices dipping to USD 431.25 per ounce. Gold recovered in the following weeks, to end the year at USD 438.10 per ounce, up 5.57% compared to prices at the start of the year.
23 III. INTERNATIONAL CAPITAL MARKETS
In an international context characterised by strong economic recovery worldwide and rising oil prices, the international capital market evolved in relative calm in 2004, despite tighter monetary policy in the US starting in June. The main international stock markets rose, although indexes did not go as high as in 2003. Bond markets were able to absorb the five increases in US key interest rates without there being the usual pressure on long-term rates. The latter closed for the year at levels very near those prevailing at the beginning of the year, although there was a rapid increase in the second quarter. European yield rates were down sharply over the same period, contrary to trends in US long-term rates. Activity grew in 2004 on the derivatives markets, on both the organised and over-the counter segments, in an international context marked by high volatility in exchange rates, interest rates and stock market indexes. A. THE STOCK MARKET Stock markets in 2004 continued on the upward path that had begun the year before, although results were significantly lower. This was largely because of strong performance by American, European and Japanese companies but also because of greater economic, commercial and financial integration worldwide, which contributed to greater convergence in stock market trends. Also of note was the lower degree of sensitivity of stock markets both to soaring oil prices and to the high volatility of exchange and interest rates throughout 2004. The main indexes gained between 3.1% and 8.6%, well below the previous year, when increases ranged between 14% and 50%.
The increase on the main stock markets over the first two months of the year was influenced by the publication of statistics showing encouraging growth overall on both sides of the Atlantic. They then (aside from Nikkei) fell in March, affected by concern about the pace of growth in continental Europe and the United States and by growing geopolitical tension.
24 The NIKKEI Tokyo Stock Market index continued to rise, reaching its highest level in two years in April. This was linked to signs of faster economic recovery and the prospect of a better rating, up from negative to neutral, for Japanese sovereign debt from the international financial rating agency S&P. This will be profitable to the banking sector, which has considerable portfolio in Japanese Government securities.
In May stock market indexes globally pursued their downward trend, aside from that of technology stocks on the New York Stock Market’s NASDAQ. This occurred after publication on 2 April and 7 May of excellent US job figures, with operators convinced that an upward trend for key interest rates in the US would begin toward the end of June. Similarly, fears that world growth would taper off in the wake of record high oil prices contributed to renewed fears about the impact of this trend on economic prospects. On the other hand, the NASDAQ index of technology stocks rose along with the many buyers who flooded onto the market after major companies in the sector announced new estimates of higher earnings. The NIKKEI index initially fell by about 10% over the first half of May, in the wake of uncertainty about a possibly slower pace of growth in China and especially the adverse effect on the Japanese economy of higher oil prices. But it bounced back in the second half of the month, posting figures that indicated a continuation of more favourable economic trends for the archipelago. In June, anticipation of gradual tightening of US monetary policy along with better prospects for growth and a sizeable drop in oil prices led to higher stocks on Wall Street. Economic recovery in the euro zone in a stable monetary environment was deemed likely to continue for the rest of 2004. Similarly, the NIKKEI evolved very positively as good economic statistics were confirmed and especially as fears about radical slowing of Chinese growth turned out to be unfounded. Starting in July, the main stock markets were once again on a downturn as signs of slower US economic growth appeared, despite higher quarterly figures for a large 25 number of companies. Stock indexes were penalised by higher oil prices and uncertainty about prospects for earnings at high technology companies. In September stock markets evolved in differing ways, with European indexes on the rise, the NIKKEI going down, and more or less mixed trends on US markets, given the differing expectations about corporate profits and the varying impact of higher oil prices on the main stock markets. Energy stocks contributed to higher stock market indexes in Europe and the United States, but the Japanese market suffered considerably from record high oil prices. There were strong advances on stock markets over the last two months of the years, building on the dip in oil prices, which was beneficial for all sectors except oil companies. Similarly, mining and steel companies were penalised by lower prices for metals, after several months of increases. Higher stock market indexes were also influenced by expectations of good results at companies listed on the stock market and the rebound in mergers and acquisitions, especially in the technology sector. In Japan, stocks took advantage of lower oil prices and better performance recorded by Japanese banks, which cleared up finances and obtained better credit ranking from the financial rating agency Moody’s for several of them. Overall, the main international stock market indexes closed for the year at a higher level than the year before. The Dow Jones was up 3.1% over the previous year to 10,783.01 vs. 10,453.92 a year earlier. The NASDAQ index rose from 2003.37 to 2175.44, an increase of 8.6%. Compared to end 2003 levels, the CAC 40 and NIKKEI indexes gained 7.4% and 7.6% respectively. B. THE BOND MARKET With economic growth in the United States on the rise and oil prices soaring, the Federal Reserve in June 2004 launched a new cycle of tighter monetary policy, with five increases in its main key interest rate. Thus the Fed Funds rate rose from 1% in June to 2.25% in December. The Federal Reserve’s objective was to anticipate the risk of renewed inflation in a context of higher depreciation of the dollar, rising oil prices and slower growth in productivity. But the cycle of tighter money did not impact on long-term interest rates. In effect, ten-year US Treasury bond yields did not fluctuate much during the second half of 2004. Furthermore, this phase of higher short-term rates was accompanied by a downturn in long-term rates, with the ten-year US Treasury bond yield dropping from 4.90%, its high for the year recorded on 14 May, to less than 4% toward the end of October. This was influenced by the convergence of several factors, notably: - greater credibility for the Federal Reserve, which managed to avoid a flare-up of inflation; - ongoing flows of major portfolio investment to the United States, especially from Asian countries where foreign currency reserves are denominated largely in US dollars; - growing demand for long-term assets on the part of pension funds and insurance companies;
26 - market conviction that the Federal Reserve would tighten monetary policy at a measured pace.
On the other hand, long-term rates for the euro since March 2004 do not seem to be influenced by trends in US yields, with a gap that continued to widen, reaching 90 base points at the end of the year in favour of the US currency. The clearly downward trend in European yield rates can be explained mainly by the growth differential between the United States and the euro zone, the stability of Central European Bank monetary policy, and the greater attraction of European issues, given the ongoing increase in the value of the euro. Market expectations counted on a deepening gap between American and European long-term US interest rates, on the strength of ongoing tightening of US monetary policy in conjunction with the ECB’s stable policy. In Japan, ten-year yields remained stable over 2004, except for June and July, when there was some tension between long-term and ten-year rates, exceeding at times the bar of 1.90%, compared to a range of between 1.20% and 1.50% for the rest of the year. This short-lived period of pressure on Japanese rates came after signs appeared of improved economic prospects for the country. Japanese yields closed for the year at about the same level as they began, in a context of recovery at a slower pace than initially foreseen and the continuation of short-term rates at nil levels. TEN-YEAR YIELD OF GOVERNMENT BOND ISSUES IN THE MAIN CURRENCIES (In billion $US) Dollar Euro Yen Pound sterling Closure 2003 4.25% 4.29% 1.36% 4.77% Closure 2004 4.22% 3.69% 1.43% 4.54% Variation in base point - 3 - 60 + 7 - 23 Highest 2004 4.87% 4.43% 1.90% 5.24% Lowest 2004 3.69% 3.55% 1.19% 4.45% Source : BIS.
27 C. THE DERIVATIVES MARKET 1. Organised markets Organised and over-the-counter markets for derivative products continued to grow in 2004, recording a substantial increase in the volume of transactions. This was due to greater aversion on the part of investors to market risks, notably those linked to interest rates, after the start of a new cycle of Federal Reserve hikes in key rates, as well as exchange rates, in the context of ongoing depreciation of the US dollar. After increasing by 26% in 2003, the volume of processed contracts (futures and options) increased by 30.8% in 2004, up from 874,284 billion dollars in 2003 to 1,143,928 billion in 2004. This increase held for the three major categories of risk : rate contracts, index contracts, and foreign currency contracts. The notional amount of rate hedging transactions (futures and options contracts), which is the main component of organised markets with 91% of global volume, increased to 1,043,268 billion dollars vs. 794,127 billion a year earlier, up 31.4%. This increase involved both short and long-term hedging instruments, with futures contracts clearly predominating over option contracts. These two hedging instruments remained the two main negotiated derivative products on organised markets in 2004, with respective shares of 73% and 27% of processed volume. It should be noted that short- term hedging instruments remained fairly predominant (futures contract on the EURIBOR, LIBOR and EUROYEN), with a share of about 80% of global volume on these markets compared to almost 11% for long-term hedging instruments. Activity on the short-term compartment was much more dynamic over the first half of the year, a period during which speculation about a change in US monetary policy was at its peak. On the other hand, the volume of activity on this compartment was down sharply in the second half, especially since uncertainty about the Fed’s intentions for monetary policy gradually came to an end. On the other hand, activity on the long-term market was more dynamic over the second half of the year, influenced by greater uncertainty concerning future trends for long-term yields, thus generating new needs for hedging on the part of portfolio investors. The volume of trade in hedging instruments on indexes recorded an increase of 23.4% in 2004, up from 75,727 billion to 93,453 billion dollars. Dynamic activity on this segment of organised markets is really the result of the increase in underlying indexes, notably in the United States, Asia and the Pacific and, to a lesser degree, Europe. But the share of transactions in this category of hedging instruments represented only 8% of global volume of trade on organised markets in 2004. The share of hedging instruments went up considerably, by some 63% from 2003 to 2004, rising from 4404 billion to 7207 billion dollars. This increase was influenced by the impact of considerable demand for hedging, in the face of high volatility in euro/dollar and dollar/yen parity. The share of hedging instruments against foreign exchange risks remained fairly weak, less than 1% of negotiated global volume on organised markets.
28 VOLUME OF EXCHANGE ON ORGANISED MARKETS Notional value Descriptions (in billion US dollars) 2003 2004 Rate contracts 794,127 1 043,268 Currency contracts 4,430 7,207 Index contracts 75,727 93,453 Total 874,284 1 143,928 Source : BIS. 2. Over-the-counter markets Over-the-counter markets showed a more moderate evolution than organised markets over the first half of 2004. The total notional outstanding balance came in at 220,000 billion dollars at the end of June, 12% more than the figure at the end of December 2003. But this trend was irregular throughout the year. In effect, the increase in the notional outstanding balance was gradual, with transactions carried out on this type of market giving rise each time to the signature of new contracts. Thus to manage counterpart risk, over-the-counter agents used sureties and bilateral compensation agreements. Hedging against interest rate risks, which represents more than 87% of turnover on this market, was up by about 16%. Foreign currency contracts (the second category of market risks) also went up, overall, by about 10%, with a jump of 42% for options. Stock instruments, characterised by sluggish activity earlier, increased by 19%, while merchandise contracts were down 10%. TRENDS IN OUTSTANDING BALANCE OF OVER-THE-COUNTER DERIVATIVE INSTRUMENTS (In billion US dollars) Notional value Description End of June End of December End of June 2003 2003 2004 A. Foreign Currency Instruments 22,071 24,475 26,997 Forward and foreign exchange swaps 12,332 12,387 13,926 Swap contracts 5,159 6,371 7,033 Options 4,580 5,717 6,038 B. Rate instruments 121,799 141,991 164,626 Forward 10,271 10,769 13,144 Swap contracts 94,583 111,209 127,570 Options 16,946 20,012 23,912 C. Stock instruments 2,799 3,787 4,521 Future and swap contracts 488 601 691 Options 2,311 3,186 3,829 D. Instruments on goods 1,040 1,406 1,270 Gold 304 344 318 Others 736 1,062 952 Future and swap contracts 458 420 503 Options 279 642 449 E. Others 21,949 25,508 22,644 Overall Total 169,658 197,167 220,058 Source : BIS.
29 IV. THE WORLD COMMODITIES MARKET
Commodity prices continued to soar in 2004 for the second straight year, affected by stronger international demand as the pace of economic activity picked up virtually everywhere, but especially in the United States, Japan, the euro zone and a number of Asian emerging economies such as China. Consequently, crude oil and most other commodity prices, especially for industrial raw materials, were up significantly, reaching record highs in a number of cases. Thus the general price index for commodities (base 100 in 2000) was up 26.6% vs. 13.1% the year before and virtual stagnation in 2002. Exclusive of energy, this increase comes to 18.6%, well above the previous year’s 7%. Price increases were particularly high for metals (36.5% vs. 12%) and foodstuffs (14.8% vs. 5.9%).
COMMODITY PRICE INDEX (IN %) 35 35
25 25
15 15
5 5
-5 -5
-15 -15 1999 2000 2001 2002 2003 2004 Global index Global index exclusive of energy Agricultural commodity index
While higher prices were beneficial to producing countries, they increased production costs and thus created inflationary pressure and lower corporate profits ; a situation corroborated by a sharp drop in indexes on the main international stock markets. The pace of economic growth began to flag in the second half of 2004 in most industrialised countries, with 2005 prospects for world growth and employment less favourable than in 2004. A. FOODSTUFFS Under the combined influence of higher demand for a number of products and relatively low inventories, overall world prices for foodstuffs went up significantly over the first half of 2004. There was then some relief for a number of items like wheat, corn, vegetable oil and cocoa, in line with higher production. World cereal production amounted to 2252 million tons in 2004, 8.3% more than the year before, compared to 2.5% from 2002 to 2003, involving all cereals but especially wheat and secondary cereals.
30 CEREAL WORLD PRODUCTION (In millions of tons) Variation in % Description 2002 2003 2004 2003/2002 2004/2003 Total 2,028.9 2,079.2 2,252.0 2.5 8.3 - Wheat 574.0 557.5 624.1 -2.9 11.9 - Secondary Cereals 883.9 935.5 1,019.4 5.8 9.0 of which : *Corn 602.0 640.1 705.3 6.3 10.2 *Barley 136.4 141.0 155.0 3.4 9.9 - Rice 571.0 586.2 608.5 2.7 3.8 Source : Food and Agriculture Organisation (FAO) Wheat production increased by about 624 million tons, up by 11.9% over the previous year’s level. This was made possible by the good weather prevailing in the main producing countries, notably China, India, France and Germany, where production was up 6%, 11%, 30% and 32% respectively. Prices were up an average $157 a ton in 2004, an increase of 7.5% vs. -2% a year earlier. This increase would have been even higher if prices had not dipped in summer the wake of bigger harvests and slower growth in demand.
MONTHLY TRENDS IN WORLD WHEAT PRICES (USD / Ton) 200 200
175 175 2003
150 150 2004
125 125
100 100 Jan . Feb . March Apr . May June July August Sept . Oct . Nov . Dec .
Production of secondary cereals remained predominant with about 45% of total, amounting to over 1019 million tons, up 9% vs. 5.8% in 2003. This increase was most marked for corn (10.2%) and barley (9.9%), especially in the United States. Prices for these products pretty much followed the same trend as wheat, with corn prices ranging from $123 per ton in June 2004 to $104 the following month and $96 in December. In terms of annual averages, prices were up 6.7% vs. 12.9% in 2003. World rice production was up a moderate 3.8% in 2004, compared to 2.7% the year before. With demand strong, this meant that prices were about 6% higher, after a 15.6% drop a year earlier. This increase occurred mostly at the start of the year then again in October, following lower harvests in a number of producing countries and subsequent low surplus for export. Thus prices rose from $270 per ton at the end of 2003 to $305 per ton at the end of 2004 : +13% vs. -15.9% respectively.
31 As for oil-yielding plants, world oil production was up in 2004 at virtually the same 6.7% as in 2003, to about 130 million tons. With higher demand from Asian countries, a prosperous market for oil (especially China where imports account for about 20% of the world total), prices for these products continued to rise overall despite lower prices starting in July when supply exceeded demand.
VEGETABLE FATS WORLD PRODUCTION (In millions of tons) Variation in % Description 2002 2003 2004 2003/2002 2004/2003 Total 114.5 122.0 130.2 6.6 6.7 Of which : - Soy oil 26.7 30.0 33.9 12.4 13.0 - Palm oil 25.7 28.1 29.7 9.3 5.7 - Peanut oil 5.2 5.8 ... 11.5 ... - Olive oil 2.4 2.7 2.3 12.5 -14.8 Source : Food and Agriculture Organisation (FAO) Soy oil prices increased an average 10.4% in 2004 compared to 22.2% the year before. This slower pace of growth was due to the ongoing increase in world production (13% vs. 12.4% in 2003). Prices for palm oil followed a similar trend (6.1% vs. 13.6% a year earlier), at an average of $470 per ton vs. $443 a year earlier. Prices for peanut oil, on the other hand, after a sharp increase in 2003 (81.7%), were down 7.3% in 2004, in the wake of lower demand. This drop took hold starting in May, with prices fluctuating between a maximum of $1237 per ton in April and a minimum of $1113 per ton in December. As for olive oil, demand continued to grow at a fairly brisk pace in 2004, especially in developed countries, exceeding supply as world production dipped by almost 15%. Thus prices rose over the first eight months of the year (by 30% compared to the figure for the same period in 2003) before dipping slightly. For Tunisia, export prices for olive oil expressed in dinars rose by 17% in 2004 vs. 15.5% the year before. World sugar prices were up 8.5% in 2004, after falling by 1.3% the year before, following the sharp rise recorded in the second half, occasioned in particular by significantly higher imports by India, where there was a drop in production. Higher demand for coffee despite increased production, especially in the Ivory Coast, led to a sizeable jump in prices from $1,430 per ton in 2003 to $2,261 per ton in 2004, a 58.1% increase. In terms of annual averages, the rate of increase rose over this time frame from 6.1% to 25.1%. Cocoa prices on the other hand continued to fall at a faster pace than the year before (-13.3% vs. -1.3%), with demand less vigorous than the fairly stable status of world production. As for tea, prices rose moderately, by 2% in 2004 vs. 8.4% the year before, given that world production remained at about 3.2 million tons while demand grew more slowly in Asian countries.
32 AVERAGE PRICES OF FOODSTUFFS (In dollars per ton) Averages for December Annual averages Products Places of quotation Variat. Variat. 2003 2004 2004/2003 2003 2004 2004/2003 in % in % Wheat Gulf Ports U.S. 166 154 -7.2 146 157 7.5 Corn Gulf Ports U.S. 112 96 -14.3 105 112 6.7 Rice U.S.(New Orleans) 270 305 13.0 255 270 5.9 Oil : .Soya bean Dutch Ports 640 552 -13.7 556 614 10.4 .Palm Malaysia/North Europe 511 422 -17.4 443 470 6.1 .Peanut Europe 1,142 1,113 -2.5 1,250 1,159 -7.3 .Olive1 Milan 3.70/ 3.05/ 3.82 3.17 Sugar Brazil 140 194 38.6 153 166 8.5 Coffee New York 1,430 2,261 58.1 1,412 1,766 25.1 Cocoa London & New York 1,647 1,484 -9.9 1,753 1,520 -13.3 Tea London 2,052 2,018 -1.7 1,943 1,982 2.0 Source: International Financial Statistics (IMF) B. INDUSTRIAL RAW MATERIALS Under the influence of the marked increase in demand thanks to greater industrial activity in developed countries along with low stocks, international prices for industrial raw materials (except cotton) were up sharply in 2004. After a steep 37.2% increase in 2003, average prices for cotton were down by 2.3% in 2004, as supply increased in the wake of a 29.4% jump in world production in the main cotton-growing countries. Thus prices fell from $1,622 per ton at the end of 2003 to $1,071 at the end of 2004. AVERAGE INDUSTRIAL RAW MATERIALS PRICES (In dollars per ton) Averages for December Annual averages Places of Products Variations Variation quotation 2003 2004 2004/2003 2003 2004 2004/2003 in % in % Cotton Liverpool 1,622 1,071 -34.0 1,399 1,367 -2,3 Natural rubber Singapore 1,227 1,212 -1.2 1,055 1,305 23.7 Copper London 2,202 3,140 42.6 1,779 2,864 61.0 Tin London 6,058 8,474 39.9 4,890 8,481 73.4 Zinc London 977 1,182 21.0 828 1,048 26.6 Lead London 690 972 40.9 514 882 71.6 Phosphate Casablanca 38 42 10.5 41 41 0 Source: International Financial Statistics (IMF) Inversely, natural rubber prices continued to rise in 2004 (23.7% in terms of averages vs. 37% the year before), to $1,305 per ton, as increased production (6.4% vs. 5.4% in 2003) was not enough to keep up with strong demand. Prices for base metals were up sharply, occasionally hitting record highs as demand grew worldwide, especially in China, and as speculation flared up in light of only moderate increases in supply.
1 Prices in U.S dollar for a litre of premium virgin oil, obtained by applying crossed exchange rates (euro, Tunisian dinar and U.S. dollar) and as per the magazine “Marchés Tropicaux”. 33 Copper prices rose almost 43%, from $938 per ton at the end 2003 to about $3,140 at the end of 2004, given the deficit in supply. In terms of yearly averages, there was a 61% increase vs. 14% in 2003.
MONTHLY TRENDS IN WORLD COPPER PRICES (USD / Ton)
3000 3000 2004
2500 2500
2000 2000 2003
1500 1500 Jan . Feb . March Apr . May June July August Sept . Oct . Nov . Dec .
Consumption of tin grew at a slightly faster pace than production: (7% vs. 6%). With inventory down, this meant soaring world prices, nearing their highest level in 15 years, averaging $9,392 per ton in April. The average price for the year as a whole was up by 73.4% vs. 20.4% in 2003 to $8,481 per ton.
Lead prices rose sharply in 2004, by 71.6% vs. 13.7% the year before. This was also the case for zinc, up an average 26.6% vs. 6.3% in 2003 to $1,048 per ton.
On the other hand, phosphate prices rose only slightly, especially in May 2004, up from $38 in December 2003 to stabilise at $42 per ton. This increase was due mainly to higher demand from Asian countries. The average price for the year as a whole came in at $41 per ton, compared to a 2.5% increase in 2003.
C. CRUDE OIL
Despite a higher level of supply exceeding demand (3.4 million and 2.6 million barrels a day respectively), crude oil prices in 2004 soared to record highs. Light American oil, in particular, reached a high of $55.67 per barrel on 27 October, with the barrel of Brent right behind at $51.94.The monthly average price for a barrel of Brent went up from $29.88 in December 2003 to $49.77 in October 2004, then dropped somewhat to $41.38 at yearend. In terms of yearly averages, the price of a barrel of Brent was up 32.7% or $9.44 to $38.29, compared to 15.5% ($3.88) a year earlier.
34 TRENDS IN WORLD SUPPLY AND DEMAND FOR CRUDE OIL (In millions of barrels per day) Variation in % Description 2002 2003 2004 2003/2002 2004/2003 Oil supply 76.9 79.6 83.0 3.5 4.3 of which: OPEC 28.8 30.7 33.0 6.6 7.5 Outside OPEC 48.1 48.9 50.0 1.7 2.2 Oil demand 78.0 79.8 82.4 2.3 3.3 of which: OECD 48.1 48.9 49.5 1.7 1.2 Outside OECD 29.9 30.9 32.9 3.3 6.5 Difference : supply - demand -1.1 -0.2 0.6 Source: Magazine “Le Pétrole et le gaz arabes” Soaring oil prices were due in particular to ongoing economic growth worldwide, leading to greater demand. This was especially true outside the OECD, mainly in China, the world’s number 2 consumer after the United States. The situation was further complicated by other factors such as low inventories in industrialised countries, geopolitical tension especially in the Middle East, adverse winter weather in Europe and North America, as well as speculation on world oil markets and depreciation of the dollar.
MONTHLY TRENDS IN THE PRICE OF BRENT ON WORLD OIL MARKETS (USD per barrel)
50 50
45 45 2004 40 40
35 35
30 30 2003 25 25
20 20 Jan . Feb . March Apr . May June July August Sept . Oct . Nov . Dec .
D. THE EFFECTS OF MAIN COMMODITY PRICES ON TUNISIA’S BALANCE OF TRADE Higher prices for commodities worldwide in 2004 had for the most part a negative impact on Tunisia’s balance of trade. A sampling of products representing about 23% of exports and 28% of imports shows a negative effect on the balance of trade, with a worsening of about 313 MTD (8.7%) of the global deficit. Imports were up a sizeable 731.6 MTD, especially for diesel oil (139.6 MTD), cast iron, iron and steel (130.5 MTD), crude oil (77.4 MTD), plastic raw materials (62 MTD), soft wheat (48.9 MTD), natural gas (40.4 MTD) and copper and worked products (40.1 MTD). This was partially lessened by the 418.5 MTD increase in exports, mainly crude oil (193 MTD) and olive oil (102.9 MTD).
35 IMPACT OF PRICE TRENDS FOR THE MAIN COMMODITIES ON TUNISIA’S BALANCE OF TRADE (Quantities in thousands of tons ; prices in dinars per ton) 2 0 0 3 2 0 0 4 Variations Unit Value in Unit Value in Unit Impact Quantity Quantity price MTD 1 price MTD 1 price in MTD Exports 1,679.8 2,746.9 418.5 Olive oil 2,865 39.9 114.3 3,352 211.2 708.0 487 102.9 Seafood 9,777 14.8 144.7 10,079 15.2 153.2 302 4.6 Dates 2,566 37.1 95.2 2,601 40.4 105.1 35 1.4 Cereal flours 333 11.1 3.7 440 14.1 6.2 107 1.5 Crude oil 265 2,414.9 640.2 334 2,797.8 935.5 69 193.0 Lime phosphate 38 865.3 33.1 37 661.2 24.6 -1 -0.7 Triple superphosphate 184 774.9 142.8 212 873.5 185.3 28 24.5 DAP 228 1,304.8 297.3 287 1,219.1 349.5 59 71.9 Phosphoric acid 183 863.4 158.3 205 1,103.0 225.6 22 24.3 Cement 60 831.5 50.2 55 978.2 53.9 -5 -4.9 Imports 3,577.3 4,518.7 731.6 Dairy milk 1,436 29.1 41.8 1,664 31.8 52.9 228 7.3 .Meat 3,357 1.4 4.7 3,444 9.9 34.1 87 0.9 Hard wheat 265 472.4 125.1 264 102.0 26.9 -1 -0.1 Soft wheat 178 773.6 137.9 230 940.4 216.2 52 48.9 Corn 167 606.0 101.2 208 723.3 150.2 41 29.7 Barley 149 75.1 11.2 166 210.0 34.9 17 3.6 Coffee 1,054 5.6 5.9 1,252 13.9 17.4 198 2.8 Tea 1,587 9.2 14.6 1,500 9.6 14.4 -87 -0.8 Sugar 269 326.2 87.7 270 368.2 99.4 1 0.4 Vegetable oil 690 200.4 138.3 789 187.2 147.7 99 18.5 Crude oil 287 1,199.3 343.6 357 1,105.0 394.8 70 77.4 LPG 2 396 322.6 127.8 486 328.9 159.7 90 29.6 Fuel oil 2 207 728.8 150.9 200 759.8 151.6 -7 -5.3 Gas oil 2 353 1,161.2 410.2 457 1,342.3 613.2 104 139.6 Kerosene 2 371 227.5 84.3 512 217.5 111.3 141 30.7 Natural gas 126 814.3 102.8 186 673.0 125.5 60 40.4 Non-refined sulphur 72 1,833.2 131.2 86 1,766.5 151.2 14 24.7 Ammonia 249 407.6 101.5 321 340.8 109.3 72 24.5 Wood & worked products 521 309.7 161.2 511 338.1 172.8 -10 -3.4 Bulk cotton 1,567 20.3 31.8 1,886 22.8 43.0 319 7.3 Paper pulp 623 60.0 37.4 671 73.2 49.1 48 3.5 Natural rubber 1,776 14.3 25.4 1,986 14.3 28.4 210 3.0 Raw tobacco 3,386 7.0 23.7 3,300 8.0 26.4 -86 -0.7 Plastic raw materials 1,277 232.5 296.9 1,548 228.8 354.2 271 62.0 Plastic worked products 5,363 53.5 286.9 5,648 60.0 338.9 285 17.1 Cast iron, iron & steel 451 939.1 423.5 561 1,186.3 665.1 110 130.5 Copper & worked products 2,975 31.8 94.6 4,167 33.6 140.0 1192 40.1 Aluminium & worked products 4,424 17.0 75.2 4,395 20.5 90.1 -29 -0.6 Overall effect -313.1 Sources : National Statistics Institute, STIR and BCT
1 Figures are rounded off and comply with the data in the section pertaining to foreign trade. 2 Imports by STIR.
36
THE DEVELOPMENT
OF TUNISIA’S ECONOMIC ACTIVITY
GLOBAL TRENDS IN ECONOMIC ACTIVITY
World economic activity in 2004 was underpinned by strong economic performance in the US and, to a lesser degree, in Japan, by progress in a number of emerging economies, particularly China, and faster growth in the European Union. The ensuing increase in world demand brought on an unprecedented jump in crude oil prices, which reached record highs toward the end of October. There were also higher prices for most commodities, but to a lesser degree. While these trends were certainly beneficial for oil producing countries, they caused economic overheating to a greater or lesser degree elsewhere in the world, aside from financial difficulties on both the micro and macroeconomic scales. Despite the increasingly difficult international environment, strongly influenced by the final phasing out of the multifibre agreements at the beginning of 2005 that exposes the textile/clothing sector to greater international competition, Tunisia was able to maintain economic growth in 2004. Most sectors and areas of activity (notably industry, tourism, transport and foreign trade) improved markedly, generating an economic growth rate of 6% in real terms, compared to 5.6% the year before, despite slower growth in agriculture and fishing : 10% vs. 21.5%. Aside from this sector, the growth rate rose, up from 3.6% in 2003 to 5.5% in 2004. Growth in manufacturing industries rose from 0.9% to 5.1% (especially agrofood industries, up from 2.5% to 12.2%), mechanical and electrical industries from 6.1% to 8%, and market services from 4.3% to 7.7%. Advance in the latter was further boosted by growth in tourism (up from 2.3% to 8.2%), transport (up from 2.2% to 7%) and especially communications (up from 19.5% to 20.5%). But the textiles/clothing and leather/footwear sector experienced a slightly negative growth (-0.4% vs. -3.7% in 2003), influenced by growing foreign competition. The achieved economic growth was five times faster than population growth (about 1.1%), thus yielding a major improvement in per capita national product, which rose from 3,123 dinars in 2003 to 3,380 dinars in 2004. This progress was accompanied by higher investment. Gross fixed capital formation (GFCF) amounted to 7,834 MTD, up 4% after a slight 1% drop in 2003, yielding (respectively) an investment rate of 22.3% and 23.4% of GDP. As in the past, the majority of investments (about 56%) were made by the private sector, taking over from the public sector to become the main motor for economic growth. There was overall renewed growth in GFCF, but the pattern varied from one sector to another. In effect, new growth in investments was particularly strong in agriculture and fishing (11.3% vs. -5.1% in 2003), mechanical and electrical industries (15.6% vs. -11.1%) and energy (15.4% vs. -12.7%), while there were more or less sharp drops for building materials/ceramic/glass industries (-7.1% vs. 9.5% a year earlier), textiles/clothing and leather/footwear (-5.8% vs. 3.2%) and mining (-7.4% vs. -12.9%). Foreign direct investment (FDI) was up 5.9% in 2004 after falling by 35.6% the year before, amounting to about 796 MTD. The increase of investment in manufacturing
38 industries (10.2%) which took advantage of high share of the total (39.2% vs. 37.6% in 2003) partly offset the drop in the sector of energy. National savings, under the influence of economic growth, increased by 10.5% (compared to 7.4% in 2003) to 7,845 MTD. The savings rate, expressed as a ratio of gross national available income (GNAI), rose from 21.8% to 22.1% from one year to the next. These stable resources were high enough to finance all investment, compared to about 94% in 2003. In this context employment improved markedly, with 74,400 new jobs in fishing and non-agricultural activities, compared to 65,000 in 2003. The rate of coverage of additional job demand thus rose from 78.4% to more than 91% and the unemployment rate dipped from 14.3% to 13.9%. There was better supply of various consumer goods to the domestic market, particularly sensitive food products, starting the second half of 2004, with an accompanying slowdown in the rise of retail prices. This largely compensated for price hikes over the early months of the year. The inflation rate for the year as a whole was held to 3.6% vs. 2.7% for each of the two previous years. The brisker pace of price increases for food products (5% vs. 3.4% in 2003), influenced by low supply of a number of commodities during periods of high consumption, was pretty much compensated by moderate increases in prices for other products (2.8% vs. 2.3%). Although the inflation differential widened with a number of trading partners like France and Germany, Tunisia maintained a favourable standing against competitors or emerging economies like Egypt, Turkey and Argentina. In the area of external payments, 2004 trade grew both for exports (16.6%) and imports (13%). This compares to 6.1% and 3.9% respectively a year earlier. Consequently, given higher income from tourism (up 20.3% vs. -5.8% in 2003) and workers remittances (up 10.7% vs. 5.8%), the current deficit continued to fall, down from 941 MTD in 2003 to 691 MTD in 2004, while share of GDP moved from 2.9% to 2%. Following the major drawings made against medium and long-term external lines of credit, net inflows of capital increased from 1,477 MTD to 1,952 MTD, contributing (along with the lower current deficit) to a higher surplus in the general balance of payments, up from 496 MTD to 1,213 MTD. Thus the level of net assets in foreign currency was up markedly, amounting to 4,733 MTD in 2004, the equivalent of 107 days of imports, compared to 3,503 MTD and 90 days at the end of 2003. But along with these positive developments was a slight increase in the parameters of external debt, with the rate of indebtedness up from 53.5% to 54.2% of GNAI and a debt service ratio of 14.1% of current external income, compared to 13.1% in 2003. Monetarily, the M3 aggregate had risen by the end of 2004 by 10.3% over the yearend 2003 figure, compared to 6.3% a year earlier. In terms of monthly averages, the rate of increase was just 8.6% vs. 9.1% for nominal GDP, leading to a drop of 0.3 percentage point of the economy liquidity rate, defined as a ratio between the average level of M3 and GDP at about 58.6%.
39 Faster growth of money supply is the result of progress in all its counterparts. Influenced by the marked improvement in the balance of payments, net external assets were up by 848 MTD vs. 370 MTD a year earlier. Net claims on the State bounced back by 536 MTD (16.3%) vs. a drop of 103 MTD (3%) a year earlier, while financing to the economy grew at a sustained pace of 5.3% vs. 4.6%. In the area of public finances, tax revenue was up 9.4% in 2004 to 7,254 MTD and the tax bite amounted to 20.6%. Non-tax revenue was up significantly (22.9% vs. -16.4% in 2003), due in particular to increased revenue from energy. State expenditure increased by about 17% over 2003, amounting to 12,996 MDT, 45.5% of which was for Administration operating costs, up 10.8%. Thus the budget deficit, net of debt principal redemption, amounted to just 2.3% of GDP in 2004 vs. 3.2% the year before.
40 TRENDS IN TUNISIA’S MAIN ECONOMIC INDICATORS (In MTD unless otherwise indicated) Variations in % 2001 2002 2003 2004 Description 2003/02 2004/03 Accounts of the Nation -GDP (in constant 1990 prices) 18,031 18,332 19,350 20,520 5.6 6.0 *GDP exclusive of agriculture & fishing 15,794 16,341 16,931 17,859 3.6 5.5 *Added value in agriculture & fishing 2,237 1,991 2,419 2,661 21.5 10.0 -GDP (in current prices) 28,757 29,933 32,212 35,228 7.6 9.4 -GDP deflator (1990=100) 159.5 163.3 166.5 171.7 2.0 2.9 -GNP per capita (in dinars) 2,837 2,922 3,123 3,380 6.9 8.2 -Gross national available income (GNAI) 28,834 30,130 32,498 35,618 7.9 9.6 -Total national consumption 22,047 23,520 25,397 27,628 8.0 8.8 *Public consumption 4,486 4,793 5,172 5,562 7.9 7.5 *Private consumption 17,561 18,727 20,225 22,025 8.0 8.9 -Av.propensity to consume (consump./GNAI) in %1 76.5 78.1 78.1 77.5 0.0 -0.6 -Gross national savings 6,787 6,610 7,101 8,031 7.4 13.1 -National savings rate (in % of GNAI)1 23.5 21.9 21.8 22.5 -0.1 0.7 -Gross fixed capital formation (GFCF) 7,542 7,607 7,531 7,942 -1.0 5.5 *Public sector 3,356 3,423 3,314 3,494 -3.2 5.4 *Private sector 4,186 4,184 4,217 4,448 0.8 5.5 -Investment rate (in % of GDP)1 26.2 25.4 23.4 22.5 -2.0 -0.9 Prices -Industrial sale price index (base 100 in 1990) 144.5 148.2 151.8 157.5 2.4 3.8 -Consumer price index (base 100 in 2000) 102.0 104.8 107.6 111.5 2.7 3.6 . Foodstuffs 102.0 106.1 109.7 115.2 3.4 5.0 . Other than agrofood products & services 102.0 104.0 106.4 109.4 2.3 2.8 Job market -Jobs created (in thousand jobs)2 69.3 62.6 65.4 74.4 3.8 14.5 -Coverage rate of additional demand (in %)1 91.2 76.4 78.4 91.3 2.0 12.9 -Unemployment rate in %1 15.0 14.9 14.3 13.9 -0.6 -0.4 External payments -Rate of coverage (exports/imports in %)1 69.6 72.2 73.7 75.5 1.5 1.8 -Balance of trade deficit (FOB/CIF) 4,161 3,762 3,696 3,910 -1.8 5.8 -Tourism earnings 2,341 2,021 1,903 2,290 -5.8 20.3 -Workers’ remittances 1,334 1,522 1,611 1,783 5.8 10.7 - Current deficit3 1,209 1,060 941 691 -119 -250 . In % of GDP1 4.2 3.5 2.9 2.0 -0.6 -0.9 -Net inflows of capital3 1,618 1,307 1,477 1,952 170 475 - Overall BOP balance3 +377 +200 +496 +1,213 296 717 -External debt service ratio (in %)1 13.3 14.9 13.1 14.1 -1.8 1.0 -Rate of external indebtedness (in % of GNAI)1 52.1 53.5 53.4 54.2 -0.1 0.8 Public finances -Tax ratio (in % of GDP)1 21.6 21.5 20.6 20.6 -0.9 0.0 -Equipment and loan granting expenditure 2,500.5 2,505.1 2,596.1 2,615.8 3.6 0.8 -Budget deficit in % of GDP1/6 3.5 1.9 3.2 2.3 1.3 -0.9 -Total State indebtedness/GDP (in %)1 61.9 61.0 60.0 58.5 -1.0 -1.5 Money and its counterparts4 - M3 Money supply 17,402 18,302 19,457 21,466 6.3 10.3 .Liquidity rate of the economy (M3/GDP) in % 1 56.8 59.1 58.6 58.6 -0.2 -0.3 -Net assets on abroad 3 1,597 1,909 2,279 3,127 370 848 of which : .Net assets in foreign currency 3 2,810 3,011 3,503 4,733 492 1,230 .In day of imports5 74 80 90 107 10 17 -Net claims on the State3 3,472 3,391 3,289 3,825 -102 536 -Financing of the economy 20,018 20,954 21,911 23,083 4.6 5.3 Source : Central Bank of Tunisia, Ministry of Development & International Cooperation & Ministry of Finances & INS 1) Variations in percentage points. 4) Financial system. 2) In fishing and non-agricultural activities. 5) Variation expressed in days. 3) Variations in MTD. 6) Exclusive of debt redemption &including privatisation resources.
41 I. AGRICULTURAL ACTIVITY
Ongoing implementation of the sector-related strategy for agriculture and fishing (outlined in the Xth Development Plan) helped the livestock sub sector not only to regain its footing after years of drought but also to rebuild buffer stocks for a number of sensitive products. The goal of these efforts was to stabilise prices and to provide regular supply of the local market. The good weather prevailing in 2004 was certainly favourable for pursuing previously launched initiatives targeting improvement of the overall environment and achievement of planned results. These objectives were to be reached through investment promotion, mobilisation and exploitation of hydraulic resources, enhanced research and extension work, and attainment of self-sufficiency in food. The national plan to promote productivity in the sector included new mesures, notably the clearing up of legal titles for agricultural land and measures to guard against the breaking up and abandonment of a number of farms. As for upgrading of the sector, agricultural services continued to improve, with better results from research and extension institutions and interprofessional groups called on to play an ever-stronger supervisory and support role for production and exports. Development groups in particular received wider mandates in the areas of natural resources’ protection, basic infrastructure, farmers’ supervising, with a view to better yields and promotion of aquaculture techniques. In the area of promotion of private investment, certain terms of the consolidated investment incentives code were revised to extend financial and tax incentives to promising new areas of activity and to support as appropriate the development of cultural techniques. In the same vein, in order to better orient agricultural activities in line with the specific conditions of each region, using very targeted State incentives and appropriate support mechanisms, the initiative to produce regional agricultural maps was finalised and implementation began. In the fishing sector, implementation of the strategy to promote deep-sea fishing production continued along with rationalised exploitation of fishing resources, by means of better distribution of the float in the various zones of production. To encourage a more efficient and competitive agricultural sector, a number of new presidential measures were announced on the occasion of National Agriculture and Fishing Day: - incentives extended to building of silos by farmers to stock and preserve animal feed, in line with the presidential directive launched on 12 May 1995; - drawing up of a legal framework to encourage joint farming under a long term lease, to help avoid situations in which land is abandoned or farmland under-utilised; - establishment of practical, appropriate mechanisms that will constitute a quality system for basic agricultural products, assigning labels of origin that are standardised and recognised worldwide; - execution of a national plan to restructure traditional olive groves and renovate plantations in order to boost productivity;
42 - granting of a subsidy amounting to 50% of the purchase price of citrus fruit plants meant for new zones considered promising. These measures were further strengthened by other incentives announced on two occasions in 2004. Motivated by the desire to ensure a good agricultural season, they included: - the granting of a supplementary loan for the use of inputs; - the maintaining of prices for selected seeds at the same levels as the previous year; - the constitution of a reserve stock of cereal seeds in order to steadily meet the country’s needs for these products; - the granting of aid to small-scale farmers: cereal seeds to 8500 small-scale farmers and nitrogen fertiliser to 30,000 small-scale farmers; - the granting of a premium of 300 dinars per ton of seed potatoes to encourage farmers to plant larger quantities in non-traditional zones; - the drawing up of an action plan to boost recovery in dairy production. These measures, which sought to further promote the sector and enhance its role in development, were helped by the favourable weather enjoyed for two straight years. In effect, rainfall during the 2003-2004 agricultural year exceeded the usual averages in most areas of the country. Harvests were good for the majority of products, creating 10% higher added value in real terms for the sector, compared to 21.5% in 2003. The sector contributed 20.7% (1.2 percentage point) to overall economic growth, compared to 42.1% (2.4 percentage points) a year earlier. Gross fixed capital formation in the sector grew by 11.3% in 2004, after falling the year before by 5.1%. Thus the total came in at 868 MTD, of which more than 49% were invested by the public sector, noting that agricultural hydraulics accounted for more than a half.
AGRICULTURE & FISHING : GROWTH IN ADDED VALUE AND CONTRIBUTION TO ECONOMIC GROWTH (constant prices) 36 60
e
ge 28 30 g a a t t
n n e e
c 20 r 0
in pe 12 e on in perc i rat
-30 t
u h
t 4 rib w -60 Gro -4 Cont -12 -90 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Growth rate in agriculture and fishing Contribution to economic growth
43 Private investment increased from 426 MTD to 445 MTD, 51% of total. Given the higher level of agricultural activity, the balance of trade for food posted a surplus of 185.4 MTD in 2004, following the 328.5 MTD deficit the year before. This performance was due to a sizeable increase in exports, mainly for olive oil : 708 MTD vs. just 114.3 MTD in 2003. Similarly, export of citrus fruit, dates and seafood was up. Imports were marked by a drop in purchases of hard wheat, down from 125.1 MTD in 2003 to 26.9 MTD in 2004.
GROSS FIXED CAPITAL FORMATION (GFCF) AND LOANS TO AGRICULTURE AND 1000 FISHING 1000
900 900
800 800
700 700
MTD 600 600 In 500 500
400 400 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
GFCF agriculture & fishing Medium & long term bank outstanding loans
A. ANNUAL CROPS Annual crops enjoyed good harvests for the second straight year, thanks to good weather and the development of agricultural techniques, especially irrigation and intensive garden crop production. 1. LARGE SCALE FARMING Cereal production was down in 2004, following the record harvest in 2003. Production was higher for most other large-scale crops. a. Cereals 2003-2004 cereal production was marked by the greater surface of land planted in cereals and favourable weather conditions, as well as regular maintenance of fields, especially chemical fertilisation and weeding. CEREALS : AREAS SOWED WITH CEREALS, PRODUCTION AND YIELD Areas sowed with cereals Production (in millions of quintals) Yields (in quintals per ha) (in thousands of hectares) Season Hard Soft 1 Hard Soft 1 Hard Soft 1 wheat wheat Barley Total wheat wheat Barley Total wheat wheat Barley 1997-1998 822 144 480 1,446 10.9 2.6 3.1 16.6 13.3 18.1 6.5 1998-1999 850 148 520 1,518 11.4 2.5 4.2 18.1 13.4 16.9 8.1 1999-2000 857 134 597 1,588 7.1 1.4 2.4 10.9 8.3 10.4 4.0 2000-2001 705 119 437 1,261 9.4 1.8 2.3 13.5 13.3 15.1 5.3 2001-2002 639 117 404 1,160 3.7 0.5 0.9 5.1 5.8 4.3 2.2 2002-2003 794 133 592 1,519 16.4 3.4 9.2 29.0 20.7 25.6 15.5 2003-2004 881 154 608 1,643 14.0 3.3 6.2 23.5 15.9 21.4 10.2 Source : Ministry of Agriculture, Environment and Hydraulic Resources
1 Including triticale. 44 There was abundant rainfall in the autumn, at the beginning of the season, throughout the various cereal-producing regions. An additional 124,000 hectares were planted in cereals, for a total of 1.6 million hectares. This development involved mostly hard wheat (881,000 hectares vs. 794,000 the previous season) and, to a lesser degree, soft wheat (154,000 hectares vs. 133,000). Although there was a 3.6% decrease in land planted in cereals in the north from 2003 to 2004, it increased by 25% in central and southern Tunisia, following major rainfall during planting. After record production of 29 million quintals in 2003, it fell to 23.5 million quintals of which 14 million (about 60% of total) were for hard wheat vs. 56.5% a year earlier. This drop is due to the adverse effect of abundant rainfall during the ripening process in June. But the level of production exceeded the annual average of 13.9 million quintals over the period of the IXth plan. Although yield per hectare in 2004 was lower than in 2003, it was higher than average levels for the period of the previous development plan : 15.9 quintals per hectare on average for hard wheat vs. just 11.8 quintals previously. By governorate, the region of Beja had the best yields of hard wheat, soft wheat and triticale, while the greater Tunis area had the best yields of barley. It should be noted that irrigated cereal plantings and yields remained at the same levels from one season to the next: 80,000 hectares and 34.9 quintals per hectare on average. The Cereals Board and authorised Cooperatives centralised 9.2 million quintals of production, 39% of the total, compared to 12.4 million and 42.8% for the 2002-2003 season. Production prices per quintal for cereal growers remained unchanged for the fifth straight year at 29.5 dinars for hard wheat, 26 dinars for soft wheat and 17 dinars for barley and triticale. TRENDS IN CEREAL PRODUCTION PRICES (In dinars per quintal) 1997 1998 1999 2000 2001 2002 2003 2004 Hard wheat 28.5 28.5 28.5 29.5 29.5 29.5 29.5 29.5 Soft wheat 25 25 25 26 26 26 26 26 Barley 17 17 17 17 17 17 17 17 Triticale 17 17 17 17 17 17 17 17 Source : Ministry of Agriculture, Environment and Hydraulic Resources But despite two years of good harvests, import of cereals was on the rise in 2004, amounting to about 20 million quintals worth 434 MTD, compared to 19.5 million quintals worth 381.9 MTD in 2003, with soft wheat continuing to constitute the major part. Average import prices, denominated in dollars, were up sharply in 2004, in line with higher world prices. Soft wheat prices were up 32.5% and barley prices increased by 22%, with average prices (cost and freight) up to $184.69 per ton of soft wheat and $137.42 per ton of barley.
45 SOFT WHEAT PRODUCTION AND IMPORTS 4000 12000 s l s a l t 3500 a n t i 10000 n u i
q 3000 qu of 8000 2500 of ands s ands u
2000 6000 s o h t hou n 1500 t 4000 n i on i s i t
1000 rt o
uc 2000 p od m I r 500 P 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Production Imports
For the 2004-2005 season, land planted in cereals remained at about the same level as the previous year: 1.6 million hectares, 52% in hard wheat and 37% in barley and triticale. Given the favourable level of rainfall, mainly in the winter and spring, the harvest is expected to come in at levels higher than the 18 million quintals targeted in the 2005 economic budget, which will certainly contribute to lower imports of cereal. TRENDS IN AVERAGE IMPORT PRICES FOR CEREALS (In dollars per ton) Variation in % 2001 2002 2003 2004 2003/2002 2004/2003 Hard wheat 164.36 182.41 202.02 - 10.8 - Soft wheat 124.51 119.25 139.42 184.69 16.9 32.5 Barley 115.11 107.33 112.64 137.42 4.9 22.0 Source : Cereals Board b. Pulses The surface of land planted in pulses remained virtually unchanged for the 2003-2004 season at 66,700 hectares. Most of this land was planted, as in the past, in broad beans and white beans (44,500 hectares), chickpeas (11,000 hectares) and peas (8,900 hectares), with lentils and haricots making up the rest. Production was up 2% overall to about 64,000 tons, half in broad beans (32,100 tons), followed by white beans (15,500 tons) and other pulses. 2. GARDEN CROPS 171,000 hectares of land were devoted to garden crops during the 2003-2004 agricultural season, down about 4000 hectares from the previous season’s level. But total vegetable production, thanks to higher yields, was up 8% to 3.5 million tons, irrespective of kind. Harvests were up for most products, except for artichokes. Tomatoes enjoyed a record harvest of 1,118,000 tons, up 12% over the 2002-2003 season. This development was due more to improved yields rather than to a larger surface of cultivated land. Indeed, average yields per hectare increased from 37 tons in 2002-2003 to 40.2 tons in 2003-2004, a level below that of the main producing countries in the Mediterranean basin.
46 750,000 tons of fresh tomatoes were processed. This is about two thirds of overall production and it yielded more than 126,000 tons of concentrated tomato paste in 2004, compared to 620,000 and 106,000 tons respectively a year earlier. Since there were 8700 tons of carryover stock, total availability of this product amounted to 134,700 tons, about 12,000 tons of which were exported, mainly to Libya. Exports of dried tomatoes almost doubled in 2004, to 1,200 tons. Despite a slight drop in cultivated land (from 20,000 to 19,300 hectares), production of hot peppers increased by 2.4% over the figure for 2003, to 256,000 tons. Processing of 39,400 tons at 27 canning plants at a purchase price of between 150 and 330 millimes per kilogram of hot peppers yielded 18,700 tons of hot pepper paste (harissa) vs. 21,000 tons a year earlier. With a carryover stock of a thousand tons, exports of harissa grew from one year to the next from 5300 to 6200 tons. Land planted in potatoes increased in 2003-2004 to 24,200 hectares. 11,600 hectares were used for seasonal production, 10,100 hectares for late-season and 2500 hectares for early-season production (vs. 2000 hectares a year earlier). This compares to 22,300 hectares for the previous season. Thus production rose by 21% to 375,000 tons, 240,000 for seasonal plantings vs. 310,000 and 145,000 tons respectively a year earlier. Late season production fell considerably, by about 26% to 100,000 tons. Supply was not high enough to cover growing demand, especially during the slack period, leading to import in 2004 of 17,600 tons of table potatoes, compared to 14,200 the year before. A stock of seasonal potatoes was built up to meet consumer demand during the autumn gap, amounting to 38,300 tons of which 23,300 tons were handled by private operators. From just 700 tons in 2003, exports were up to 7700 tons in 2004, mostly because of incentives for exporting to Europe. But this was well below the quota of 18,300 tons granted to Tunisia by the European Union for 2004. GARDEN CROPS (In thousands of tons) 1997 1998 1999 2000 2001 2002 2003 2004 Tomatoes 500 663 930 950 750 810 998 1,118 Peppers 186 189 185 190 214 242 250 256 Melons & watermelons 315 300 350 370 380 411 497 515 Potatoes 289 295 320 290 330 310 310 375 Onions 246 270 241 272 259 257 310 355 Artichokes 24 23 19 17 18 16 13 12 Source : Interprofessional Vegetable Group and Ministry of Agriculture, Environment and Hydraulic Resources Despite the approximately 15% drop in cultivated land, total production of melons and watermelons increased by 3.6% in 2004 to 515,000 tons, thanks to yields that were up from 18.3 tons in 2003 to 22.3 tons per hectare on average. This level of production meant that domestic demand was easily met, with enough left over to export 2500 tons of melons and 159 tons of watermelons, compared to 500 and 2 tons respectively in 2003. After a drop in onion production in 2001 and 2002, the 2004 figure was up by 14.5% to 355,000 tons, after 2003’s 20.6% increase. Artichokes experienced the opposite tendency, with production down 7.7% to 12,000 tons. This decrease is attributable to both the smaller area planted in artichokes and the floods that took place in a number of production regions. 47 B. TREE FARMING This branch of agriculture was marked over the 2003-2004 season by a major increase in the production of olives for oil, which almost reached the record level of the 1996-1997 season, and by the increase in spring and summer fruit harvests. Thus there was regular supply of the domestic market at affordable prices, along with higher exports, especially of olive oil. 1. OLIVES FOR OIL Thanks to favourable weather, the harvesting of olives for oil for the 2003-2004 season rose to 1.4 million tons, yielding 280,000 tons of oil. This compares to 350,000 and 72,000 tons respectively the season before. Quantities collected by the National Oil Board (ONH) were up significantly, to 53,600 tons, more than 29% of which was high quality oil. This compares to just 183 tons collected in 2002-2003. Thus, with local consumption of oil estimated at between 50,000 and 55,000 tons, exports reached a record high of 209,000 tons vs. 39,000 for the previous season. This situation helped boost income for oil producers while also ensuring steady supply of the domestic market at lower prices, quite aside from its positive effect on the country’s balance of food. OLIVE OIL PRODUCTION AND EXPORTS (In thousands of tons) 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Production 90 180 225 115 30 72 280 130 Exports 100 172 114 95 22 39 209 701 Source : National Oil Board (ONH) The scale for advances paid by ONH when purchasing olive oil was set for the 2003-2004 season at 2.100 dinars per kilogram of premium oil and 1.750 dinars per kilogram of lighting oil, up 150 and 100 millimes respectively. TRENDS IN ONH INTERVENTION’S PRICES (In dinars per kilogramme) 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Minimum advance 1.420 1.005 2.000 1.450 1.450 1.650 1.750 1.850 Maximum advance (Extra high quality oil) 1.800 1.300 2.300 1.700 1.700 1.950 2.100 2.200 Price complement 2 0 0.600 0 0 0 0 0 .. Source : National Oil Board (ONH) Table olive production was also up, reaching 24,000 tons, 525 tons of which were exported in the form of canned goods. This compares to 10,200 and 153 tons respectively for the previous season. The harvest of olives for oil over the 2004-2005 season amounted to 650,000 tons, yielding 130,000 tons of oil, 70,000 tons of which are slated for export. This drop was due to the pattern of olive tree production, which is low the season after a year of exceptionally high production, but also to the low level of rainfall in the early autumn of 2004. Measures taken to limit the adverse effect of irregular production, announced on the occasion of National Agriculture and Fishing Day, include : - the granting of a subsidy corresponding to 50% of the cost of purchasing olive plants; - restructuring of traditional olive groves and renovation of plantings.
1 Forecasts. 2 The price complement is determined at the end of the marketing season. 48
EDIBLE OIL PRODUCTION, EXPORTS AND IMPORTS 320 320 280 280
s
n 240 240 o t 200 200 of 160 160 120 120
housands t
n 80 80 I 40 40 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Olive oil production Olive oil exports Vegetable oil imports
2. CITRUS FRUITS The 2003-2004 citrus fruit harvest was 16,000 tons lower than the previous season’s figure, down to 209,000 tons because of the adverse effect of higher temperatures at the time of blossoming, causing the loss of a large quantity of fruit. This drop involved all varieties except Maltese oranges, for which production stagnated at 95,000 tons. But thanks to improved quality, export of citrus fruit (made up largely of Maltese oranges) increased for the 2003-2004 season to 18,600 tons vs. 17,200 for the 2002-2003 season. France remained the predominant market. CITRUS FRUIT PRODUCTION AND EXPORTS (In thousands of tons) 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005
Production 229 211 226 240 236 225 209 243 Exports 22.8 21.2 27 24.8 22.0 17.2 18.6 19.1 Source : Interprofessional Citrus Fruits and Fruits Group (GIAF) But the 2004-2005 season saw a 16.3% rebound in citrus fruit production, amounting to 243,000 tons (101,000 tons of which were Maltese oranges, up 6.3%). Higher production also characterised production of lemons and sweet oranges. 60% of production was medium-calibre fruit, compared to 40% the previous season. Exports amounted to 19,100 tons, a level which is lower than the target of 22,000 tons set in the beginning of the season, despite organisational measures taken before the start of the export effort on 15 January 2005. These measures included : - marketing of small and medium-calibre fruit in new packaging ; - promotion of exports to eastern European countries. 3. DATES 2004 date production came in at 122,000 tons, more than 76,000 tons of which were deglet nour, up 11,000 and 8000 tons respectively over the previous season’s figures. Most of the harvest was of good quality, thanks to implementation of several initiatives to ensure the quality of dates, such as :
49 - protection of plantations against bad weather, by providing 426 tons of plastic sheeting to date growers ; - anti-worm measures and post-harvest clearing of fallen wood, weeds and fruit from date groves on 20,000 hectares. Exports were down 4.3% in 2003-2004 in terms of quantity, offset by an 8.6% increase in value, amounting to 40,200 tons worth 107 MTD. The export target for the current season is 45,000 tons. DATE PRODUCTION AND EXPORTS (In thousands of tons) 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Production 95 103 103 104 105 115 111 122 of which : Deglet nour 65 69 65 70 65 72 68 76 Exports 25.2 29 25.7 36 38 42 40.2 451 Source : Interprofessional Dates Group (GID) 4. GRAPES In the wake of favourable weather, the 2004-2005 harvest of wine grapes increased by about 49% to 52,000 tons. Processing of this production yielded 375,000 hecto- litres of wine, a level that was 54.3% higher than the previous season’s figure. With a carry-over stock of some 199,000 hectolitres as of end August 2004, the total quantity of wine available amounted to 574,000 hectolitres, up from 505,000 a year earlier. Exports from the beginning of the campaign up to end May 2005 totalled 113,000 hectolitres vs. a total of 94,000 over 2003-2004 campaign. Table grape production remained stationery at 75,000 tons, the same level for the third straight year. WINE PRODUCTION AND EXPORTS (In thousands of hectolitres) 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005
Production 372 352 469 411 321 273 243 371 Exports 91 80 87 137 73 170 94 1132 Source : National Grape Board 5. OTHER FRUITS Harvests were more or less up in 2004 for most spring and summer fruit. Production of dry-shell almonds increased by 22.2% to 44,000 tons. But because of growing domestic demand, exports remained marginal, going entirely to the French market. DRY-SHELL ALMOND PRODUCTION AND EXPORTS (In thousands of tons) 1997 1998 1999 2000 2001 2002 2003 2004 Production 51 55 58 60 30 18 36 44 Exports 0.1 0.5 0.3 0.2 0.4 0.1 0.2 0.1 Source : GIAF and Ministry of Agriculture, Environment and Hydraulic Resources Apricot production increased to 27,000 tons, 287 tons of which went for export, compared to 26,000 and 181 tons respectively a year earlier. Production of other fruits (except plums and a number of secondary products, which posted lower harvests) was up considerably, especially for apples, peaches and figs. Pomegranate production was also up in 2004, reaching 69,000 tons vs. 67,000 the year before, mostly in the governorates of Gabes (23,000 tons) and Beja (9,500 tons), with 815 tons of exports shipped mainly to France and the Gulf states (vs. 302 tons a year earlier).
1 Forecasts. 2 Achievements from the beginning of the campaign up to end May 2005. 50 APRICOT PRODUCTION AND EXPORTS (In thousands of tons) 1997 1998 1999 2000 2001 2002 2003 2004 Production 26 27 31 30 25 25 26 27 Exports 0.2 0.4 0.4 0.2 0.1 0.1 0.2 0.3 Source : GIAF and Ministry of Agriculture, Environment and Hydraulic Resources C. INDUSTRIAL CROPS Land planted in tobacco remained stationary in 2004 at 2000 hectares. This is also the case for production, which stayed at 2000 tons, made up essentially of smoking tobacco : 1,800 tons or 90% of the total. To bridge the gap in production, 8000 tons of raw tobacco were imported at a cost of 26.4 MTD, compared to 7000 tons and 23.7 MTD in 2003. 49,000 tons of esparto grass were harvested during the 2003-2004 season, up from 35,400 tons the previous season, thanks to flourishing esparto grass fields in the wake of plentiful rainfall in the spring of 2004. Esparto grass processing, handled by the National Cellulose and Esparto Paper Company (SNCPA), produced 12,100 tons of esparto pulp, compared to 10,700 the year before. Consequently, exports of this product (in high demand for use in several areas such as manufacture of special- purpose paper) rose from 10,800 tons worth 17.2 MTD to 11,700 tons worth 22.8 MTD. D. LIVESTOCK FARMING Despite dense groundcover, readily available fodder and incentive measures taken to boost the sector, livestock production posted results that were only just satisfactory. As in the past, livestock took advantage of vaccination campaigns to protect against disease. Breeding livestock increased for sheep and goats but decreased for cattle, to 4,319,000, 809,000 and 436,000 head respectively. LIVESTOCK FOR REPRODUCTION (In thousands of heads) 1997 1998 1999 2000 2001 2002 2003 2004 Cows 430 459 480 482 484 485 450 436 Sheep 3,972 3,943 3,962 4,053 4,110 3,990 4,100 4,319 Goats 788 733 782 829 829 798 801 809 Source : Ministry of Agriculture, Environment and Hydraulic Resources Red meat production was down due to the long-term effects of drought in years past and the phenomenon of holding back animals for slaughter in good agricultural years. The decrease amounted to about 3%, involving some 115,000 tons.
MEAT PRODUCTION AND IMPORTS 220 14.0
s n
12.0 s o n t
o f t
200 f o 10.0 o nds a nds s
8.0 a 180 s hou t hou
n 6.0 t n i on i s i t 4.0 rt 160 po duc m 2.0 I Pro 140 0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Production Imports
51 Imports of red meat involved some 10,000 tons in 2004 worth 34.1 MTD, compared to 1,400 tons worth 4.7 MTD only a year earlier. This was also the case for production of fresh milk, down from 892,000 to 864,000 tons. But quantities collected for processing by the dairy industry were up by 5% to 482,000 tons, about 56% of national production.
PRODUCTION OF RED MEAT AND MILK (In thousands of tons) Structure in % 1998 1999 2000 2001 2002 2003 2004 2003 2004 Meat 1 112.0 120.2 123.1 125.5 132.2 118.5 114.8 100.0 100.0 -beef 52.9 57.5 59.8 60.3 64.4 57.7 53.4 48.7 46.5 -lamb 49.9 52.9 54.1 55.9 58.3 51.4 52.0 43.4 45.3 -goat 9.2 9.8 9.2 9.3 9.5 9.4 9.4 7.9 8.2 Fresh milk 734 817 887 934 945 892 864 Source : Ministry of Agriculture, Environment and Hydraulic Resources Production of poultry meat grew by 11,500 tons over the 2003 figure to about 94,000 tons. But production was irregular, requiring the intervention of the poultry products interprofessional group (GIPA) to regulate the market and ensure stable prices. In particular, a buffer stock made up of about 3000 tons of poultry meat was built up, along with 57.8 million eggs to cover demand during the month of Ramadan. Like chicken meat, egg production was up 6.8% in 2004 to 1.344 million, after decreasing by 15.3% the year before.
POULTRY PRODUCTION 1997 1998 1999 2000 2001 2002 2003 2004 Poultry meat (in 1000 tons) 63.7 74.2 81.0 87.0 91.0 77.1 82.4 93.9 Eggs (in millions) 1,400 1,407 1,523 1,476 1,434 1,487 1,259 1,344 Source : Ministry of Agriculture, Environment and Hydraulic Resources E. FISHING In the framework of modernisation of the fishing fleet and acquisition of new modern boats to improve yields, fishing production was up in 2004 by 14,800 tons (15.6%) to 109,600 tons. This increase held for all kinds of fishing, but especially lamp fishing or deep-sea fishing (31.4%) and trawling (4.7%). By region, production increased in the majority of governorates, except for Sousse (-8%) and Ariana (-6%).
FISHING PRODUCTION (In thousands of tons) 1998 1999 2000 2001 2002 2003 2004 Variation (%) 2003/2002 2004/2003 Coastal fishing 28.5 26.6 26.0 26.1 27.0 26.2 27.4 -3.0 4.6 Lamp fishing 32.8 36.4 37.6 37.8 35.5 35.7 46.9 0.6 31.4 Trawling 24.1 25.0 24.7 26.2 26.5 27.8 29.1 4.9 4.7 Miscellaneous 4.6 5.2 6.8 8.5 7.7 5.1 6.2 -33.8 21.6 Total 90.0 93.2 95.1 98.6 96.7 94.8 109.6 -2.0 15.6 Source : General Department of Fishing and Aquaculture at the Ministry of Agriculture, Environment and Hydraulic Resources
1 Cleaned meat and offal. 52 As for sales, seafood exports were up in 2004 by 2.7% in terms of quantity and 5.9% in value, amounting to 15,200 tons worth 153.2 MTD, thanks to higher external demand and higher prices for crustaceans and molluscs. Imports, mainly of tuna for processing, decreased from 27,100 tons worth 47 MTD in 2003 to 26,200 tons worth 36 MTD in 2004. Consumption of fresh fish increased on average from 8.3 kilograms per year per inhabitant over the period 2000-2003 to 10 kilograms in 2004. Higher domestic demand for fish grew significantly along with the rebound in tourism and in conjunction with the overall higher standard of living.
53 II. INDUSTRIAL ACTIVITY
Industry continued to benefit in 2004 from implementation of programmes targeting the upgrading and modernisation of Tunisia’s production apparatus. Further efforts also went into the setting up of new companies and the promotion of innovative projects, as well as more in-depth reforms to give the sector an ever-stronger base to help increase competitiveness and enhance performance, thus leading to a better overall environment for business. 2004 saw the development of eight new industrial zones and the creation of companies to promote and manage technological poles. A campaign to build awareness was also carried out to encourage promoters to take advantage of various incentives as per the unified investment code. Also under implementation was the action plan to keep energy consumption down. Seeking to modernise the production apparatus and to help it be more efficient and competitive to face up the increasingly tough competition on both domestic and foreign markets the upgrading programme for the industrial sector counted 3161 participating companies by the end of 2004, about 80% of all targeted companies. The steering committee (COPIL) had approved 1946 submissions for total investment of some 2,893 MTD and subsidies amounted to about 415 MTD, including 133.5 MTD in premiums for intangible investments. Surveys to assess this aspect have pointed out that investment has increased by 70% and exports by 16% at companies that have already completed their upgrading plans in addition to their higher supervisory rate (12% on average). The upgrading programme involved first and foremost textile and clothing companies, for which 807 submissions have been approved, followed far behind by miscellaneous industries (279) and agrofood industries (274). As for corresponding investments, agrofood industries are in first place with 663 MTD, 23% of the total, followed by textile and clothing companies in second place with 544 MTD (18.8%). Investment in miscellaneous industries came to just 431 MTD, almost 15% of the total. In 2004, 306 upgrading proposals were approved for industry, compared to 302 the year before. But the amount of investments was down by 18%, to about 268 MTD, an average investment per company of 875,000 dinars vs. 1,083,000 dinars in 2003. This level, the lowest since the start of the programme in early 1996, arises mainly from strong participation of small and medium scale companies in line with the strategy set by public authorities. At the same time, the total amount of premiums granted by the State fell from about 51 MTD in 2003 to 41 MTD in 2004. The programme to upgrade services linked to industry has helped 187 companies since it began in February 2000, with 73 proposals approved for total investments of 31 MTD and State-granted premiums of about 9 MTD. The programme to privatise public enterprises has involved 185 companies over the period ranging from 1987 to the end of 2004, all sectors taken together, for a total of 2,385 MTD, about three quarters of which (1,770 MTD) were in the form of foreign 54 direct investment. These transactions consisted mainly in privatising entirely 97 companies, partial sale of the assets of 31 others, and liquidation of 37 concerns. 76 of these companies were in the industrial sector, accounting for 1,025 MTD or 43% of the total, with the remainder in agriculture, fishing and services. The industrial sector made progress in 2004 despite tougher international competition and continued increase in world oil prices, which allowed for better positioning on both the domestic and foreign markets. Added value expressed in constant prices was up 4.5% (vs. 1.1% a year earlier). This higher level of activity recorded across the board basically reflects that of manufacturing industries, energy and construction/civil engineering, which contrasted with mining activity setback. TREND IN ADDED VALUE IN THE INDUSTRIAL SECTOR, EXPRESSED IN REAL TERMS (In %) Description 2000 2001 2002 2003 2004 Mining 2.8 -1.6 -3.3 4.5 -0.4 Energy -3.9 3.7 5.8 -0.5 3.5 of which : Hydrocarbons -7.9 2.6 6.8 -3.5 2.9 Manufacturing industries 6.6 6.9 1.8 0.9 5.1 Building and civil engineering 10.2 3.7 5.1 3.4 4.1 Overall industrial sector 4.8 5.5 3.0 1.1 4.5 Source : Ministry of Development and International Cooperation Despite the slightly lower share of industry in nominal GDP (down from 28% to 27.7%), its contribution to economic growth expressed in real terms increased markedly in 2004, up over this same period from 6% (0.3 of a percentage point) to 21.2% (1.3 point).
TREND IN ADDED VALUE IN THE INDUSTRIAL SECTOR (constant 1990 prices) 8 8
6 6
4 4
age
ent 2 2
perc 0 0 n I -2 -2
-4 -4 1997 1998 1999 2000 2001 2002 2003 2004 Overall industrial sector Manufacturing industries Energy
Renewed activity in manufacturing industries was led in particular by the sizeable increase in olive oil production, leading to higher growth in agrofood and net expansion in building materials/ceramics/glass and mechanical/electrical industries. On the other hand, textile/clothing industries pursued their downward trend, mainly because of dismantling of the multi-fibre agreements. Growth in non-manufacturing industries was also up in 2004, following in particular recovery in hydrocarbons, tied to further increases in oil production.
55 Good performance in industry was accompanied by a 17.5% increase in export of manufactured goods, compared to just 5.7% in 2003. This faster growth was evident in particular in agrofood industries, with sales abroad almost doubling from 2003 to 2004, led by the sizeable increase in export of olive oil. Energy exports also continued to grow (by 11.5%), strongly influenced by higher prices. On the other hand, exports by the mining sector were down by 11.8%. As for investment, the industrial sector absorbed some 1,988.5 MTD in 2004, 5.6% more than in 2003, representing 25.4% of global GFCF. The increase concerned in particular mechanical and electrical industries (15.6%) as well as agrofood industries (7.1%). On the other hand, investment dropped by 7.4% in mining and by 5.8% in textile/clothing and leather footwear. Overall, the investment rate was down slightly, from 20.9% to 20.4%. Growth in new jobs was up by 3.4% to 24,300 jobs, about one third of the total number of new jobs in the economy (exclusive of agriculture). SECTOR-RELATED SHARE OF GDP IN CURRENT PRICES (In %) Description 2000 2001 2002 2003 2004 Non manufacturing industries 10.3 10.4 11.0 10.1 10.0 Mining 0.8 0.8 0.8 0.7 0.6 Energy 4.8 4.8 5.0 4.2 4.3 -Hydrocarbons 3.0 3.4 3.4 2.9 3.0 -Electricity 1.4 1.0 1.1 0.9 0.9 -Water 0.4 0.4 0.5 0.4 0.4 Building & civil engineering 4.7 4.8 5.2 5.2 5.1 Manufacturing industries 18.2 18.5 18.6 17.9 17.7 Agrofood industries 3.4 3.1 3.1 3.1 3.3 Manufacturing industries other than agrofood 14.8 15.4 15.5 14.8 14.4 -Building materials, ceramics and glass 1.7 1.7 1.8 1.7 1.7 -Mechanical and electrical industries 2.5 2.7 2.8 2.9 3.0 -Chemical industries 2.0 1.9 2.0 1.9 1.9 -Textiles, leather & footwear 6.3 6.7 6.6 6.0 5.6 -Miscellaneous industries 2.3 2.4 2.3 2.3 2.2 Overall industrial sector 28.5 28.9 29.6 28.0 27.7 Source : Ministry of Development and International Cooperation A. MINING After posting renewed growth of 4.5% the year before, added value in the mining sector (expressed in real terms) fell in 2004 by 0.4%. This drop is mainly due to slower growth in production of lime phosphate and drop in the volume of zinc and aluminium fluoride. MINING PRODUCTION Variation In thousand tons Description 2004/2003 2000 2001 2002 2003 2004 In % Lime phosphate 8,301 8,144 7,461 7,890 8,051 2.0 Iron ore 183 204 202 161 244 51.6 Lead ore 11.1 11.2 8.2 8.2 8.6 4.9 Zinc ore 74.6 72.7 64.2 65.9 52.7 -20.0 Barytine 4.9 4.2 6.0 2.6 1.8 -30.8 Aluminium fluoride 42.7 43.9 38.9 44.5 41.8 -6.1 Sea salt 620 654 659 700 834 19.1 Source : Directorate General for Mining (Ministry of Industry, Energy and Small and Medium Companies). 56 1. Lime phosphate 12.3 million tons of raw phosphate were extracted in 2004, a slight increase over the previous year. The volume provided by quarries, which represents more than 90% of the total, remained practically unchanged at 11.5 million tons. Broken down by mining complex, the open-air mines at Kef Eddour, Kef Eschfair and Jallabia remained the main extraction centres, with an approximate 29%, 28% and 15% of total respectively. The one remaining underground mine (Redeyef) provided just 120,000 tons of raw phosphate, while subcontracting brought in 736,000 tons. This compares to 148,000 and 446,000 tons respectively the year before. The production of market phosphate increased by 2% to slightly over 8 million tons, corresponding to an average yield of 65.2% vs. 65.7% a year earlier. As usual, most of this production went through the washing plants at Metlaoui (28%), M’dhilla (26%) and Kef Eddour (25%). The remainder came from washing plants at Redeyef and Moulares. Commercially, total sales of phosphates continued to fall, from 7.5 million tons in 2003 to 7.3 million in 2004. This was particularly true for exports, which amounted to just 661,000 tons worth 24.6 MTD, down 23.6% and 25.7% respectively. Shipments of phosphate to local processing plants were maintained at about 6.6 million tons. Thus stocks of market phosphate had increased by 28% at the end of 2004, to 3.6 million tons, the equivalent of five months of production. Stocks of raw phosphate increased by 298,000 tons to 910,000 tons. 2. Iron ore Production of iron ore, made up entirely of hematite (pure iron ore) was once again on a growth path in 2004 after falling for two years. It increased by 51.6% to 244,000 tons, 145,000 (about 60%) of which were mined at Jerissa, compared to 115,000 a year earlier. Quantities extracted from the Tamera-Douaria mine more than doubled, up from 46,000 in 2003 to almost 100,000 tons in 2004. Reflecting increased demand, local sales of iron ore were up 46.4% to a total of 232,000 tons, going mainly to the steel plant in Menzel Bourguiba. Exports were marginal, involving just 11,600 tons of carbonate, which came entirely from stock, compared to 12,800 in 2003. In any case, ever greater quantities of cast iron, iron and steel continued to be imported, for a total of some 1186 tons worth 665.1 MTD, an increase of 26.3% and 57% respectively. 3. Non ferrous metals Mining of non-ferrous metals was affected in 2004 by the closing of the Fej Lahdoum mine in May and that of the Boujabeur mine in July, due to depletion of reserves. Consequently, aside from lead, all other non-ferrous metals (especially zinc and barytine) suffered more or less sharp drops in production. Zinc was down 20% to about 53,000 tons, virtually all from the Bougrine mine. Production of aluminium fluoride dropped to 41,800 tons, down from 44,500 in 2003,
57 influenced by the drop in demand from France, Brazil and Egypt. With the closing of the Boujabeur mine, production of barytine, already very weak, dipped even lower, to less than 2000 tons. 4. Sea salt Production of sea salt increased in 2004, up by about 19% (vs. 6.2% the year before) to 834,000 tons. But exports fell from 674,000 tons in 2003 to 528,000 in 2004. Sales on the local market remained stable at about 80,000 tons, made up essentially of processed salt. B. ENERGY The deficit in the balance of primary energy amounted to 594,000 tons of oil equivalent (toe) in 2004, a reduction of some 20% from the 2003 figure. This is because national resources grew at a faster pace than demand: 6.6% and 3.7% respectively, to 6602,000 and 7196,000 toe. The energy balance of trade with abroad yielded a higher deficit of some 507 MTD, compared to 423.6 MTD a year earlier. With steady growth in production of electricity and natural gas and renewed growth in that of crude oil, added value for the energy sector was up 3.5% in real terms, compared to a drop of 0.5% a year earlier. 1. Electricity National production of electricity was up by 5.3% in 2004 to 12.5 billion kWh. 69.6% of this volume was supplied by the Tunisian Electricity and Gas Company (STEG), 22.8% by independent private producers (IPP) and 7.6% by self-producers. This compares to 70.2%, 22% and 7.8% respectively a year earlier. ELECTRICITY PRODUCTION AND CONSUMPTION In million kWh Variation Description 2004/2003 2000 2001 2002 2003 2004 in % STEG production 9,222 9,787 8,270 8,302 8,664 4.4 .Thermal 9,135 9,709 8,176 8,103 8,466 4.5 .Hydraulic 64 54 64 166 154 -7.2 .Wind-power 23 24 30 33 44 33.3 Independent private production(IPP) 0 161 2,070 2,599 2,844 9.4 Self-producers 874 906 941 929 947 1.9 National production 10,096 10,854 11,281 11,830 12,455 5.3 Net trade with Algeria 1 10 -20 5 6 20.0 Total energy given out in Tunisia 10,097 10,864 11,261 11,835 12,461 5.3 High and medium-voltage consumption 5,648 6,062 6,170 6,308 6,646 5.4 .Mining industries 619 671 661 669 690 3.1 .Steel and metal industries 217 220 209 181 171 -5.5 .Chemical and oil industries 637 641 652 664 709 6.8 .Building materials 998 1,030 1,032 1,083 1,184 9.3 .Paper and publishing industries 135 137 137 157 164 4.5 .Textile, leather and footwear industries 425 496 510 534 544 1.9 .Food industries 421 433 457 461 469 1.7 .Miscellaneous industries 420 467 535 545 606 11.2 .Other sectors 1,776 1,967 1,977 2,014 2,109 4.7 Low voltage consumption 3,340 3,544 3,792 4,102 4,208 2.6 Total national consumption 8,988 9,606 9,962 10,410 10,854 4.3 Exports 0 3 38 25 34 36.0 Losses in transit and energy in metres 1,109 1,255 1,261 1,400 1,573 12.4 Source : Tunisian Electricity and Gas Company (STEG)
58 After a year of virtual stagnation, STEG’s production increased by 4.4% to almost 8.7 billion kWh. Most of this production (some 8.5 billion kWh) was thermally generated. This category included a drop of 18.4% in the quantity produced by gas turbines, compensated by a 35.4% increase in production at the combined cycle plant in Sousse, while the volume produced by steam turbines remained at about the same 4.6 billion kWh level. As in the past, natural gas was the predominant fuel used to produce electricity, at 96%. After start up of the extension in September 2003 of the Sidi Daoud plant in El Haouaria (8.72 megawatts of power), wind generated electricity continued to grow in 2004, reaching 44 million kWh. Inversely, hydraulically generated electricity was down by 7.2% to 154 million kWh.
NATIONAL ELECTRICITY PRODUCTION AND CONSUMPTION
15,000 15,000
12,000 12,000
9,000 9,000 ion kWh
ll 6,000 6,000
In mi 3,000 3,000
0 0 1997 1998 1999 2000 2001 2002 2003 2004 Production Consumption
Independent private production increased by 9.4% to 2844 million kWh. Virtually all of this volume (2716 million kWh) came from the Rades II power plant and the rest from the El Bibene plant (with 27 megawatts of power). National electricity consumption rose by 4.3% to 10,854 million kWh. 6646 million kWh (more than 61% of this total) involved high and medium voltage (vs. 6308 million kWh in 2003). This progression concerned all sectors of activity except for steel and metal industries (-5.5%). Building materials/ceramics/glass industries remained the primary sector for electricity consumption with 1.2 billion kWh. Consumption of low voltage electricity grew at a slower pace than the year before : 2.6% vs. 8.2%, up to 4208 million kWh, reflecting better behaviour by consumers. With hook-up of 75,000 new subscribers to STEG’s network, 22,000 of whom live in rural areas, the total number of subscribers was about 2.6 million as of the end of 2004, bringing the overall rate of electrification to 98.9% vs. 97% in 2003. 2. Crude oil National production of crude oil was up 5.6% in 2004 after dropping by 9.2% the year before, amounting to 3,342,000 tons despite the downward trend in volume produced 59 at the oilfields of El Borma (-5.8%) and Ashtart (-10.4%). This progress was made possible mainly because of considerable input from the Adam-Eve oilfield discovered in 2003, which provided 452,000 tons. But shipments of crude oil to the Tunisian Refining Industries Company (STIR) were down by about 200,000 tons to 1.6 million tons, a million of which were imported from Libya. Total purchases of crude oil abroad amounted to 1.1 million tons worth 394.8 MTD in 2004, compared to 1.2 million tons worth 343.6 MTD in 2003. CRUDE OIL PRODUCTION BY OILFIELD In thousand tons Variation Description 2000 2001 2002 2003 2004 2004/2003 In % El Borma 825 759 683 616 580 -5.8 Ashtart 739 681 669 644 577 -10.4 Other oilfields (Sidi El Kilani, Ezzaouia, Tazarka, etc.) 2,098 1,888 2,134 1,906 2,185 14.6 Total 3,662 3,328 3,486 3,166 3,342 5.6 Source : National Energy Watch (Ministry of Industry, Energy and Small and Medium Companies) Oil exports were up by 15.9% in terms of quantity and by 46.1% in terms of value, to 2.8 million tons and 935.5 MTD. This significant increase in value was due mainly to higher world prices. Indeed, the average selling price for Tunisian oil (all categories taken together) rose from $28.68 per barrel in 2003 to $37.49 in 2004, an increase of some 31%. Exploration activity in 2004 was characterised by a drop in the number of wells dug and of research licenses granted, as high increases in oil prices led operators to increase production to the detriment of exploration and research. Thus only two wells were dug and only one discovery made (Dalia 1). There were 30 valid licenses as of end 2004, 20 of which corresponded to onshore operations. This compares to 37 and 26 licenses respectively a year earlier, issued to 34 national and foreign companies. 3. Natural gas Coming mainly (about 80%) from the Miskar field, national natural gas production was up in 2004 by 6.1% compared to the previous year’s level, to 2299 million cubic metres. With a sizeable increase in quantities received as part of royalties, direct purchases from Algeria remained stagnant. Global availability of natural gas increased by 6.4% to 4125 million cubic meters. Thus the share of natural gas in total primary energy resources was up slightly, from 47.2% in 2003 to 47.7% in 2004. Consumption was up, but at a slower pace than the year before, growing by 4.1% (vs. 5.4%) to 3521 million cubic meters or 85.4% of gas resources. Consumption by STEG, the major component, has more or less stood still since 2002 due to entry on the market of private electricity producers, whose gas consumption grew by 10% in 2004.
60 GAS PRODUCTION AND CONSUMPTION In million cubic metres Variation Description 2004/2003 2000 2001 2002 2003 2004 in % Production 1,985 2,254 2,149 2,166 2,299 6.1 of which Miskar 1,719 1,805 1,739 1,763 1,858 5.4 Total royalties 1,277 1,117 1,047 1,082 1,197 10.6 Purchases 459 467 533 629 629 0.0 Total availability 3,721 3,838 3,729 3,877 4,125 6.4 Consumption 2,882 3,209 3,208 3,381 3,521 4.1 - Electricity producers 2,240 2,532 2,515 2,617 2,669 2.0 . STEG 2,240 2,490 2,109 2,139 2,143 0.2 . I P P 0 42 406 478 526 10.0 - Other (industrial clients, residential and tertiary sectors) 642 677 693 764 852 11.5 Exports 839 629 521 496 604 21.8 Source : National Energy Watch (Ministry of Industry, Energy and Small and Medium Companies) Gas consumption aside from electricity generating plants continued to grow at a steady pace : 11.5% vs. 10.2% a year earlier. This included in particular hotels (+12.6%), especially in the Cap Bon (20%) and the Sahel (9.6%). Similarly, public distribution consumption including the residential sector grew by 13.4%: +12.7% for the greater Tunis area, 19.6% for the Cap Bon and 13.3% for the Sahel. Consumption in the industrial sector was up 10.9% from 2003 to 2004. 4. Fuel Fuel production was handled almost entirely by STIR, down 8.1% in 2004 (after a slight 1% increase the year before) to 1.8 million tons. This level meets 46.3% of local needs vs. 52.3% a year earlier. There were drops in production of gas-oil, fuel oil, standard petrol and virgin naphta. Production of other fuels was on the increase, especially for liquefied petroleum gas (GPL) and both premium and unleaded petrol. FUEL PRODUCTION In thousand tons Variation Description 2004/2003 2000 2001 2002 2003 2004 in % Liquefied petroleum gas 110 102 113 103 108 4.9 Premium and unleaded petrol 292 338 325 348 356 2.3 Standard petrol 95 94 71 74 49 -33.8 Paraffin oil 168 203 207 165 169 2.4 Gas-oil 537 468 469 502 432 -13.9 Fuel oil 653 593 604 609 595 -2.3 Virgin naphta 80 80 104 112 46 -58.9 Gasoline 27 31 28 28 28 0.0 White spirit1 7 7 8 8 8 0.0 Total 1,969 1,916 1,929 1,949 1,791 -8.1 In % of consumption 53.1 50.9 51.0 52.3 46.3 -6.0 points Sources : National Energy Watch (Ministry of Industry, Energy and Small and Medium Companies), STIR and INS
1 Intermediary refined product between petrol and kerosene that serves as a paint thinner. 61 On the consumption side, there was a return to growth (3.9%), after the previous year’s drop of 1.5%, amounting to 3.9 million tons. This increase involved all oil products except premium and standard petrol. Consumption of kerosene in particular was up by a high 15% after 2003’s drop of 8.3%, linked to better performance in air transport. Faced with sustained domestic demand, 2.9 million tons of refined products were imported in 2004, worth 1,130.5 MTD, compared to 3.3 million tons worth 999 MTD the year before. FUEL CONSUMPTION In thousand tons Variation Description 2004/2003 2000 2001 2002 2003 2004 In % Liquefied petroleum gas 381 397 415 431 447 3.7 Premium petrol 188 178 163 147 133 -9.5 Unleaded premium petrol 106 144 182 203 228 12.3 Standard petrol 97 91 82 68 56 -17.6 Paraffin oil 195 203 201 187 196 4.8 Kerosene 277 264 218 200 230 15.0 Gas oil 1,640 1,711 1,705 1,726 1,801 4.3 Total exclusive of fuel oil 2,884 2,988 2,966 2,962 3,091 4.4 Fuel oil 821 779 815 763 780 2.2 of which STEG 84 54 59 22 36 63.6 Overall total 3,705 3,767 3,781 3,725 3,871 3.9 Source : National Energy Watch (Ministry of Industry Energy, and Small and Medium Companies) C. MANUFACTURING INDUSTRIES After two years of weak growth, added value for manufacturing industries overall, expressed in real terms, was up in 2004 at a faster pace than a year earlier : 5.1% vs. 0.9%. This trend is tied to good performance in all sectors except textiles- clothing/leather-footwear, which continued to lose ground for the second straight year. However, given the progress in other sectors of the economy, the share of manufacturing industries in GDP at current prices was down slightly, from 17.9% in 2003 to 17.7% in 2004. TRENDS IN ADDED VALUE IN MANUFACTURING INDUSTRIES, EXPRESSED IN REAL TERMS (In %) Description 2000 2001 2002 2003 2004 Agrofood industries 7.8 -2.7 -0.6 2.5 12.2 Manufacturing industries other than agrofood 6.3 9.3 2.3 0.5 3.5 -Building materials/ceramics/glass 7.8 4.5 4.6 3.0 6.0 -Mechanical and electrical industries 6.6 14.2 3.6 6.1 8.0 -Chemicals and rubber 5.0 2.8 3.2 0.3 3.0 -Textiles, leather and footwear 6.3 12.0 0.5 -3.7 -0.4 -Miscellaneous industries 6.1 6.0 3.4 3.0 6.0 Overall manufacturing industries 6.6 6.9 1.8 0.9 5.1 Source : Ministry of Development and International Cooperation 1. Agrofood industries In line, notably, with the sizeable increase in olive oil production after a strong 2003-2004 season, agrofood industries grew at a considerably faster pace. Higher added value, expressed in real terms, increased from 2.5% in 2003 to 12.2% in 2004. At the same
62 time, the share of this sector in the nominal added value of manufacturing industries increased to 18.9%, up from 17.2% a year earlier. MAIN PRODUCTION OF AGROFOOD INDUSTRIES (In thousand tons unless otherwise indicated) Variation Description 2000 2001 2002 2003 2004 2004/2003 in % Cereal-based products Baking flour 656 648 644 673 689 2.4 Semolina 634 640 650 588 535 -9.0 Pasta 140 142 150 138 132 -4.3 Couscous 45 46 48 46 42 -8.7 Animal feed (concentrated) 1,360 1,552 1,425 1,300 1,400 7.7 Milk and dairy products Industrially-processed milk (in 1000 hl) 3,190 3,090 3,340 3,150 3,360 6.7 Yoghurt (in million units) 740 750 840 790 830 5.1 Cheese 12.9 13.5 14.4 14.2 14.8 4.2 Canned goods Tomato paste 127 77 98 106 126 18.9 Harissa 13.4 12.7 17 21 18.7 -11.0 Canned vegetables and fruits 30 15.9 16.7 18.3 19.9 8.7 Canned fish 6.3 8.9 8.5 10.3 7.5 -27.2 Sugar and confectionery Granulated sugar 104 102 126 131 130 -0.8 Lump sugar 14 14 15 15 17 13.3 Candy 33 36 38 39 39 0.0 Chocolates 5.3 6.8 7.4 8.2 8.4 2.4 Oil and fats Olive oil 225 115 30 72 280 288.9 Margarine and vegetable fats 32.3 29.1 35.9 45.7 51.9 13.6 Processed seed oils 80 86 97 101 105 4.0 Beverages Mineral water (in million litres) 283 303 321 351 378 7.7 Carbonated beverages (in 1000 hl) 3,450 3,700 3,800 4,000 4,100 2.5 Beer (in 1000 hl) 1,066 1,089 1,100 996 1,050 5.4 Wine (in 1000 hl) 411 321 273 243 375 54.3 Source : National Statistics Institute, Ministry of Industry, Energy and Small and Medium Companies Production of cereal-based products was up for baking flour and animal feed, but there were drops for other products, especially semolina and pasta. Production in the dairy industry took off again in 2004 for all products, after posting lower yields for livestock the year before. As for canned goods, quantities of tomato paste and canned fruits and vegetables continued to grow but production of hot pepper paste (harissa) and especially canned fish were down markedly. Production of sugar and confectionery followed different trends from one item to another. There were more lump sugar and chocolate products but less granulated sugar and unchanged quantities of candy. Olive oil production almost quadrupled in 2004, up from 72,000 to 280,000 tons, along with increases for other oil and fat products.
63 Production of beverages increased for all products, especially mineral water, in line with steadily higher demand. 2. Building materials, ceramics and glass industries Stimulated by higher domestic demand, in line with renewed investment and housing construction that grew at a faster pace, the building materials/ceramics/glass sector in 2004 enjoyed growth in added value expressed in real terms that was twice as much as the year before : 6% vs. 3%. PRODUCTION OF BUILDING MATERIALS, CERAMICS AND GLASS (In thousand tons unless otherwise indicated) Variation Description 2000 2001 2002 2003 2004 2004/2003 in % Cement 5,657 5,721 6,022 6,038 6,662 10.3 of which : White cement 250 247 259 296 304 2.7 Lime 517 467 469 446 477 7.0 Clay products 3,910 4,400 4,700 4,870 5,180 6.4 Mosaic tiles (in thousand m2) 17,200 18,100 18,800 19,200 20,400 6.3 Earthenware tiles (in thousand m2) 9,930 12,500 13,950 14,500 15,450 6.6 Bottles and drinking glasses 47 45 45 44 45 2.3 Source : National Statistics Institute for binding products & Ministry of Development & International Cooperation for the rest Although production of binders remained stagnant in 2003, cement was turned out at a faster (10.3%) pace in 2004, amounting to 6.7 million tons. Of this total, 304,000 tons of white cement were produced by the Tuniso-Algerian Feriana Company (SOTACIB), posting 2.7% growth after 2003’s 14.3% increase. Lime production was again on a growth path (+7%) after dropping by 4.9% a year earlier, turning out 477,000 tons. As for commercialisation, cement exports were up 17.6% in terms of quantity and 7.4% in terms of value, to about 978,000 tons and 53.9 MTD respectively. The local market sustained strong demand for all these products.
MAIN BUILDING MATERIAL PRODUCTION
7,000 7,000 6,000 6,000 5,000 5,000 tons 4,000 4,000 3,000 3,000 2,000 2,000 In thousand 1,000 1,000 0 0 1997 1998 1999 2000 2001 2002 2003 2004
Cement Clay products Lime
64 Production of clay products also increased in 2004 at a faster pace (6.4% vs. 3.6% the year before) to 5.2 million tons. This was also the case for production of mosaic and ceramic tiles, up 6.3% and 6.6% respectively, compared to 2.1% and 3.9% a year earlier. Thus exports of ceramic products amounted to 187,500 tons worth 82.9 MTD, compared to 133,000 tons worth 66.9 MTD in 2003. Production of glass remained, overall, somewhat stagnant. This was due, in particular to the low increase in production of bottles and drinking glasses, up from 44,000 tons in 2003 to 45,000 tons in 2004. 3. Mechanical and electrical industries Despite the technical difficulties encountered in steelworks, mechanical and electrical industries moved ahead in 2004 at a faster pace than the year before: 8% vs. 6.1% in real terms. Their share in nominal GDP increased just slightly, to 3%. This expansion was facilitated by both external demand (especially for electrical items and means of transport) and local demand. Steel production was handled by the El Fouladh Company, continuing on a downturn for all products due notably to the discontinuation of cast iron production as of May 2003. Thus production of iron bars came to just 70,000 tons, all produced in the electric oven. And because of the lack of intermediary products, production of iron rods for concrete, drawn iron and metal structures dropped by 27.5%, 20% and 25% respectively. To ensure regular supply of the local market, El Fouladh imported about 229,000 tons of iron rods for concrete in 2004, mostly for construction. IRON AND STEEL ITEMS In thousand tons Variation Description 2004/2003 2000 2001 2002 2003 2004 in % Cast iron 195 192 152 36 0 -100.0 Iron bars 237 239 200 86 70 -18.6 Iron rods for concrete 259 228 185 149 108 -27.5 Drawn iron 20 24 19 20 16 -20.0 Metal structures 9 9 10 8 6 -25.0 Source : El Fouladh Company In the area of automotive assembly, production of vehicles by the Tunisian Automotive Industries Company (STIA) was up by about 37% for buses/coaches, but down 32% for industrial vehicles, to 261 and 512 units respectively. 191 motor coaches were assembled for mass transit, compared to 149 in 2003. In this context, the average rate of integration remained low, just 4% for industrial vehicles and 25% for buses/coaches, a real difficulty in keeping down production costs and thus improving profitability. Electrical and electronic industries continued to progress as reflected in particular by higher production of electricity meters, up from 150,000 in 2003 to about 187,000 in 2004. Production of household appliances was also on the rise, especially televisions, refrigerators and air conditioners.
65 As for commercialisation, export of electrical wires and cables, mostly for the European automotive market, was up 21.7% to 504.4 MTD, 19.4% of total exports in mechanical and electrical industries. 4. Chemical industries In line with strong recovery in exports of phosphate by-products (about 30% vs. a drop of 4.8% in 2003 and 5% in 2002), activity in chemical industries picked up in 2004. Added value grew in real terms by some 3% after virtual stagnation (0.3%) the year before. There was an increase in the processing of phosphates, with production up for several phosphate by-products, especially phosphoric acid, compound fertiliser and bicalcium phosphate. Inversely, it was down for other products such as ammonium nitrate and simple superphosphate. Production of triple superphosphate more or less stagnated at 872,000 tons. Commercially, exports rose for all products, especially in terms of value, in line with higher selling prices. Sales of phosphoric acid in particular increased by about 28% in terms of quantity and by 42.5% in terms of value, to 1.1 million tons and 225.6 MTD, following an increase in shipments to Brazil and especially to India. Similarly, sales abroad of triple superphosphate were up 12.7% in terms of volume and almost 30% in terms of income, to about 874,000 tons worth 185.3 MTD. This was possible despite the lower volume of shipments to Europe, Algeria and Iran. On the other hand, export of diammonium phosphate (DAP) was down 6.6% in terms of quantity, mainly because of lower sales to Pakistan, Argentina and Brazil, but in terms of value exports brought in 17.6% more, posting 1.2 million tons worth 349.5 MTD. PRODUCTION OF PHOSPHATE BY-PRODUCTS In thousand tons Variation Description 2004/2003 2000 2001 2002 2003 2004 in % Phosphoric acid 1,125 1,144 1,216 1,164 1,241 6.6 Triple superphosphate 794 782 791 872 872 0.0 Diammonium phosphate (DAP) 1,113 1,125 1,315 1,324 1,314 -0.8 Ammonium nitrate 182 170 127 164 134 -18.3 Simple superphosphate 12 8 9 9 8 -11.1 Hyperphosphate (granules) 35 34 32 18 21 16.7 Compound fertiliser 18 11 21 30 38 26.7 Bicalcium phosphate (DCP) 97 116 113 67 73 9.0 Sodium tripolyphosphate (TPPS) 100 118 119 119 126 5.9 Source : Directorate General for Mining (Ministry of Industry, Energy and Small and Medium Companies) Average export prices expressed in dollars were up in 2004 for most products, especially triple superphosphate (18%). Import prices for raw materials increased significantly from 2003 to 2004, especially for ammonium nitrate and non-refined sulphur.
66
PRODUCTION OF PHOSPHATE BY-PRODUCTS
1,400 1,400 1,200 1,200
ns 1,000 1,000 to
d 800 800 n a s u 600 600
tho 400 400
In 200 200
0 0 1997 1998 1999 2000 2001 2002 2003 2004
Phosphoric acid D A P Triple superphosphate
Other branches of chemical industries grew at a sustained pace, especially pharmaceutical industries, rubber and tire industries and parachemical industries. Increases were especially posted for glues and linseed oil (5.3%) and for paint, varnish and ink (3.6%), while production of soap remained virtually stationary for the second straight year. 5. Textile, clothing, leather & footwear industries This sector continued to be faced with lively international competition in 2004, especially in light of the end of the process to dismantle the multi-fibre agreements that have regulated the textile and clothing industries sector. The flood of highly competitive Chinese, Indian and Pakistani textile goods throughout the world and the emergence of other large competitors like Turkey have begun to seriously affect textile and clothing industries in a number of Mediterranean countries including Tunisia, extending as far as industrialised countries in western Europe. Thus added value for the sector as a whole, including leather and footwear industries, continued to fall in real terms (-0.4% vs. -3.7% in 2003) for the second straight year. Its share in GDP in current prices posted continued to fall : from 6% in 2003 to 5.6% in 2004. In any case, the sector continued overall to maintain a top ranking in manufacturing industries in 2004, with 18.1% of investment, 31.7% of nominal added value and 48.6% of exports. Export of textiles and clothing alone accounted for 37.2% of total Tunisian export of goods in 2004, vs. 41.1% in 2003. As for production, virtual stagnation in production of cotton and wool yarns and a slight drop in that of fabric were counterbalanced by a degree of recovery in finishing and, to a lesser degree, for ready-to-wear clothing. Hosiery production was down for the second straight year : -4.6% vs. -4.9%. Footwear production was down 2% in 2004, after several years of steady increases. This was attributable to the impact of greater foreign competition, leading to stagnation in total exports of leather and footwear industries.
67 Production of carpets remained stationary at 3200 tons. It should be noted that industrially-produced carpets face greater competition from hand-made carpets which post a better quality-price ratio. PRODUCTION OF TEXTILE, CLOTHING, LEATHER AND FOOTWEAR MAIN ITEMS (In thousand tons unless otherwise indicated) Variation Description 2000 2001 2002 2003 2004 2004/2003 in % Cotton yarns 24.8 24.6 24.8 25.0 25.0 0.0 Wool yarns 8.4 8.6 8.8 8.9 9.0 1.1 Fabric (million metres) 164.7 193.0 209.0 208.3 207.8 -0.2 Finishing (million metres) 60.0 65.0 70.0 70.0 75.0 7.1 Ready-to-wear clothing (million items) 210.0 239.6 216.5 206.6 207.4 0.4 Hosiery 30.0 32.0 36.4 34.6 33.0 -4.6 Carpets 2.9 3.0 3.1 3.2 3.2 0.0 Shoes (million pairs) 41.3 48.9 51.0 54.0 52.9 -2.0 Footwear accessories 5.4 5.9 6.0 6.0 6.1 1.7 Source : Ministry of Development and International Cooperation 6. Miscellaneous manufacturing industries Taken together, miscellaneous industries enjoyed faster growth in real terms in 2004: 6% vs. 3%. Its share of added value remained at 2.2% of nominal GDP and 12.3% of manufacturing industries. Wood industries, the largest branch in this sector, posted production that continued to grow at a steady pace, notably for carpentry and particle boards, up 4% and 3.4% respectively vs. 2.2% and 1.4% a year earlier. This was also the case for paper industries especially for production of paper pulp and packaging, up 2.7% and 2.1% over 2003 figures. Plastic industries continued to post sustained growth, with volume up 6.8% vs. 6% in 2003. D. CONSTRUCTION AND CIVIL ENGINEERING Led by renewed growth in investments and the fairly brisk pace of housing, office and commercial construction, the building and civil engineering sector posted a 2004 growth rate that was up 4.1% in real terms vs. 3.4% a year earlier. But the share of the sector in nominal GDP remained stationary, accounting for 5.1%. This sector provided 5500 new jobs, vs. 4850 in 2003, while also providing a fairly high number of occasional jobs. It also had an influence on other economic activities.
68 III. SERVICES
With tourism and air transport bouncing back and foreign trade and dynamic domestic trade posting higher growth, added value expressed in real terms increased in 2004 by 7.7% (vs. 4.3% in 2003) for market services. Similarly, investments in current prices went up by 2.1% vs. 1% in 2003, influenced in particular by the greater volume of infrastructure projects in the fields of road transport and communications. A. TRANSPORT With the gradual improvement in 2004 of the difficult international conditions in effect since the end of 2001, transport enjoyed a rebound, in line with good performance in tourism and trade. Reforms in this sector continued, with a view to enhancing its contribution to the economic and social development of the country and to boosting its competitiveness as it faces tougher international competition. This involves in particular higher productivity, quality services and cost containment. To this end efforts focused on liberalisation of a number of activities at Tunisair, finalisation of feasibility studies relating to the new Enfidha Airport of central-eastern Tunisia and carrying out of new infrastructure projects in the field of land transport. For all these reasons public authorities continued to work to clear up and develop the transport sector, in line with Xth Development Plan orientations that target in particular privatisation of passenger road transport and restructuring of companies working in all branches of transport. Upgrading activities continued quite actively in 2004 in the field of maritime transport, including in particular restructuring of lighterage and handling as well as the implication of private companies in the construction and exploitation of harbour facilities through the use of franchises. Feasibility studies relating to extension and modernisation of the rail system in the greater Tunis area were carried out. This involves in particular installation of rails for the light metro system to extend coverage to the university campus in Mannouba and the suburb of El Mourouj as well as electrification of the rail line linking the southern suburbs to the capital. These projects are likely to improve transport conditions and thus related services. In this same line of thought, measures were taken to facilitate the flow of rail and land traffic at key intersections, especially by building gradients and level crossings at a number of stations in the suburbs south of Tunis. At the same time, the programme to upgrade and restructure a number of public enterprises continued in 2004, as was the case for the Tunisian National Railway Company (SNCFT) and Tunisair. The latter launched a global upgrading programme, which includes the sale of certain activities to private companies, notably catering, maintenance and ground services. As for results recorded in transport over 2004, investments decreased by 3.3% to about 1,015 MTD, 12.9% of gross fixed capital formation (GFCF). Funds went in particular for strengthening and renovation of railways, acquisition and modernisation 69 of rolling stock, and ongoing upgrading of various ports and airports. Added value in the sector, expressed in real terms, was up 7% in 2004, compared to just 2.2% the year before, especially after recovery in air transport. Thus its contribution to overall economic growth went up to 6.1% or 0.36 of a percentage point, compared to 2.2% or 0.12 of a point a year earlier. 1. Maritime transport At the end of 2004 the national fleet was made up of 5 ships owned by the Tunisian Navigation Company (CTN), 4 boats held by the New Transport Company of Kerkennah (SONOTRAK) and 5 units for private companies that work in the transport of hydrocarbons and phosphoric acid. The total number of ships entering Tunisian commercial ports was down for the second year in a row (-1.7% vs. -4.4% in 2003). It amounted to 6528 units with a total transport capacity of 21 million tons, the equivalent of a total gross gauge of 71.7 million tons1, compared to 20.6 million tons and 67.3 million tons the year before. Aside from the ports of Sfax, Bizerte and Zarzis, all other ports recorded a higher volume of maritime traffic.
NUMBER OF SHIPS ENTERING TUNISIAN PORTS (Units) Variation in % Description 2001 2002 2003 2004 2003/2002 2004/2003 Tunis-Goulette-Rades 3,283 3,017 2,774 2,925 -8.1 5.4 of which : Rades 1,735 1,727 1,501 1,567 -13.1 4.4 Sfax 1,411 1,476 1,547 1,341 4.8 -13.3 Bizerte 569 569 508 454 -10.7 -10.6 Gabes 686 662 616 674 -6.9 9.4 Sousse 524 661 556 558 -15.9 0.4 Zarzis 283 564 642 576 13.8 -10.3 Total 6,756 6,949 6,643 6,528 -4.4 -1.7 Source : Merchant Marine and Port Authority (OMMP) The structure of traffic by type of ship underwent changes in 2004, with an increase in the shares of cruise ships, car ferries, container ships and bulk carriers : 5.7%, 10.3%, 9.5% and 17.9%, respectively. Inversely, the shares of oil and gas tankers, roll-on/roll-off ships and special-purpose boats fell to 5%, 13.9% and 14.4%, while the share of conventional ships remained virtually unchanged at 23%. In relation to sustained growth in foreign trade, international transport of goods bounced back in 2004. In effect, the volume of incoming freight was up 2.1%, influenced in particular by higher imports of cereals (exclusive of hard wheat), sugar, soy cakes, chemical products, wood, iron, cast iron and steel, and paper and cardboard. Similarly, the volume of outgoing freight went up 8.7%, influenced mainly by higher exports of olive oil, crude oil, phosphate by-products and cement.
1 International unit of volume to gauge ships, equivalent to 2.83 cubic meters. 70 TRENDS IN SHIPPING TRAFFIC (In thousands of tons) Description 2 0 0 3 2 0 0 4 Variation in % Entries Exits Entries Exits Entries Exits International traffic 12,895 8,820 13,163 9,583 2.1 8.7 Port of Tunis-Goulette-Rades 4,262 891 4,858 972 14.0 9.1 of which : Port of Rades 3,431 860 3,944 937 15.0 9.0 Port of Sfax 2,192 2,240 2,040 2,173 -6.9 -3.0 Port of Bizerte 2,909 981 2,760 977 -5.1 -0.4 Port of Gabes 2,179 1,724 2,167 1,885 -0.6 9.3 Port of Sousse 1,138 234 1,089 340 -4.3 45.3 Port of Zarzis 215 422 249 528 15.8 25.1 Port of Skhira and offshore Platforms 1 0 2,328 0 2,708 16.3 Coastal 2 987 987 869 869 -12.0 -12.0 Port of Tunis-Goulette-Rades 269 0 256 0 -4.8 - of which: Port of Rades 269 0 256 0 -4.8 Port of Sfax 24 29 16 14 -33.3 -51.7 Port of Bizerte 620 198 553 108 -10.8 -46.3 Port of Gabes 54 0 17 0 -68.5 Port of Sousse 6 0 0 0 -100.0 - Port of Zarzis 14 0 27 0 92.9 - Port of Skhira and secondary ports 0 760 0 747 -1.7 Total 13,882 9,807 14,032 10,452 1.1 6.6 Source : Merchant Marine and Port Authority (OMMP) Coastal shipping handled oil and by-products, phosphoric acid, clinker and drilling equipment, down 12% vs. an increase of 37.8% in 2003. The volume of this merchandise dropped from 987,000 in 2003 to 869,000 tons in 2004. This drop was due mainly to lower tonnage of crude oil going from the port of Skhira to that of Bizerte, with no clinker at all shipped from Bizerte to Gabes, as was the case the year before. The Tunisian Navigation Company (CTN) has a merchandise transport fleet that pretty much meets requirements for capacity, security and rapidity. There are two roll-on/roll-off ships and a bulk carrier, and foreign boats are chartered as required. Thanks to its expertise in land logistics and trans-shipment, the company is able to handle on a large-scale basis containers coming from and going to the rest of the world. Shipped tonnage went up by 18.3% in 2004 to more than 1.5 million tons. 1,219,000 tons of this total (81%) were carried on regular lines linking Tunisia to other countries in the Mediterranean, about 43% of which used their own ships. Client demand for transport of merchandise on solid and liquid bulk carriers involved 289,000 tons, up almost 15% over the 2003 figure. CTN’s share in total maritime commercial traffic (exclusive of coastal shipping) increased by 0.7 of a percentage point to 6.6%. Merchandise carried by private companies maintained a 5.4% market share, with Gabes Marine Tankers (GMT) transporting about 725,000 tons of phosphoric acid to India and Europe, 38% more than in 2003.
1 Crude oil only. 2 Coastal shipping here involves only national commercial ports. But since the number of entries of merchandises is higher than exits, the gap is absorbed under the heading “Port of Skhira and secondary ports”. 71
Passenger traffic coming into and leaving from national ports continued to grow in 2004, though at a slower pace than a year before: 4.4% vs. 11%, to 549,000 travellers. As in the past, the port of La Goulette handled virtually all passenger traffic, the remainder going through the ports of Bizerte, Sousse and Sfax. Much of this traffic involves the summer visits of Tunisians resident abroad, with Tunis-Marseille and Tunis-Genoa remaining the predominant lines.
INTERNATIONAL MARITIME GOODS TRAFFIC BY PORT
1994 Tunis-Goulette- 2004 18.5% 24.0% Rades Sfax 25.7% 16.8% 20.8% Bizerte 16.4%
Gabes
Others 17.8% 20.8% 17.6% 21.6%
There were 194,844 passengers travelling with their vehicles in 2004, 103,558 incoming and 91,286 outgoing, compared to 183,971 a year earlier. The difference (12,272 units vs. more than 16,000 in 2003) corresponds to that part of remittances provided in kind by Tunisians resident abroad. Like passenger traffic, vehicle traffic continued to go virtually entirely through the port of La Goulette. CTN’s share increased from 64.6% to 65.5% of passenger traffic and from 68.7% to 69.2% of vehicle traffic. Cruise traffic grew in 2004 in line with the new wave in global tourism. The number of tourists transported was up 26.4% to 450,000 people. As usual, the port of La Goulette handled the majority of this traffic: about 415,000 tourists, 92% of total.
PASSENGERS ENTERING THE PORT OF TUNIS-GOULETTE (In thousands of passengers) Variation in % Description 2001 2002 2003 2004 2003/2002 2004/2003 Passagers entries 233 249 275 280 10.4 1.8 Passagers exits 214 225 251 269 11.6 7.2 Total 447 474 526 549 11.0 4.4 Source : Merchant Marine and Port Authority (OMMP) 2. Air transport Renewed activity in tourism in 2004 stimulated growth in air transport, as seen in the considerable increase in the number of planes recorded at the country’s international airports and especially in the number of passengers. In effect, the number of arriving and departing planes at Tunisia’s seven international airports was up 13.5% in 2004, for a total of 92,200. This increase held for all airports except Gafsa, where traffic
72 stagnated. Global traffic was made up of regular flights (36.3%), charter flights (46.5%) and domestic lines (17.2%). Passenger traffic, which had decreased for two years in a row, was up by a strong 21.2% in 2004 to 9.6 million people. The majority of this traffic (8.8 million passengers or more than 94%, vs. 93% a year earlier) consisted of international flights (+22.9%), essentially charter flights, which represented a 63.3% share vs. 59.5% in 2003.
COMMERCIAL PLANE AND PASSENGER TRAFFIC AT INTERNATIONAL AIRPORTS (In thousands) 2 0 0 3 2 0 0 4 Variation 2004/2003 in % Description Planes1 Passengers2 Planes1 Passengers2 Planes1 Passengers2 Tunis-Carthage 34.4 3,049.2 36.9 3,449.2 7.3 13.1 Monastir-Skanes 22.4 2,841.9 27.9 3,667.4 25.1 29.0 Jerba-Zarzis 17.9 1,804.2 20.3 2,240.4 13.4 24.2 Sfax-Thyna 4.1 76.7 4.4 73.3 7.1 -4.4 Tozeur-Nefta 1.4 69.9 1.5 87.9 7.1 25.8 Tabarka-November 7th 0.6 57.3 0.7 57 16.7 -0.5 Gafsa-Ksar 0.4 11.7 0.4 10.7 0 -8.5 Total 81.2 7,910.9 92.2 9,585.9 13.5 21.2 Source : Civil Aviation and Airport Authority (OACA) Inversely, air traffic on domestic lines fell by 1.4% vs. 3.1% a year earlier, transporting 540,000 passengers, most of whom went through Tunis-Carthage (43%) and Jerba-Zarzis (37%). There were significant increases at Tunis-Carthage (13.1%), Monastir-Skanes (29.0%), Tozeur-Nefta (25.8%) and especially Jerba- Zarzis (24.2%), but other airports recorded lower figures. In 2004 the Tunisian Air Company (Tunisair) managed to overcome the adverse conditions prevailing over the past few years and to boost growth, thanks to better use of its fleet of 29 planes, all modern Airbus and Boeing models. With a higher average rate in plane occupancy, up from 66.6% in 2003 to 69.5% in 2004, the total number of passengers on Tunisair grew by 23% to more than 3.6 million. This included 53.5% in regular international traffic (including supplementary flights), 45.9% in charter flights and 0.6% for the pilgrimage. Higher traffic for this company came mainly from charter flights, up 36.6% to 1.7 million passengers. This is all the more remarkable because there was considerable competition from other airlines, especially in the area of available capacity and rates. Thus Tunisair managed to increase its market share to 29.5% of charter flights and 60.8% of regular international traffic, compared to 26.8% and 60% in 2003. Globally, market share for passenger international traffic (irrespective of category) was up about one percentage point to 40.9%. It grew in particular on traditional markets like Germany (30%), France (11%), Italy (17%), Austria (26%), Spain (48%) and the Czech Republic (64%). But there was also higher traffic to the Middle East (+23%) and Africa (+21%), as new lines opened over the past two years: Beirut-Dubai and Abidjan-Bamako, for example, and greater frequency was added for the Tunis- Nouakchott-Dakar flight.
1 Number of planes recorded upon arrival and departure. 2 Number of passengers recorded upon arrival and departure and in transit. 73
Passenger traffic on Nouvelair was up a high 32% to 1.2 million, in line with the greater number of planes used both in summer and winter. This favourable trend involved classic markets in western Europe (France, Italy, Germany, the United Kingdom, Belgium and Switzerland) but also relatively new ones in central and eastern Europe (like the Czech Republic, Poland, the Slovak Republic, and Rumania). In the framework of fleet modernisation, 10 planes were in service over the winter, including 8 Airbus A320 planes. Two more A320s were added over the summer to meet seasonal needs and market share increased from 22% to 23%. Commercial freight, handled at all of the country’s airports, was up 2.6% (after a drop of about 6% in 2003) to 21,200 tons. More than 94% of this traffic continued to go through the Tunis-Carthage Airport.
PASSENGER TRAFFIC BY AIRPORT 1994 2004 23.4% 20.0% 2.5% 2.4% Tunis-Carthage Monastir-Skanes
Jerba-Zarzis Others
36.0% 40.5% 37.0% 38.2%
3. Land transport There were only modest results in 2004 for rail transport, both freight and passenger, but sustained growth overall for road transport. a. Rail transport Freight carried by the Tunisian National Railway Company (SNCFT) was down for the third straight year, by 4.2% (vs. -3.4% in 2003), involving 2 million ton-kilometres. This drop involved mainly the volume of transported phosphates, fertilisers and sulphur, representing more than 85% of total merchandise carried by rail.
74 RAIL FREIGHT (In million ton/kilometres) Variation in % Description 2001 2002 2003 2004 2003/2002 2004/2003 Phosphate 1,613 1,661 1,614 1,540 -2.8 -4.6 Iron ore1 44 35 19 15 -45.7 -21.1 Building materials 203 124 134 157 8.1 17.2 Fertiliser and sulphur 281 279 294 240 5.4 -18.4 Cereals 64 85 61 71 -28.2 16.4 Energy 1 0 0 0 Others 80 67 52 59 -22.4 13.5 Total 2,286 2,251 2,174 2,082 -3.4 -4.2 Source : SNCFT Passenger traffic on SNCFT was up a slight 1.7% (after falling by 2.2% a year earlier) to 36.3 million. Of this total, 5.3 million travellers took long-distance lines while the majority (31 million) took short-distance lines mainly to and from the southern suburbs of Tunis.
DEVELOPMENT IN RAIL PASSENGER TRAFFIC (In million travellers) Variation in % Description 2001 2002 2003 2004 2003/2002 2004/2003 Tunisian National Railroad Company 43.0 36.5 35.7 36.3 -2.2 1.7 (SNCFT) -Long distance routes 5.7 5.3 5.0 5.3 -5.7 6.0 -Short distance routes 37.3 31.2 30.7 31.0 -1.6 1.0 Tunis Rapid Transit Company (SMLT) 118.1 122.1 124.0 121.6 1.6 -1.9 - Metro lines 99.7 103.9 106.3 104.6 2.3 -1.6 - Tunis-Goulette-Marsa line 18.4 18.2 17.7 17.0 -2.7 -4.0 Source : SNCFT and SMLT Inversely, passenger traffic carried by the Light Metro Company of Tunis (SMLT) was down 1.9%, vs. +1.6% a year earlier. This involved 121.6 million people, 104.6 million of whom took the light metro lines that serve several Tunis suburbs. The rest rode on the Tunis-Goulette-Marsa (TGM) line, where traffic was down by 4% vs. -2.7% in 2003. b. Road transport Restructuring and liberalisation of transport continued in 2004, reflected in particular in start-up of two new private passenger transport companies. The first, ‘urban and suburban transport’ (TUS), began operations on 9 November 2004 with 10 lines. The second, ‘mass transit company’ (STC), will run lines between big cities that do not have enough good mass transit links. Major new initiatives were also carried out in 2004 in the field of infrastructure. In particular, roads were rehabilitated and traffic cloverleaves built to boost road security and improve traffic flow. A significant effort went into replacing and maintaining rolling stock. Consequently, passenger road traffic was up 2.6% in 2004 to 702 million, 337 million (48%) of whom were carried by the Tunis Transport Company (TRANSTU), where
1 This includes iron, lead and zinc.
75 activity was up 1.8%. The number of travellers carried by overall regional companies that offer urban and suburban bus service was up 3.5% to 356 million users. Inversely, the number of travellers transported by the National Interurban Transport Company (SNTRI) stagnated at 3.6 million. The operational bus fleet was down by 13 to 181, given that a portion of rolling stock was quite old and competition on the rise. Private mass transit was handled mostly by two companies that have been in operation for a number of years. The number of travellers carried by the Traveller Mass Transit Company (TCV), which runs lines in the greater Tunis area, remained at about the same 3.2 million passenger figure as the year before. 1.4 million (43%) of these passengers rode the Tunis-Marsa line. But passenger traffic for the Tunisian Urban Transport Company (TUT), which has a fleet of 32 buses, was up slightly to 2.4 million passengers. There was greater participation by other private passenger road transport operators. Data available as of mid-September 2004 shows 635 new permits for taxis, 338 for rental cars and 371 new authorisations for rural transport, bringing totals to 22,085, 7734 and 8141 respectively. The International Company for Road Transport of Freight (TIR) continued to enjoy higher growth, in line with the higher volume of foreign trade. The number of operators increased from 57 operators carrying 8900 tons in 2003 to 58 in 2004 with a global carrying capacity of 9400 tons. B. COMMUNICATIONS This sector has undergone rapid development worldwide over the past few years, making greater use of various information and communication technologies (ICT) in different aspects of economic and social life. This deep-seated change on the international scene motivated Tunisia to carry out a comprehensive strategy to promote various components of this sector and to adapt them to the requirements that are continually changing in today’s society. To reach these objectives, emphasis has been put on consolidating and modernising basic infrastructure by strengthening and expanding communication networks while also introducing new technologies, implementing appropriate organisational and regulatory frameworks and developing partnerships with foreign operators. Thanks to these efforts Tunisia has succeeded in making a significant qualitative jump, becoming the choice of the international community to organise and host the second phase of the World Summit on the Information Society (WSIS) that will be held in Tunis 16 - 18 November 2005. Added value in communications, one of the main levers in the development process, grew in real terms by 21% (vs. 19.5% the year before). At the same time its share increased to 5.9% (vs. just 3.9% in 2001), while its contribution to global economic growth amounted to about 18% or 1.1 of a percentage point vs. 16% and 0.9 of a point the year before. This is because investment in the ICT sector grew steadily for
76 the year, up 32.5% to 1,409 MTD (vs. 1,063 MTD the year before), 17.6% of the overall total, leading to about 10,000 permanent new jobs. Implementation of the national programme to promote the ICT sector was highlighted in 2004 by ongoing development of computer systems and communication networks so that they are used to a greater extent in the production process and encouragement to make the intangible investments that are needed. A particularly important effort has been made to develop infrastructure, an indispensable condition to build a knowledge-based society. Available statistical indicators show the following for 2004: - a 94% increase in the number of subscribers to mobile phone networks, to 3.7 million (vs. 1.9 million in 2003); - an ongoing increase in land lines, up more than 3% to 1.2 million units (vs. 375,000 in 1992), with a 100% rate of geographic coverage and a ratio of 35.6 lines per 100 households; - an increase in the number of computers to 472,000 units, three times the number in 1997, with a rate of penetration of computers in households up to 7%, corresponding to 4.76 units per 100 inhabitants; - the rapid evolution of the internet network, bringing the number of subscribers to 121,000, compared to 91,800 in 2003 and just 2400 in 1997, a ratio of 12.11 subscribers per 1000 inhabitants vs. just 7.8 in 2002. As for the dissemination of information technology products and services, banks, insurance companies and the Administration remain the main users. Export of computer services continues to increase at a steady pace. France, the countries of the Maghreb and the other French-speaking African nations are the main clients for Tunisian ICT products. In the field of postal services, major advances have also been achieved, illustrated by the following: - extension of the postal network to more than 1012 post offices; - modernisation of postal services and postal financial services by introducing new technologies, developing monetics and having the Tunisian Post join the banking electronic clearing system; - introduction of electronic money called “e-dinar” to pay bills and to make commercial transactions via internet, a move that is likely to boost electronic commerce. Progress has been made in television and radio broadcasting over the past few years, notably: - total radio coverage throughout all of Tunisia; - ongoing increases in the rate of coverage for public TV stations Canal 7 and Canal 21, increasing to 99.7% of the population; - setting up of a private TV station; - setting up of a private radio station.
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C. TOURISM Tourism recovered in 2004 both worldwide and in Tunisia, under the influence of renewed economic growth and a stable international environment. 1. Trends in world tourism After three years of slower growth of its main indicators, world tourism posted strong recovery in 2004. The number of international tourist arrivals reached a record level of 760 million, 10% more than the 2003 figure, after a 1.7% decrease the year before. This is the highest growth rate since 1984, attributable to greater economic growth in the main regions from which tourists come, notably Europe, America and Japan as well as an end to the SARS epidemic in eastern Asia and the Pacific. Other factors for the rebound in tourism around the world that benefited virtually all regions were lower costs for air transport and hotel accommodation, with more all- inclusive packages and greater recourse to last-minute reservations, along with the phenomenon of shorter stays. In this context world tourism generated 600 billion dollars in 2004 compared to 514 billion a year earlier. By region, Europe continued to occupy by far the first place in world tourism, with a 54.5% market share. There were 414 million tourists (3.8% more than in 2003) vs. virtual stagnation (0.5%) the year before. This held for all regions, especially northern Europe (8.5%) and central and eastern Europe (7.4%). It was western Europe that posted the lowest growth rate (2.2%) with 139 million tourist arrivals, influenced by considerable appreciation of the euro. The eastern Asia and Pacific region recorded the highest increase in number of visitors, up 29.2% to 146 million visitors, after falling by 9.6% the year before. Its share of world total thus increased from 16.4% in 2003 to 19.2% in 2004. But the devastating effects of the tsunami that struck the region in late December are likely to adversely affect tourism at least in the opening months of 2005. Meanwhile, southern Asia welcomed 8 million tourists, an increase of 33.3%. There were 124 million international tourists travelling to the American continent in 2004, a 9.7% increase after the 3.4% decrease in 2003. But its market share remained at a virtually unchanged 16.3%. This better performance is attributable mainly to improved economic conditions both in the region and worldwide. The Middle East welcomed 35 million visitors in 2004, including 8 million tourists in Egypt. This represents a significant increase in tourist flows : 20.7% vs. just 3.6% in 2003. This was also the case for Africa, with 33 million tourists (+6.5%), with 20 million visiting sub-Saharan Africa and 13 million North Africa, of which some 6 million travelled to Tunisia. World ranking maintains France in first place as a tourist destination with 75.1 million entries, followed by Spain, the destination for 53.6 million tourists.
78 TRENDS IN WORLD TOURIST ARRIVALS In millions Share in % Variation in % Regions of tourists 2003 2004 2003 2004 2003/2002 2004/2003 Europe 399 414 57.7 54.5 0.5 3.8 America 113 146 16.4 19.2 -9.6 29.2 Eastern Asia and Pacific 113 124 16.4 16.3 -3.4 9.7 Africa 29 35 4.2 4.6 3.6 20.7 Middle East (including Egypt) 31 33 4.5 4.3 3.3 6.5 South Asia 6 8 0.8 1.1 0.0 33.3 Total 691 760 100.0 100.0 -1.7 10.0 Source : World Tourism Organisation 2. Tourist activity in Tunisia a. General trends Tourism in Tunisia was marked in 2004 by a sharp increase in the main indicators for the sector, notably foreign tourist entries (+17.3%), overall bednights (+19.1%) and foreign currency earnings (20.3%). Added value for the sector was up significantly in 2004 : +8.2% in real terms vs. 2.3% the year before. Thus its share of GDP expressed in current prices increased from 5.6% in 2003 to 5.7% in 2004. There was more tourist activity in all zones, but especially Yasmine-Hammamet, Jerba-Zarzis, Monastir-Skanes and Nabeul-Hammamet. At the relatively recently created zone of Yasmine-Hammamet (with its 37 hotels – including 23 four star hotels and 12 five star hotels - and approximately 14,000 available beds) overall bednights were up 52.7% (vs. 14.7% in 2003) to 2.5 million units, 7.5% of total. The relative occupancy rate was thus up 13.5 percentage points to 55.6%. Such performance was underpinned by stronger economic growth in the countries of the European Union, traditionally the main home base of tourists, but also by a more competitive Tunisian tourism product from the point of view of price/quality. This was made possible by upgraded service to tourists, a more diversified range of tourist offerings, and better promotion and marketing. But although results were better, they were not as good as in 2001 for certain indicators, notably European entries (-3.5%), non-resident bednights (-7.1%), foreign currency earnings (-2.2% or -51 MTD) and average expenditure by tourist (382 dinars vs. 435 dinars). As was the case in past years, marketing continued to play a decisive role in attracting more tourists from both traditional markets and elsewhere, thanks to advertising and active participation by Tunisia in various cultural and tourist events abroad. Investment in tourism in 2004 remained at about the same 320 MTD level as the year before, 4.1% of overall GFCF. These funds were devoted to building of new hotels, creating an additional operating accommodation capacity by about 4000 beds (+1.8%) vs. 8000 beds (+3.7%) in 2003, totalling 226,000 beds by the end of the year. Higher capacity concerned mainly the tourist zones of Monastir-Skanes (+1248 beds), Sousse-Kairouan (+1095 beds) and Yasmine-Hammamet (+698 beds).
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There were 10 new hotels, including 5 four-star hotels, bringing the total to 800 as of end December 2004. Most of these hotels (368 or 46% of total) are three or four-star hotels. By region, Jerba-Zarzis remained in first place with 152 hotels, followed closely by Nabeul-Hammamet (137), then Tunis-Zaghouan (113) and Sousse- Kairouan (109). Average operational accommodation capacity reached 188,000 beds, up by almost 5000 beds or +2.7% vs. 3.4% in 2003. This increase involved mostly Yasmine- Hammamet (1662 beds), Monastir-Skanes (1008 beds) and Nabeul-Hammamet (985 beds). MAIN TOURISM INDICATORS Variation in % Description Unit 2002 2003 2004 2003/2002 2004/2003 Real growth of added value % -4.5 2.3 8.2 Added value in current 5.7 5.6 5.7 prices/GDP % Investments -In value MTD 340 320 320 -5.9 0.0 -In % of overall GFCF 4.5 4.2 4.1 Available capacity -End of period 1000 beds 214 222 226 3.7 1.8 -Monthly average 1000 beds 211 217 223 2.8 2.8 Operational accommodation capacity (monthly average) 1000 beds 177 183 188 3.4 2.7 Non resident tourist entries 1000 beds 5,064 5,114 5,998 1.0 17.3 Overall bednights 1000 beds 28,519 28,110 33,487 -1.4 19.1 -Non resident tourist bednights 1000 beds 25,897 25,301 30,665 -2.3 21.2 -Resident bednights 1000 beds 2,622 2,809 2,822 7.1 0.5 Occupancy rate 1 -Absolute % 36.5 34.7 40.5 -Relative % 44.0 42.0 48.7 Average length of stay Days 5.1 4.9 5.1 -3.9 4.1 Gross foreign currency earnings -In value MTD 2,021 1,903 2,290 -5.8 20.3 -In % of current earnings 13.2 11.9 12.3 Expenditure per bednight TND -General average TND 78 75 75 -3.8 0.0 -Maghrebians excluded TND 69 66 66 -4.3 0.0 Expenditure per tourist TND -General average TND 399 372 382 -6.8 2.7 -Maghrebians excluded TND 577 551 549 -4.5 -0.4 Source : Tunisian National Tourism Board ; Ministry of Development and International Cooperation and BCT
1 The absolute occupancy rate is calculated with reference to overall bednights and to available accommodations, while the relative occupancy rate is determined in relation to the same bednights and the accommodations actually offered. 80 TRENDS IN AVAILABLE CAPACITY PER TOURIST ZONE Number of beds (in units) Structure in % Zones Variation 2003 2004 2003 2004 2004/2003 in % Jerba-Zarzis 49,317 49,662 0.7 22.2 22.0 Nabeul-Hammamet 44,550 44,830 0.6 20.1 19.8 Sousse-Kairouan 38,252 39,347 2.9 17.2 17.4 Monastir-Skanes 23,535 24,783 5.3 10.6 11.0 Tunis-Zaghouan 22,475 22,601 0.6 10.1 10.0 Yasmine-Hammamet 13,377 14,075 5.2 6.0 6.2 Mahdia-Sfax 11,657 11,657 0.0 5.3 5.2 Gafsa-Tozeur 10,395 10,486 0.9 4.7 4.6 Tabarka-Aïn Draham 5,220 5,278 1.1 2.4 2.3 Bizerte-Beja 2,699 2,865 6.2 1.2 1.3 Sbeïtla-Kasserine 541 569 5.2 0.2 0.2 National Total 222,018 226,153 1.8 100.0 100.0 Source : Tunisian National Tourism Board b. International tourism (i) Non resident entries Tunisian tourism was marked in 2004 by the arrival of 6 million tourists, a record level that was 17.3% above the previous year’s figure, vs. just 1% in 2003. This development was made possible by the major rebound in European tourist entries, up 22.6% (vs. a drop of 2.7% in 2003) to 3.5 million tourists or 58% of total. There were higher numbers for all nationalities, especially traditional clients like the French (+22.4% vs. -5.8% in 2003), the Germans (+16.6% vs. -20.5%), the Italians (+17.9% vs. 1.3%) and the English (+35% vs. -13.6%). These four nationalities together account for more than two thirds of total European tourists. Maghreb entries also grew at a faster pace of about 10% vs. 6.1% a year before. This involved mainly Algerians (12.7% vs. 11.4%) and Libyans (8.3% vs. 3.5%). For the third straight year Libyans continued to represent the number one nationality to visit Tunisia, with more than 1.4 million tourists or 24% of total. The numbers were also up significantly for visitors from the Middle East (+19.4%), North America (+31.8%) and Africa other than the Maghreb (+44.4%).
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ENTRIES AND BEDNIGHTS OF NON RESIDENTS BY NATIONALITY Variat.2004/2003 Entries (in thousand persons) Bednights (in thousand units) Description in % 2002 2003 2004 2002 2003 2004 Entries Bednights Europe 2,919 2,840 3,482 24,418 23,670 28,873 22.6 22.0 of which : Germany 885 834 1,021 6,067 5,671 6,835 22.4 20.5 France 614 488 569 6,805 5,499 6,535 16.6 18.8 Italy 375 380 448 2,679 2,712 3,251 17.9 19.9 Great Britain 258 223 301 2,678 2,290 2,964 35.0 29.4 Belgium 122 133 141 1,102 1,268 1,396 6.0 10.1 Switzerland 94 86 99 758 650 740 15.1 13.8 Austria 77 70 84 553 465 544 20.0 17.0 Spain 74 78 115 582 626 864 47.4 38.0 Scandinavia 67 70 81 570 624 646 15.7 3.5 Netherlands 49 44 54 352 330 364 22.7 10.3 Czech Repub. 59 90 128 583 984 1,289 42.2 31.0 Poland 37 54 75 353 525 748 38.9 42.5 Russia 47 73 99 503 859 1,181 35.6 37.5 Maghreb 2,054 2,179 2,394 832 890 866 9.9 -2.7 of which : Algeria 728 811 914 498 581 565 12.7 -2.8 Libya 1,281 1,326 1,436 284 257 247 8.3 -3.9 Morocco 39 35 36 50 52 54 2.9 3.8 Middle East 30 31 37 101 114 138 19.4 21.1 America (USA & Canada) 22 22 29 140 185 243 31.8 31.4 Africa, Maghreb excluded 12 18 26 59 93 114 44.4 22.6 Miscellaneous 27 24 30 347 349 431 25.0 23.5 Total 5,064 5,114 5,998 25,897 25,301 30,665 17.3 21.2 Source : Tunisian National Tourism Board (ii) Non resident bednights Along with the higher number of tourists, non-resident bednights increased in 2004 at a high 21.2% rate, after dropping by 2.3% the year before. They rose to 30.7 million, more than 94% for Europeans, who spent 22% more bednights in 2004 than in 2003. This compares to a drop of 3.1% in 2003. The higher number of bednights was generated in particular by the French (+20.5% vs. -6.5%), the Germans (+18.8% vs. -19.2%) who remained in second place for the second year in a row, and the English (+29.4% vs. -14.5%). Italian tourists also posted more bednights, up by a sharp 19.9% in 2004 vs. 1.2% in 2003. Bednights for visitors from the Maghreb, however, were down by 2.7% in 2004, after a 7% increase the year before, involving both Libyans (-3.9% vs. -9.5%) and Algerians (-2.8% vs. 16.7%). This is because a large portion of tourists from neighbouring countries prefers to rent their own accommodations to the detriment of hotel stays, while another category comes for shopping and spends only a short time in Tunisia.
82 Non resident entries Non resident bednights (in thousands) (in thousands)
5998 33151 33168 33006 5387 30665 5057 5064 5114 4832 25897 25301
1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004
(iii) Average length of stay The average length of stay was up only slightly, from 4.9 to 5.1 days, an unsatisfactory level that is lower than the 6.1 day average length of stay recorded in 2001. This was due to new tourist patterns, especially for Europeans, which involve more, shorter vacations to far-flung destinations and shopping around for lower fares. Thus the average length of stay for European tourists has remained at 8.3 days. This was the result of tourist stays by Scandinavians (8 days vs. 8.9 in 2003), the Dutch (6.7 days vs. 7.5), the English (9.8 days vs. 10.3) and the Spanish (7.5 days vs. 8). But length of stay increased for other nationalities, for example the Germans (11.5 days vs. 11.3 in 203), the Italians (7.3 days vs. 7.1) and the Poles (10 days vs. 9.7). (iv) Tourist earnings After two years of decreases, income from tourism was up 20.3% in 2004 (vs. 5.8% decrease a year earlier) to 2,290 MTD or 12.3% of total current income. This favourable progress was made possible by the high increase in non-resident entries and bednights and by appreciation of the euro, keeping tourism the number one foreign currency earner. Average expenditure per tourist increased by 2.7% to 382 dinars, compared to a 6.8% decrease in 2003. If visitors from the Maghreb are excluded, this average goes up to a higher level of 549 dinars, still 2 dinars (2.7%) less than the year before. This regression in average expenditure held for some European nationalities, especially the French, English, Spanish, Danish and Czechs. Average expenditure by bednight stood at 75 dinars (vs. 3.8% decrease a year earlier). Unlike expenditure per tourist, this average is even lower 66 dinars if Maghreb tourists are excluded. Despite the notable increase in foreign currency receipts, Tunisia would do well to enhance its standing against countries with which it competes. In effect, earnings were fairly high in 2004, notably for Egypt (more than 6.5 billion dollars), Turkey (15.9 billion dollars) and, to a lesser degree, Syria (2.2 billion dollars for 3 million tourists).
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To further boost earnings and to enhance ways for tourists to spend their money by diversifying options and improving service, tourism professionals need to renegotiate contracts on the basis of rates denominated in foreign currency, notably the euro, and to rule out price slashing, which is contrary to the rules of sound and fair competition and which could hurt the image of Tunisian tourism.
TOURIST EARNINGS (in MTD)
2,341 2,290 2,095 2,021 1,954 1,903 1,713 1,565 1,413 1,323
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 c. Domestic tourism Despite promotional measures, domestic tourism remains a weak point for the sector. Resident bednights more or less stagnated at 0.5% growth after an increase of 7.1% in 2003 and 12.6% in 2002, to 2.8 million. Their share in overall bednights fell from 10% in 2003 to 8.4% in 2004. In this context, new appropriate measures are needed to boost domestic tourism. Professionals will need to mobilise to boost this weak link in Tunisia’s tourist industry, which in effect is characterised by an average hotel stay of no more than 2.3 days per arrival. To help this promising activity get up to speed in the coming years it will be necessary to improve the welcome and quality of services to resident clients, along with application of rates that have been carefully calculated to attract clients all year long but especially during school vacations, holidays, and the summer. d. Analysis of regional tourism After recording drops over the past two years, overall bednights were up by a considerable 19.1% in 2004 to 33.5 million. This increase applied in varying degrees to all tourist zones, particularly Yasmine-Hammamet (52.7% vs. 14.7% in 2003), Jerba-Zarzis (25.3% vs. -1.1%) and Monastir-Skanes (24.2% vs. 4.1%). Furthermore, a higher number of bednights was recorded at virtually all categories of hotels, especially four-star hotels (26.8% vs. 4.9% a year earlier) and five-star hotels (21.5% vs. 3.4%). In parallel, the average relative occupancy rate was up 6.7 percentage points to 48.7%. All tourist zones, more particularly traditional zones, posted a significant increase in this rate. This was the case in particular for Jerba-Zarzis, Sousse-
84 Kairouan, Monastir-Skanes, Yasmine-Hammamet and Mahdia-Sfax where occupancy rates continued to exceed the country’s overall average. By category of hotel the average relative occupancy rate for four-star hotels continued to be the highest (55.5% vs. 47% in 2003), followed by five-star hotels (49% vs. 41.2%) then three-star hotels (48.6% vs. 41.3%). These are the categories of hotel that together make up almost 83% of average operational accommodation capacity. It is important to note that the relative occupancy rate was up considerably for the high season (86% vs. 73% in 2003) and middle season (50.9% vs. 41.7%). The increase was more modest for low season (2.6 points), up from 24.7% in 2003 to 27.3% in 2004. BREAKDOWN OF BEDNIGHTS AND RELATIVE OCCUPANCY RATE BY TOURIST ZONE Overall bednights Occupancy Region 2003 2004 Variation in % rate in % In In % of In In % of 2003/2002 2004/2003 2003 2004 thousand the total thousand the total Jerba-Zarzis 6,631 23.6 8,306 24.8 -1.1 25.3 45.6 56.4 Sousse-Kairouan 6,758 24.0 7,246 21.6 2.4 7.2 52.0 55.0 Nabeul-Hammamet 4,912 17.5 5,944 17.8 -13.0 21.0 36.4 42.8 Monastir-Skanes 3,043 10.8 3,779 11.3 4.1 24.2 45.4 53.3 Yasmine-Hammamet 1,649 5.9 2,518 7.5 14.7 52.7 42.1 55.6 Tunis-Zaghouan 1,989 7.1 2,142 6.4 -2.3 7.7 32.2 34.2 Mahdia-Sfax 1,580 5.6 1,784 5.3 0.4 12.9 44.0 51.4 Gafsa-Tozeur 857 3.0 1,029 3.1 -7.8 20.1 28.3 33.2 Tabarka-Aïn Draham 479 1.7 514 1.5 6.0 7.3 31.9 32.1 Bizerte-Beja 184 0.7 195 0.6 -2.6 6.0 22.1 23.8 Sbeïtla-Kasserine 28 0.1 30 0.1 0.0 7.1 15.8 16.7 Total 28,110 100.0 33,487 100.0 -1.4 19.1 42.0 48.7 Source : Tunisian National Tourism Board
3. Impact on the main sectors linked to tourism Activities linked to tourism such as air transport, handicrafts, trade and construction were for the most part on the rise in 2004. Air transport, one of the main sectors that is closely tied to tourism, posted a sharp increase in passenger traffic : 21.2% vs. -2.1% a year earlier. This development concerned mainly international lines (22.9% vs. -2%), while passenger traffic on domestic lines was down once again (-1.4% vs. -3.1% en 2003). To reverse this downward trend, due mainly to weak domestic tourism, new appropriate measures need to be taken. This could take the form of preferential rates and appropriate options that will encourage tourists, businessmen and others to use domestic lines and thus boost tourism in the various regions of the country. One such initiative is the measures taken recently with regard to Tabarka’s November 7th International Airport. D. DOMESTIC TRADE 1. General trends Added value for domestic trade continued to increase in 2004, up at a fairly brisk pace of 5.6% in real terms vs. 6.1% the year before. This progress took place along 85 with development of legislative and regulatory frameworks meant to strengthen competition and lower taxes and customs on the import of a number of capital goods, raw materials and agricultural products and foodstuffs. The relevant authorities and structures continued to carry out their role, which consists mainly in ensuring regular supply of the domestic market and safeguarding the interests of various participants, in full respect of the rules of competition and of transparency of transactions. In particular, the competition council and the consumer rights organisation widened their field of intervention, carrying out more awareness-building activities and resolving conflicts linked to trade activities, missions that have taken on more and more importance in the country’s current circumstances of economic liberalisation. At the same time, the domestic trade sector became more active, developing and modernising outlets and distribution centres in the framework of sector-related upgrading. In this context the main measures taken in 2004 concerned: - organisation of the national consultation to examine the current situation and the future of trade, which will help address concerns and envisage implementation of an action plan to modernise the sector, much like the industrial upgrading programme. The main elements of this plan would concern legislative and institutional frameworks, instalment plans, trade urbanisation, illegal trade, the tax system, financing and relations with the administration; - the lowering of customs duties, value added tax and consumer duty on a number of imported products, meant to improve supply of the domestic market and let market operators compete fairly. Commerce has for several years now moved steadily toward superstores (in partnership with foreign investors) and periodic organisation of fairs and exhibits of both a general and sector-related nature. It should be noted that consultation at the national level shows consumer preference for such superstores, where almost all products are available. Thus the main indicators for the sector were up in 2004, in particular for added value and job creation. 2. Market supply and distribution channels 2004 was characterised by favourable weather, unlike the previous year. This led to higher agricultural production and better supply of foodstuffs on the domestic market, especially during the second half of the year. There was however some limited disruption with supply of a number of sensitive products during gap periods. As in the past, recourse to buffer stocks and supplementary imports helped maintain balance on the market and keep retail prices down. There was normal market supply during periods of high consumption, for example during Ramadan, religious and yearend holidays, thanks to smoother distribution flows. Thus overall quantities of fresh vegetables on the Bir El Kassaa wholesale market went up by 15.2% over 2003, compared to a drop of 6.8% a year earlier. The same trend held for fruits, with quantities up by a sizeable 17% on this market, after 86 falling by 7.5% a year earlier. Seafood available on the market was up at about the same 7.6% rate as in 2003. Domestic market supply of non-food items also moved ahead under good conditions, thanks to the sustained increase in national production, higher imports and modernisation of distribution channels that are well established throughout the country. And periodic organisation of trade fairs and exhibits throughout the year along with the 6th «Tunisie Shopping» promotional campaign largely contributed to both quantitative and qualitative improvement in supply and inflation control, as prices went down significantly. 3. Trends in consumption and savings Global final consumption grew in 2004 : 5.2% in constant terms vs. 5% in 2003, slower pace for the second straight year compared to economic growth in real terms. This global trend reflects that of private consumption (5.3% as in 2003), while public consumption grew at a rate that was slightly higher than in 2003 (4.6% vs. 4.5%). MAIN INDICATORS OF TRADE SECTOR
Description Unit 2002 2003 2004 Real growth rate % 6.1 6.1 5.6 Contribution to economic growth % 33.7 10.6 8.9 Investment MTD 748.2 779.2 805.1 - Variation % 3.1 4.1 3.3 - Share in the GFCF % 9.8 10.3 10.3 Progress of final consumption in current prices % 6.7 8.0 8.8 -Public % 6.9 7.9 7.5 -Private % 6.6 8.0 9.1 Progress of final consumption in constant 1990 prices % 3.9 5.0 5.2 -Public % 4.3 4.5 4.6 -Private % 3.8 5.1 5.3 Average propensity to consume % GNAI 78.1 78.1 77.9 of which : households % 62.2 62.2 62.2 GNP/Capita Dinar 2,922 3,123 3,380 - Variation % 3.0 6.9 8.2 Private consumption per capita Dinar 1,915 2,045 2,222 - Variation % 5.5 6.8 8.7 Gross national savings MTD 6,610.2 7,100.7 7,845.0 - Variation % -2.6 7.4 10.5 - Savings rate % GNAI 21.9 21.8 22.1 Source : Ministry of Development and International Cooperation and National Statistics Institute With the overall level of price trends up under current conditions, mainly because of foodstuffs, global consumption expressed in nominal terms grew at a faster pace than a year earlier: 8.8% vs. 8%. Although private consumption was up (9.1% vs. 8% a year earlier), public consumption grew more slowly (7.5% vs. 7.9%). Nevertheless given the higher rate of economic growth, the average propensity to consume fell from 78.1% in 2003 to 77.9% in 2004. At the same time, national savings were up in 2004 at a faster pace than the year before : 10.5% vs. 7.4%, to 7,845 MTD or 22.1% of gross national available income (GNAI), compared to more than 7,101 MTD and 21.8% in 2003. 87
IV. PRICES
Under the combined effect of unfavourable exogenous factors, especially soaring prices on the international market for oil and other imported commodities, prices in Tunisia were marked in 2004 by faster rise in both production and retail sales notably for energy and foodstuffs. The increase in the overall index of industrial sale prices rose from 2.4% to 3.8% and that of general price index for household consumption went up from 2.7% to 3.6%. The faster growth in foodstuff prices that began in the summer of 2003 continued throughout the first half of 2004. In fact, sustained domestic demand was accompanied by a certain deficit in supply, due mainly to weather conditions. This situation developed along with higher import prices for a number of products such as energy (especially in the second half of the year) and for most raw materials and semi-finished products, such as cotton, rubber, plastic materials, cast iron, iron and steel, and other metals. The result was a sharp increase in production costs and consequently considerable increases in prices for a number of products at the level of distribution. To these factors were added appreciation of the euro and higher international freight costs. Furthermore, higher domestic demand (especially in household consumption) resulting from the faster pace of economic growth and job creation as well as higher instalment sales put some pressure on domestic prices. The price rise would have been even higher if it had not been for prudent monetary policy, continually adapting to economic situation requirements. Furthermore, better supply of foodstuffs on domestic markets thanks to a good agricultural season intervened in conjunction with stable level of subsidised prices for cereals and cereal- based products, reduced customs duty and other import levies on a number of products, development of distribution circuits and enhanced transparency in trade transactions. These actions were further strengthened by a lower State budget deficit and greater intervention by the general equalisation fund to support subsidised product prices despite higher costs, aside from recourse to buffer stocks, supplementary imports and price checks to guard against any excessive price hikes. The inflation rate in 2004 was well above the annual budget’s forecast. It also exceeded levels recorded in the main partner countries, especially in Europe and some competitor countries like Greece, Portugal and Morocco. But it was lower than in other competing countries like Egypt and Turkey. A. INDUSTRIAL SALE PRICES Contrary to the year before, the index of overall industrial sale prices rose at a faster pace in 2004. In effect, its rate of increase was up from 2.4% in 2003 to 3.8% in 2004. This upward trend concerned both manufactured and energy products,
88 influenced in particular by higher commodity prices. Inversely, prices for mining products continued on the downturn in effect since 2001. The increase for manufactured products, which account for 79.3% of all industrial sale prices index, was up from 2.5% in 2003 to 3.5% in 2004. This held for most sectors but especially agrofood and mechanical/electrical industries. In effect, the increase in agrofood prices reached 4.6% vs. 3.4% a year earlier, following higher prices for oils and fats (4.5% vs. 1.4%) because of the lower level of oil production for the 2004-2005 year as well as other products, especially slaughterhouse products (6.7% vs. 6.4%). ANNUAL TRENDS IN THE INDEX OF INDUSTRIAL SELLING PRICES (Base 100 in 1990) (In %) Description 2000 2001 2002 2003 2004 General index 2.2 1.8 2.6 2.4 3.8 Manufacturing industries 1.5 1.7 3.1 2.5 3.5 -Agrofood industries 2.9 2.1 4.8 3.4 4.6 -Building materials/ceramics/glass 0.6 0.8 4.5 4.9 3.0 -Mechanical and electrical Industries 0.7 1.2 1.0 2.1 5.3 -Chemical industries 0.3 2.1 0.4 3.4 2.7 -Textiles/clothing-leather/footwear 0 1.5 0.1 0.5 1.4 -Miscellaneous manufacturing Industries 0.3 1.8 3.0 0.8 1.2 Mining 4.6 - 5.8 -0.1 -11.0 -2.7 Energy 5.6 3.0 0.6 3.5 6.1 -Oil products and gas 8.1 2.7 0.2 3.2 6.9 -Electricity and water 1.3 3.5 1.4 4.1 4.5 Source : National Statistics Institute In mechanical and electrical industries, the increase in sale prices was brisker than a year earlier (5.3% vs. 2.1%), influenced by the extent of the increase in the rate of growth for steel product price (18.4% vs. 6.5%), while that of electrical material recovered (3.8% vs. -0.4%). Prices in textiles, clothing, leather and footwear continued for the most part on their upward trend at a slightly faster pace (1.4% vs. 0.5% in 2003), following in particular higher prices for hosiery (3.8% vs. -0.1%), clothing (2.4% vs. 1.3%), footwear (2.3% vs. 1.3%) and spinning products (0.5% vs. -0.8%). This was also the case for sale prices in miscellaneous manufacturing industries (1.2% vs. 0.8% a year earlier), a trend that affected mainly plastic, wood and cork items (1.3% vs. 0.4%), construction carpentry (1.8% vs. 1%) and miscellaneous manufactured products (1.4% vs. 0.5%). On the other hand, selling prices for building materials, ceramics and glass experienced slower growth, down from 4.9% in 2003 to 3% in 2004 in the wake of slower growth than in 2003 for ceramics (10% vs. 15.2%), binders and concrete products (1.5% vs. 3.5%). Prices for chemical products also grew at a slower pace (2.7% vs. 3.4% a year earlier) despite the sizeable increase in pharmaceutical products (8.9% vs. 4.7%) and recovery for fertiliser (3.9% vs. -1.9%). Inversely, prices grew more slowly than a
89 year ago for miscellaneous chemical products, paints and glues (1.3% for each of the two categories of products vs. 2.4% and 5.8% respectively in 2003). As for sale prices for energy products, the increase almost doubled, up from 3.5% in 2003 to 6.1% in 2004, influenced in particular by higher prices for oil and gas (6.9% vs. 3.2%) and electricity (4.7% vs. 3.8%), strongly affected by soaring prices on the international market for oil and its by-products. In the mining sector, sale prices continued to drop in 2004 (-2.7% vs. -11% the previous year).
INFLATION RATE 6 6
5 5
e ag
t 4 4 n e
c 3 3 per n
I 2 2
1 1 1997 1998 1999 2000 2001 2002 2003 2004
Global trend Foodstuff Housing
B. CONSUMER PRICES In terms of monthly averages the general price index for family consumption increased by 3.6% in 2004, vs. 2.7% the year before. This faster pace involved, to varying degrees, different groups of products except for transport and commu- nications.
In terms of annual slide prices rose but at a slower pace (1.1% vs. 4.5% a year earlier), following lower prices for foodstuffs starting in July thanks to plentiful harvests. For this category of products the price index showed a sustained drop over the last five months of the year, recording a cumulative decrease of 2% after the previous seven months’ 1.3% increase.
90 TREND IN CONSUMER PRICES IN TUNISIA AND PARTNER/COMPETITOR COUNTRIES (In %) Country 2000 2001 2002 2003 2004 France 1.7 1.7 1.9 2.2 2.3 Germany 1.5 2.0 1.4 1.0 1.8 Italy 2.5 2.8 2.5 2.8 2.3 Belgium 2.5 2.5 1.6 1.5 1.9 Spain 3.4 3.6 3.1 3.1 3.1 United Kingdom 2.9 1.8 1.3 1.4 1.3 United States 3.4 2.8 1.6 2.3 2.7 Japan - 0.7 - 0.7 -0.9 -0.2 0.0 Tunisia 2.9 2.0 2.7 2.7 3.6 Morocco 1.9 0.6 2.8 1.2 2.0 Algeria 0.3 4.2 1.4 2.6 5.4 Egypt 2.7 2.3 2.7 4.5 11.3 Jordan 0.7 1.8 1.8 2.3 3.5 Greece 3.2 3.4 3.6 3.4 3.0 Portugal 2.8 4.4 3.5 3.3 2.5 South Africa 5.3 5.7 8.0 5.8 1.4 Source : IMF In terms of averages, prices for foodstuffs (36.5% of the household shopping basket) were up 5% in 2004 vs. 3.4% in 2003. Thus despite slower growth starting in the summer, it was the main source of inflation, contributing 1.8 of a percentage point or 50% compared to 1.2 points and about 45% a year earlier. This development was due mainly to higher prices for agricultural products (7.5% vs. 4.4% the year before), notably eggs (10.7% vs. 6.4%), meat, slaughter and poultry (10% vs. 8.3%) and vegetables (7.3% vs. -1.7%). On the other hand, prices for processed agricultural products evolved at about the same rate as the year before: 2.1% vs. 2.2%. If food were excluded, consumer prices increases would be 2.8% in 2004 vs. 2.3% the year before, a trend that held for both non-food manufactured products (2.6% vs. 1.8%) and services (3.2% vs. 3%). It was prices for cleaning, health and personal care products that grew at the fastest pace: 4% vs. 2.7% in 2003. This involved mainly toiletries (3.2% vs. 2.1%), cleaning products and detergents (2.3% vs. 1.9%) and especially the cost of care and medicine (5.1% vs. 2.8%). Prices for housing grew at a higher rate (2.7% vs. 2% in 2003). This increase involved in particular rent and charges (4.6% vs. 2.9%), energy products (3.8% vs. 2.7%) and furnishings (2% vs. 1.6%). Similarly, clothing prices recorded a higher increase than the year before (1.6% vs. 0.8%). It concerned in particular second-hand clothes (6.7% vs. 0.9%), fabric and notions (3.2% vs. 0.9%), men’s underwear (3.5% vs. 1.6%) and, to a lesser degree, footwear (1.4% vs. 0.5%). Prices for «leisure, culture and miscellaneous» grew at a slightly higher pace (2.5% vs. 2.2% in 2003), a development that reflected in particular higher growth for beverages and meals (2.9% vs. 1.9%), prices for cultural events and shows (1.2%
91 and 1% respectively vs. 0.2% and 0.4% in 2003), and for tobacco and cigarettes (3.4% vs. 3.3%). TRENDS IN THE GENERAL INDEX OF HOUSEHOLD CONSUMER PRICES (Base 100 in 2000) (In %) In terms of annual slide Yearly averages Description Dec.2004 Mar.2004 June 2004 Sept.2004 Dec.2004 Dec.2003 Mar.2003 June 2003 Sept.2003 Dec.2003 2003/2002 2004/2003 General index 4.5 4.5 5.0 2.6 1.1 2.7 3.6 Food 6.6 7.7 7.4 2.9 -0.6 3.4 5.0 Housing 2.9 2.7 3.0 2.8 2.7 2.0 2.7 Cleaning, health and personal care 5.5 5.3 5.4 2.5 1.3 2.7 4.0 Transport 3.6 3.6 3.9 2.7 3.4 4.5 3.4 Clothing 2.8 -0.1 2.6 1.3 1.4 0.8 1.6 Leisure, culture & misc. 2.1 1.9 3.3 2.4 2.2 2.2 2.5 Source : National Statistics Institute Prices for transport and communications were the only ones in 2004 to have undergone an overall slowdown. The increase fell from 4.5% to 3.4%, following a reduction in rates for «postal services and telecommunications» (-0.9% vs. no movement in 2003) and slower growth for mass transit (3.4% vs. 5.3%) and personal transport costs (4.5% vs. 5%). By price-setting regime, the increase for unregulated products was higher in terms of average than that recorded for regulated products (3.7% and 3.1% respectively), unlike 2003 (2.4% and 3.4%). In terms of annual slide, the increase was moderate for products for which prices are freely determined (0.7% vs. 4.7% in 2003), linked in particular to the drop in foodstuff prices (-0.9% vs. 7.4%), along with slower growth in regulated or controlled prices (1.6% vs. 4.1%).
TRENDS IN THE INDEX OF INDUSTRIAL SELLING PRICES (base 100 in 1990) 5 5
4 4 ge a t 3 3 en c r 2 2 pe n I 1 1
0 0 1997 1998 1999 2000 2001 2002 2003 2004 Global trend Manufacturing industries
92 TRENDS IN PRICE SLIDE BY REGIME (Base 100 in 2000) Variation (%) Contribution (% points) Description Dec2003/Dec2002 Dec2004/Dec2003 Dec2003/Dec2002 Dec2004/Dec2003 Unregulated goods 4.7 0.7 3.2 0.5 .Food 7.4 -0.9 2.1 -0.2 .Non food 2.7 1.9 1.1 0.7 Regulated goods 4.1 1.6 1.3 0.6 .Food 3.8 0.0 0.3 0.0 .Non food 4.2 2.1 1.0 0.6 Overall 4.5 1.1 4.5 1.1 Source : National Statistics Institute In total, the contribution of regulated and unregulated products to price slide from the end of 2003 to the end of 2004 was almost identical : 0.5 and 0.6 of a percentage point respectively vs. 3.2 points and 1.3 point a year earlier. C. INTERVENTION OF THE GENERAL EQUALISATION FUND Charges supported by the general equalisation fund (CGC) increased by a sizeable 28.3% in 2004 (after dropping by about 10% the year before), reaching almost 262 MTD. Thus their share in GDP expressed in current prices increased from 0.6% in 2003 to 0.7%. The increase in charges was generated by higher prices for imported cereals and vegetable oils in conjunction with ongoing growth in domestic consumption, since for reasons tied to prevailing conditions there was no adjustment of cereal product prices in 2004, as was the case the year before. On the other hand, depreciation of the US dollar against the dinar and a lower tax bite for customs on imports of certain products contributed to a more moderate increase in prices. TRENDS IN GENERAL EQUALISATION FUND OUTLAYS (In MTD) Description 1999 2000 2001 2002 2003 2004 Cereals and cereal-based products 126.4 152.9 181.2 150.2 123.1 176.4 Vegetable oils 57.6 42.2 34.0 49.2 62.3 66.7 Milk 10.9 11.8 9.8 7.8 5.7 6.3 Sugar 1.9 0 0 0 0 0 School paper 7.6 15.0 15.4 14.7 12.8 12.3 Others 0.1 3.4 7.5 4.3 0 0 Total 204.5 225.3 247.9 226.2 203.9 261.7 Source : Ministry of Trade and Handicrafts. The structure of CGC interventions remained marked by charges for cereals and cereal-based products, which predominated with more than 176 MTD, about two thirds of the total, followed by vegetable oils with almost 67 MTD (a 25.5% share). The remainder of subsidies from the fund involved fairly moderate amounts to compensate prices for school paper and milk. Financing of CGC transactions was provided by means of a 200 MTD allotment from the State budget, the remainder being covered from core resources.
93 V. EMPLOYMENT AND WAGES
Public authorities made ever-greater efforts to boost employment in 2004, seeking to further stimulate supply and to better structure demand, especially from new graduates of higher education who are looking to start their careers. According to the general census on population and housing carried out in 2004, those who have taken university courses or even just secondary studies account for 46.3% of the global unemployed population vs. 27.8% in 1994. The percentage of the unemployed who have a higher education rose from 1.6% (6300 people) to 9.4% (40,700). To reverse this situation, given the ongoing increase in additional demand (especially from graduates of higher education and from women), additional measures were taken at the end of 2004 in the framework of the finance law for the following year. Thus new measures were implemented to increase the pace of investment while also pursuing ongoing programmes and mechanisms to boost jobs. These involved in particular : - extension for another five years of State assumption of a portion of the employer’s contribution to social security for companies set up in priority regional development zones, with those that have already benefited from this incentive becoming eligible once again at a rate beginning at 80% for the first year and gradually decreasing to 20% for the last year ; - extension for seven years of State assumption of a portion of the employer’s contribution to the legally constituted social security system for wages paid to newly recruited graduates of higher education, a measure that should help boost the supervisory rate at private companies after becoming part of the investment incentives code, effective from 1st January 2005 through 31 December 2009, starting at 100% for the first two years and falling to 25% for the last year ; and - incentives for reinsertion in professional life of wage earners who have lost their jobs. Private sector companies that have recruited workers in this category can benefit from State assumption of 50% of the wages they receive, up to 200 dinars per month as well as the employer’s contribution to the legally constituted social security regime. Aside from adjusting guaranteed minimum wages in such a way as to preserve buying power for low-income socio economic groups, the last yearly portion of the wage increase was released. This was done in the framework of the 2002-2004 three-year programme signed by social partners relating to workers in sectors governed by collective bargaining and the civil service. The cycle to start new negotiations for the sixth round of negotiations began on 20 March 2005. At the same time, public authorities continued to improve social coverage for all socio-professional categories, reaching 87% of the working population in 2004 and targeting an increase to 95% by the end of 2009. This includes efforts over the past few years to set up a social security system for new employees’ categories such as construction workers, small-scale fishermen and farmers, household helpers and craftsmen.
94 A. EMPLOYMENT Sustained economic growth (especially in market services and manufacturing industries) along with mechanisms and programmes implemented to boost employment in various ways contributed in 2004 to improved conditions on the job market. Thus the number of new fishing and non-agricultural jobs increased to 74,400, compared to 65,000 the year before. Consequently, the rate of coverage for additional job demand (estimated at 81,500) in fact increased from 78.4% in 2003 to more than 91% in 2004, This compares to a Xth development plan target of 95%. And the unemployment rate fell over this same period from 14.3% to 13.9% of the working population, coming in at about 3.3 million people. To promote small-scale initiatives and create jobs, the Tunisian Solidarity Bank (BTS) financed 7586 projects in 2004 for loans totalling about 31 MTD. This compares to 7398 projects and 43.6 MTD a year earlier. Jobs increased from 11,428 in 2003 to 12,211 in 2004. The regional breakdown of projects financed by this bank shows that 2094 projects (27.6% of total) were in the District of greater Tunis, followed by central eastern Tunisia (1332 projects or 17.6%) and central western Tunisia (1015 projects or 13.4%). In line with its original mandate, the BTS has continued to give priority to small trades and market services, although they have registered a reduced number of projects : 6164 (81.3% of total) vs. 6214 (84%) in 2003. From the time it was founded until the end of 2004, the BTS received more than 177,000 loan requests, 74,000 of which were approved for a total of some 306 MTD, corresponding to investments of almost 438 MTD and expected to generate some 107,000 jobs. Of this total, 85.4% were granted for new projects, mostly (76.6%) initiated by people between the ages of 18 and 39. Loans to graduates of higher education accounted for 12.8% of the total. Employment programmes tailored to prevailing conditions were carried out in the form of make-work activities, tapping a budget allocation of some 131 MTD vs. 144 MTD in 2003. Of this total, 52 MTD were committed at the national level and the rest was devoted to the regions individually : 69 MTD for the regional programme for development (PRD) and 10 MTD for regional work initiatives programme for development (PCRD). These work initiatives involved mainly forestry and water/soil conservation works, providing 24 million workdays vs. 23.2 million a year earlier. On another front, programmes to help create and consolidate jobs had at their disposal some 102 MTD in budget support, almost 80% of which were granted to the National Job Fund (21-21). Intervention by this Fund moved ahead briskly, especially in support of vocational training, learning, and encouragement of young promoters to set up their own businesses. The number of beneficiaries increased by 6.9% in 2004 to 118,400 people, 43,591 (36.8%) of whom are from northwestern or central western Tunisia.
95 PROGRAMMES IN SUPPORT OF EMPLOYMENT (In MTD) Variation Description 2001 2002 2003 2004 in % 2004/2003 Temporary employment in construction 105.2 71.2 144.0 131.0 -9.0 -National sites 60.5 40.7 52.0 52 0 -Regional sites 44.7 30.5 92.0 79.0 -14.1 . Regional development programme (PRD) 34.7 20.5 82.0 69.0 -15.9 . Regional development construction sites programme (PCRD) 10.0 10.0 10.0 10.0 0 Assistance in job creation and consolidation 115.8 109.2 95.4 102.0 6.9 -Integrated rural development programme 3.4 1.9 0.1 0.9 800.0 .Agriculture & fishing 3.3 1.9 0.1 0.9 800.0 .Small trades 0.1 0 0 0 -Regional development programme 4.3 3.6 3.4 7.7 126.5 -Integrated urban development programme (PDUI) 13.0 7.0 6.2 4.5 -27.4 -National fund to promote handicrafts and small trades (FONAPRA) 15.1 16.7 5.7 8.9 56.1 -National Fund of Employment (21-21) 80.0 80.0 80.0 80.0 0 Programmes for insertion into professional life 14.6 14.4 16.9 23.3 37.9 -Training programmes for initiation into 9.5 7.9 11.2 15.3 36.6 professional life (SIVP) .SIVP1 8.6 7.1 9.7 12.8 32.0 .SIVP2 0.9 0.8 1.5 2.5 66.7 -Fund for professional initiation & adaptation (FIAP) 4.7 6.3 5.2 7.2 38.5 -Training-employment contracts (CEF) 0.4 0.2 0.5 0.8 60.0 TOTAL 235.6 194.8 256.3 256.3 0 Source : Ministry of Development and International Cooperation and Ministry of Employment and General Commissariat for Regional Development Investments made in the framework of the integrated rural development programme (PDRI) increased from 844,000 dinars to 887,000 in 2004, entirely devoted to agriculture, resulting in 127 permanent new jobs compared to just 8 in 2003. Improved initiatives were carried out in priority rural zones, with a view to creating more jobs as appropriate under current conditions and to improving living conditions. On the other hand, the budgetary allotment for the integrated urban development programme (PDUI) decreased by 27.4% in 2004, amounting to just 4.5 MTD. It helped launch 551 initiatives vs. 849 in 2003. But there were only 608 new jobs (compared to 1102 in 2003) divided between small trades (119 vs. 383) and handicrafts (489 vs. 719). Financing by the national fund to promote handicrafts and small trades (FONAPRA) to launch new initiatives grew at a faster pace in 2004. Banks approved 4126 projects, 1975 of which were actually funded, compared to 1356 and 1047 a year earlier. Relevant investments amounted to a total of 26 MTD, financed by medium-term loans (15.6 MTD), budgetary allotments (8.9 MTD) and the initiators themselves (1.5 MTD). They supported 6616 new jobs, compared to 4264 in 2003. Contracts signed in the framework of internships serving as initiation in professional life (SIVP1) continued to increase, amounting to 13,378 in 2004, up 48.6% over the previous year’s figure. 48.7% of that total received certification but not all could be kept on because of higher demand from graduates of higher education. Services
96 and manufacturing industries hired 91.5% of the total, with private companies accounting for 86.5%. At the same time, the programme to introduce young people to professional life (SIVP2) received some 2.5 MTD in funding, up 66.7% compared to the 2003 figure. Correlatively, the number of young beneficiaries was up from 3523 to 4796, with 777 and 1697 actually starting their first job. Manufacturing industries and services remained predominant with 97.4% of the total. The initiation and professional adaptation fund (FIAP), which is meant to provide additional professional training to job seekers and technical supervision to young promoters, enjoyed 7.2 MTD in funding in 2004, vs. 5.2 MTD a year earlier. 13,442 people took advantage of this facility, 11,563 of whom were actually recruited. This compares to 12,069 and 9220 the year before. Young people who left school between the 9th year of basic schooling and the 4th year of secondary school and who are looking for their first job accounted for 3357 of the internships in the framework of employment-training contracts (CEF) vs. only 2701 in 2003. A higher volume of funds (0.8 MTD) had to be devoted to this facility. The number of new jobs continued to rise steadily in 2004 in all sectors of non- agricultural economic activity except fishing, mining and energy. The largest number of new jobs was in manufacturing industries : 18,600 vs. 18,400 in 2003. JOB CREATION IN FISHING AND NON-AGRICULTURAL ACTIVITIES (Number of jobs) Description 2000 2001 2002 2003 2004 Fishing 600 1,200 350 650 550 Mining and energy 100 500 220 250 200 Building & civil engineering 3,600 5,000 4,770 4,850 5,500 Manufacturing industries 20,400 20,800 18,000 18,400 18,600 Transport & communications 6,000 6,200 6,000 6,000 8,750 Tourism 3,700 3,000 1,600 2,000 2,400 Other services 24,000 25,800 25,000 24,650 28,800 Government services 8,600 6,800 6,660 8,200 9,600 Total 67,000 69,300 62,600 65,000 74,400 Source : Ministry of Development and International Cooperation and Ministry of Employment In transport and communications, new jobs grew at a much faster rate (45.8%), to 8750 jobs, following in particular the higher volume of investment in communications to develop and extend the landline and mobile phone networks. Similarly, job creation saw steady progress in 2004 in tourism (up 20% to 2400 jobs) and the administration (up 17% to 9600 jobs). The higher volume of new jobs also held for other market services, totalling 28,800 jobs vs. 24,650 in 2003. It should be noted that planned emigration placed 1234 people abroad in 2004, compared to 1024 in 2003, 942 for seasonal work and 292 for permanent work. France alone took in 981, 942 for seasonal work. Saudi Arabia was the destination for 160 people who took up permanent jobs. Only specialists in given fields such as public works, general mechanics and agriculture were able to go to Italy. Out of a total of 1008 candidates, just 282 were accepted to study Italian before taking up their jobs, while four others were given contracts for permanent jobs and 57 signed preliminary contracts.
97
JOB CREATION IN NON-AGRICULTURAL ACTIVITIES AND FISHING (In thousands of jobs) 75 75
70 70
65 65
60 60
55 55 1997 1998 1999 2000 2001 2002 2003 2004
B. WAGES As in the past, wages were increased in 2004 in order to maintain the buying power of low income socio-professional categories. Thus the minimum interprofessional guaranteed wage (SMIG) went up as of July by 34 millimes an hour, corresponding to a monthly increase of 7.072 dinars for a 48 hour workweek and 5.894 dinars for a 40 hour workweek. Thus monthly wages rose to 218.192 dinars for the former and to 189.800 dinars for the latter. The agricultural minimum wage went up over the same date by 200 millimes per workday, to 6.709 dinars. Average annual wages expressed in nominal terms increased by 6% (to 2290 dinars) in agriculture and fishing, by 4.7% (to 5620 dinars) in non-agricultural production sectors, and by 5.8% (to 10,370 dinars) in public administration. With a growth rate well above that of inflation (3.6% in 2004 vs. 2.7% in 2003), average annual wage was higher in real terms. TREND IN MINIMUM LEGAL WAGES (In dinars unless otherwise indicated) Variation in % May July July July July Description 2000 2001 2002 2003 2004 July 2003 July 2004 July 2002 July 2003 Guaranteed minimum inter- professional wage (SMIG) -Hourly SMIG (in millimes) . 48-hr week 899 940 974 1,015 1,049 4.2 3.3 . 40-hr week 945 986 1,020 1,061 1,095 4.0 3.2 -Monthly SMIG 1 . 48-hr week 186.992 195.520 202.592 211.120 218.192 4.2 3.3 . 40-hr week 163.798 170.905 176.799 183.906 189.800 4.0 3.2 Guaranteed minimum daily agricultural wage (SMAG) 5.809 6.059 6.259 6.509 6.709 4.0 3.1 Source : Ministry of Social Affairs and solidarity and Official Journal of the Republic of Tunisia The number of wage earners has grown steadily (all sectors taken together), up from 1,971,000 in 2003 to 2,022,000 in 2004 : 175,000 in agriculture and fishing, 1,380,000 in non agricultural production sectors, and 467,000 in public administration. In this context, overall wages increased by 7.8% in 2004 to 13,005 MTD, 37% of GDP expressed in current prices, compared to 12,061 and 37.4% respectively in 2003.
1 Excluding the monthly TND 5 transport allowance instituted in July 1986. 98 VI. INVESTMENT
Investment promotion continued to be a priority issue for national development in 2004. Since it contributes to a stronger base for national production and to a faster pace for economic growth and job creation, investment can boost exports and thus ensure a more balanced external sector. For all these reasons, new measures were adopted, seeking in particular : - intensifying new companies setting up and implementing innovative initiatives through improvement of business environment and financing conditions : to this end, the higher volume of financing from the industrial promotion and decentralisation Fund (FOPRODI) worked in conjunction with new financial incentives for small-scale initiatives launched by graduates of higher education and tax incentives to benefit development capital investment companies (SICAD), and a new system pertaining to loans and shareholdings hedging was established; - encouragement of private investment in promising sectors, especially commu- nications, student accommodation, and cultural and social services; - promotion of long-term savings by modernising the financial system and ongoing fine-tuning to meet real needs, contributing to judicious allocation of funds in line with the country’s overall development plan; it was in this context that a new bank specialised in financing small and medium-scale companies was launched. Gross fixed capital formation (GFCF) bounced back by 4% in 2004 (after the previous year’s -1% figure) to 7.834 MTD. This progress concerned agriculture and fishing, energy and market services in particular, communications. Inversely, investment was down for manufacturing industries, especially building materials, and mining. In light of higher economic growth, the investment rate continued to fall : from 23.4% of GDP in 2003 to 22.5% in 2004.
GDP AND GFCF (in current prices and in MTD 40000 40000
30000 30000
20000 20000
10000 10000
0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 GDP GFCF
99 GROSS FIXED CAPITAL FORMATION BY BRANCH OF ACTIVITY Value in MTD Variation in % Structure in % Description 2002 2003 2004 2004/2003 2002 2003 2004 Agriculture & fishing 822 780 868 11.3 10.8 10.4 11.1 Mining 40 35 32 -8.6 0.5 0.5 0.4 Energy (water, electricity & hydrocarbons) 807 705 813 15.3 10.6 9.4 10.4 Manufacturing industries 975 998 993 -0.5 12.8 13.2 12.7 Construc. & civil engineering 150 145 150 3.4 2.0 1.9 1.9 Market services 3,979 4,018 4,102 2.1 52.3 53.3 52.3 Community facilities 834 850 876 3.1 11.0 11.3 11.2 Total 7,607 7,531 7,834 4.0 100.0 100.0 100.0 Source : Ministry of Development and International Cooperation The private sector’s share of overall GFCF stabilised at about 56%, despite the greater participation of companies in industrial and services upgrading programmes. In effect, the total number of industrial companies with approved upgrading plans had increased by the end of 2004 to 1946 units for total investment of about 2,893 MTD, compared to 1640 and 2,625 MTD a year earlier. Similarly, approval of the upgrading proposals of services companies increased from 65 units and 26 MTD in investments in 2003 to 73 units and 31 MTD in 2004. Foreign direct investments (FDI) increased by 5.9%, after falling by 35.6% in 2003, amounting to 796 MTD. If energy were excluded, this rate of increase would be 19.7% vs. -41% a year earlier.
BREAKDOWN OF GFCF BY SECTOR
1994 2004
13.2% Agric. & fishing 12.7% 12.1% 11.1% 12.7% 20.7% Manuf.industries 9.6% 11.2% Non-manuf. industries
Market services
Community facilities
44.4% 52.3%
A. GROSS FIXED CAPITAL FORMATION BY BRANCH OF ACTIVITY 1. Agriculture and fishing After falling by about 5% in 2003, investment in this sector grew by 11.3% in 2004, reaching 868 MTD, about 52% of which by the private sector. Public investment (mainly the Administration) concentrated on agricultural hydraulics and water and soil conservation, while private investment was devoted mainly to acquisition of agricultural material, livestock and implementation of tree farming initiatives.
100 Investment in agricultural hydraulics increased by 10.7%, after dropping by 17.2% in 2003. It amounted to 352 MTD, 40.5% of overall GFCF for the sector, provided mainly by the Administration in the amount of 206 MTD or about 59% of total funds in this area. The main initiatives concerned construction of dams and water mains for an amount of 89 MTD, equipping of irrigated land and better operational conditions for an amount of 78 MTD ; and supply of drinking water for an amount of 26 MTD. The private sector provided 140 MTD in funds, which served to mobilise water resources. 95% of investment for acquisition of agricultural material was provided by the private sector, up by a sizeable 42.4% to 84 MTD in the framework of ongoing mechanisation and modernisation of agricultural operations. Thus imports of tractors were up 31% and agricultural machinery about 19%. 2004 investment in livestock once again involved a sizeable amount, although the growth rate was lower than in 2003. The total came to 108 MTD, an increase of 4.9% following the previous year’s figure of about 20%. The private sector contributed 79% of these funds, mostly to build up breeding stock. Public sector investments increased from 22 MTD to 23 MTD, allotted mainly to development of pastureland and for extension and protection of animal health. Investment in tree crops was made almost solely by the private sector, increasing from 65 MTD in 2003 to 76 MTD in 2004. These funds financed the planting of 42,000 hectares of fruit trees, 29,000 of which were olive trees and 8000 almond trees. GROSS FIXED CAPITAL FORMATION IN AGRICULTURE AND FISHING Value in MTD Variat. in % Structure in % Description 2002 2003 2004 2004/2003 2002 2003 2004 Agricultural hydraulics 384 318 352 10.7 46.7 40.8 40.5 Agricultural material 58 59 84 42.4 7.1 7.5 9.7 Livestock 86 103 108 4.9 10.5 13.2 12.4 Tree farming 52 65 76 16.9 6.3 8.3 8.8 Fishing 37 80 48 -40.0 4.5 10.3 5.5 Forestry 49 49 58 18.4 6.0 6.3 6.7 Water & soil conservation (CES) 62 47 56 19.1 7.5 6.0 6.5 Various integrated projects 84 46 67 45.7 10.2 5.9 7.7 Studies, research & extension 10 13 19 46.2 1.2 1.7 2.2 Total 822 780 868 11.3 100.0 100.0 100.0 Source : Ministry of Development and International Cooperation After a significant increase the year before, GFCF in fishing fell considerably in 2004, down from 80 MTD to 48 MTD. This was attributable mainly to the drop in private investment, down from 69 MTD to 40 MTD. Public investment in 2004 was 3 MTD lower than in 2003, amounting to 8 MTD : 7 MTD invested by the Administration and 1 MTD by the fishing port and equipment agency. Forestry investments were up a brisk 18.4% to 58 MTD. These funds came mainly from the Administration, especially for implementing the strategy to conserve and develop national forestry resources and to carry out various targeted reforestation projects.
101 Similarly, GFCF for water and soil conservation rose by 19.1% to 56 MTD. Most of this amount (49 MTD) came from the Administration, which pursued implementation of various projects in the framework of the national strategy in this field, with the rest coming from the private sector. GFCF for various integrated projects recorded a big jump, from 46 MTD in 2003 to 67 MTD in 2004. And investment for studies, research and extension continued to grow, up from 13 MTD to 19 MTD. 269 MTD of the funds invested in agriculture and fishing came from the State budget, 292 MTD were financed by the profession itself, 188 MTD came from external resources, 91 MTD were financed by banks and 28 MTD came from special Treasury funds. 2. Non manufacturing industries After falling for two years, GFCF in non manufacturing industries was up by 12.4% in 2004 to 995 MTD, 12.7% of the total. This return to growth was due in particular to the large increase in investments in electricity, contrary to downward trends in hydrocarbons and mining. Investment in hydrocarbons reached 320 MTD, decreasing by 30 MTD (8.6%) in 2004 following the lesser volume of funds allotted to oil research and exploration, falling from 118 MTD in 2003 to 81 MTD in 2004. This drop could not be offset by higher investment in refining and storage.
GROSS FIXED CAPITAL FORMATION IN THE ENERGY SECTOR Value in MTD Variat. in % Structure in % Description 2002 2003 2004 2004/2003 2002 2003 2004 Water 100 105 121 15.2 12.4 14.9 14.9 Electricity 230 250 372 48.8 28.5 35.5 45.7 Hydrocarbons 477 350 320 -8.6 59.1 49.6 39.4 Total 807 705 813 15.3 100.0 100.0 100.0 Source : Ministry of Development and International Cooperation On the other hand, GFCF in electricity grew at a faster pace, up from 250 MTD in 2003 to 372 MTD in 2004. This focused on production and transport. Investment in water exploitation and distribution continued to grow, up from 105 MTD to 121 MTD. Thus the service rate for drinking water continued to rise in rural areas, reaching 88.5% vs. 85.7% a year earlier. It should be noted that part of investments served to renew equipment at SONEDE (the national company for water exploitation and distribution) and to pursue water conservation projects. GFCF in mining dropped in 2004 to about 38 MTD. As in the past, most of the funds came from the Gafsa Phosphate Company (CPG), serving mainly to acquire equipment and maintain production plants. Investment for construction and civil engineering were once again on a growth path, up from 145 MTD in 2003 to 150 MTD in 2004.
102 3. Manufacturing industries Investment in manufacturing industries has not progressed over the past few years, recording a 0.5% decrease in 2004 after a 2.3% increase the year before, amounting to 993 MTD or 12.7% of global GFCF. This drop was in line with investment trends in building materials/ceramics/glass, textile/clothing/leather/footwear industries and miscellaneous industries. On the other hand, there was a considerable rebound in investment in mechanical and electrical industries, up 15.6% following a drop of 11% a year earlier. GFCF in agrofood industries continued to grow, reaching 225 MTD vs. 210 MTD in 2003. The private sector provided the major part of these funds, notably in canned goods, cereal by-products and oil production. Investment by public enterprises concerned in particular tobacco industry and sugar refining. Inversely, investment in building materials/ceramics/glass was down about 7% to 178 MTD. With an 85% share, private companies continued to provide the bulk of investment funds, especially in the manufacture of marble and quarry products, production of cement and items in cement and ceramics. Public sector investment concerned in particular renewal and major maintenance of equipment at publicly owned cement plants. After falling in 2003, GFCF in mechanical and electrical industries increased anew in 2004, up from 160 MTD to 185 MTD, about 30 MTD of which came from the upgrading programme. As in the past, the private sector accounted for virtually all investments (98%), devoted mainly to processing of metals, production of electrical and electronic material and manufacture of machines and equipment. In rising to 3 MTD, public sector investment was made by the El Fouladh Steel Company and the Tunisian Automotive Industries Company (STIA). GROSS FIXED CAPITAL FORMATION IN MANUFACTURING INDUSTRIES Value in MTD Variation in % Structure in % Description 2002 2003 2004 2004/2003 2002 2003 2004 Agrofood industries 200 210 225 7.1 20.5 21.1 22.7 Building materials, ceramics and glass 175 192 178 -7.3 17.9 19.3 17.9 Mechanical & electrical industries 180 160 185 15.6 18.5 16.0 18.6 Chemical industries 95 100 105 5.0 9.7 10.0 10.6 Textiles, clothing, leather & footwear 185 191 180 -5.8 19.0 19.1 18.1 Miscellaneous industries 140 145 120 -17.2 14.4 14.5 12.1 Total 975 998 993 -0.5 100.0 100.0 100.0 Source : Ministry of Development and International Cooperation Investment in chemical industries continued to climb, amounting to 105 MTD in 2004 vs. 100 MTD the year before. This was made up solely of private investment, representing more than 70% of the total, benefiting in particular parachemical and pharmaceutical industries.
103 GFCF in textiles-clothing/leather-footwear, carried out mostly by the private sector was down 5.8% in 2004 to 180 MTD. This drop involved in particular spinning/weaving/finishing, hosiery/clothing and leather/footwear. With about 90% coming from the private sector, investment in miscellaneous manufacturing industries fell by 17.2% in 2004 to 120 MTD. Most of these funds were invested by private parties in the production of paper and packaging, wood/furnishing/plastics, while public investments went mostly to paper and printing industries. 4. Market services With more than half of the overall total, the predominant category for investment was market services, which grew in 2004 by 2.1% (compared to 1% in 2003) for a total of 4,102 MTD. Apart from transport and tourism, all other sectors benefited from the higher volume of funds, especially communications and trade and other services. In effect, investment in transport was down by about 3% in 2004, amounting to 1,015 MTD. This drop concerned in particular road infrastructure and rail and maritime transport.
GROSS FIXED CAPITAL FORMATION IN MARKET SERVICES Value in MTD Variation in % Structure in % Description 2002 2003 2004 2004/2003 2002 2003 2004 Transports 1,080 1,050 1,015 -3.3 27.1 26.1 24.7 Communications 545 593 655 10.5 13.7 14.8 16.0 Tourism 340 320 320 0.0 8.6 8.0 7.8 Housing 1,266 1,276 1,307 2.4 31.8 31.7 31.9 Trade and other services 748 779 805 3.3 18.8 19.4 19.6 Total 3,979 4,018 4,102 2.1 100.0 100.0 100.0 Source : Ministry of Development and International Cooperation Investment in rail transport in 2004 was down from about 50 MTD in 2003 to 39 MTD in 2004. The major part of these funds was made available by the Tunisian National Railway Company (SNCFT), which continued to strengthen infrastructure by improving a number of rail lines and adding a second track along certain stretches, along with acquisition of rolling stock. GFCF in road transport which is predominant in the transport sector was, mainly, for acquisition of equipment and rolling stock (about 300 MTD), mainly by private companies and regional public companies. Investment to strengthen and modernise infrastructure, made by the Ministry of Equipment, Housing and Land Planning, local government and the Tunisia Highway Company regressed due to a delay in the starting up of a number of projects. These funds were used to implement various projects to develop road networks, such as those tied to opening of the Msaken-Sfax highway, to develop and modernise national and regional roads and to construct various roadworks.
104 Investment in maritime transport continued to decrease in 2004. The major share came from the Merchant Marine and Port Authority (OMMP) and the Tunisian Lighterage and Handling Company (STAM), which proceeded to develop and improve port infrastructure and to acquire capital goods. GFCF in air transport was up once again in 2004 to about 65 MTD, after dropping the year before, mainly due to higher investment in infrastructure by the Civil Aviation and Airport Authority (OACA). Investment in communications continued to grow at a steady rate of 10.5% vs. 8.8% in 2003, for a total of 655 MTD (8.4% of GFCF). Most of these funds went to telecommunication companies, notably to extend both land and mobile phone lines. Thus the telephone density rate continued to grow, up from 30.7 lines per 100 inhabitants in 2003 to 45.6 lines in 2004. Investment in tourism stagnated at the same 320 MTD level as the year before. These funds were invested mainly by private parties, serving for the most part to strengthen hotel capacity, especially after activity picked up in the sector. Investment is likely to increase in the future, thanks to implementation of the strategy to upgrade and modernise hotel units. In the housing sector, investments increased by 2.4% in 2004 (vs. 0.8% the year before) to 1,307 MTD. These funds, representing 31.9% of GFCF in market services (16.7% of overall total), came mostly from private parties, i.e. households and real estate promoters. 5. Community facilities Investment in community facilities increased by 3.1% in 2004 vs. 1.9% a year before, up to 876 MTD. These funds served in particular for construction of administrative offices and acquisition of materiel and equipment, particularly in the fields of education, higher education, health, sports and youth. B. INVESTMENT FINANCING In relation to the higher level of national savings, up 10.5% in 2004 vs. 7.4% the year before, financing of global GFCF was covered entirely by domestic resources vs. 94.3% in 2003. Given stock variations, which were up significantly for the second straight year, the rate for domestic financing of investments continued to grow, up from about 88% in 2003 to 92% in 2004. 1. National savings With the sizeable step up in the pace of economic growth and job creation, national savings recorded a major increase to 7,845 MTD or 22.1% of gross national available Income (GNAI), compared to almost 7,101 or 21.8% in 2003.
105 NATIONAL SAVINGS AND INVESTMENT DOMESTIC FINANCING Variation in % Description 2001 2002 2003 2004 2003 2004 2002 2003 Global GFCF (in MTD) 7,541.7 7,607.2 7,531.3 7,834.0 -1.0 4.0 - Investment rate (in % of GDP) 26.2 25.4 23.4 22.3 GFCF Structure by economic agent - Public sector (in %) 44.5 45.0 44.0 44.01 - Private sector (in %) 55.5 55.0 56.0 56.01 Stock variation (in MTD) 487.2 86.6 530.7 702.3 Total financing needs (in MTD) = GFCF + stock variation 8,028.9 7,693.8 8,062.0 8,536.3 4.8 5.9 National savings (In MTD) 6,787.1 6,610.2 7,100.7 7,845.0 7.4 10.5 National savings rate - In % of GNAI 23.5 21.9 21.8 22.1 - In % of GDP 23.6 22.1 22.0 22.3 Rate of investment domestic financing - National Savings/GFCF (in %) 90.0 86.9 94.3 100.1 - National Savings/Total financing needs (in %) 84.5 85.9 88.1 91.9 Source : Ministry of Development and International Cooperation and Central Bank of Tunisia 2. External resources Gross inflows of medium and long-term external funds were up 20.7% in 2004, compared to a drop of 16.3% the year before, for a total of 3,895 MTD. This rebound concerned foreign holdings, made up mainly of foreign direct investment (FDI), with flows up by 5.9% to 796 MTD and drawings on borrowings contracted with foreign donors increasing by 24.6% to 3,036 MTD. MEDIUM AND LONG TERM FINANCIAL RESOURCES FROM FOREIGN SOURCES Value in MTD Variation in % Structure in % Description 2002 2003 2004 2004/2003 2002 2003 2004 Borrowings 2,664 2,437 3,036 24.6 69.1 75.5 77.9 Foreign participations 1,191 789 859 8.9 30.9 24.5 22.1 of which : FDI 1,167 752 796 5.9 30.3 23.3 20.4 Gross foreign inputs 3,855 3,226 3,895 20.7 100.0 100.0 100.0 Capital outflows 1,627 1,451 1,945 34.0 42.2 45.0 49.9 Net foreign inputs 2,228 1,775 1,950 9.9 57.8 55.0 50.1 Source : Central Bank of Tunisia Made up mostly of repayment of the principal on external borrowings, capital outflows in 2004 amounted to 1,945 MTD, a level that was 34% higher than the year before. In this context net external inputs of capital were up by 9.9% to 1.950 MTD.
1 Estimates. 106 VII. FOREIGN TRADE
A. GENERAL DEVELOPMENT World trade was very brisk in 2004, contributing to a higher volume of foreign trade for Tunisia. In effect, Tunisian exports were up by 16.6% (vs. 6.1% the previous year) to 12,054.9 MTD, while the growth rate for imports was up from 3.9% in 2003 to 13.7% in 2004, reaching 15,965.1 MTD. Overall exports grew more quickly due in particular to higher sales of agricultural and agrofood products (82.5% vs. 7.9% in 2003), especially olive oil, in line with higher production and better quality besides higher prices on the international scene. Exports of just this one product accounted for about 35% of the increase in overall exports. TRENDS IN TUNISIA’S FOREIGN TRADE 1992-2004 (in MTD unless otherwise indicated) Rate of coverage of imports Year Exports FOB Imports CIF Deficit by exports (in %) 1992 3,550 5,689 2,139 62.4 1993 3,760 6,172 2,412 60.9 1994 4,696 6,647 1,951 70.6 1995 5,173 7,464 2,291 69.3 1996 5,372 7,499 2,127 71.6 1997 6,148 8,794 2,646 69.9 1998 6,518 9,489 2,971 68.7 1999 6,967 10,071 3,104 69.2 2000 8,005 11,738 3,733 68.2 2001 9,536 13,697 4,161 69.6 2002 9,749 13,511 3,762 72.2 2003 10,343 14,039 3,696 73.7 2004 12,055 15,965 3,910 75.5 Source : National Statistics Institute Export of products produced by mechanical and electrical industries continued to be very active, up by 20.8% vs. 13.9% in 2003. This strengthened the sector’s standing on foreign, especially European markets. Sales of phosphates and by-products also rose dramatically, thanks to sustained world demand along with higher world prices. Export of textile-clothing/leather-footwear items increased moderately, held back by strong competition on traditional markets (especially from Asian countries) for similar items.
FOREIGN TRADE DEVELOPMENT IN TUNISIA
18000 18000 15000 15000 12000 12000 9000 9000
D T 6000 6000
In M 3000 3000 0 0 -3000 -3000 -6000 -6000 2000 2001 2002 2003 2004
Imports CIF Exports FOB Deficit
107 As for imports, purchase of raw materials, semi-finished products and capital goods was stimulated by a healthy national economy, while that of energy products was influenced by higher oil prices. In line with past trends, exports and imports expressed in terms of monthly averages increased respectively from 862 MTD and 1,170 MTD in 2003 to about 1,005 MTD and 1,330 MTD in 2004. Imports and exports under the general regime came to 67% and 35% of the total respectively, the rate of coverage having gained four percentage points to reach 39.2%. As for trade under the offshore regime, the traditional surplus grew by 19.7% and the rate of coverage increased by 5.8% percentage points to 148.8%. These results are corroborated by favourable trends in the main foreign trade ratios. In effect, the rate of economic openness, corresponding to the share of exports and imports in GDP, grew from 75.7% in 2003 to 79.7% in 2004. The export effort, measured by the ratio between exports and GDP, increased from 32.1% to 34.3%. TRENDS IN MAIN FOREIGN TRADE RATIOS (in %) Year Export effort rate Rate of dependence Rate of openness Rate of penetration 1992 25.9 41.5 67.4 38.8 1993 25.6 42.1 67.7 39.1 1994 29.7 42.0 71.7 40.8 1995 30.3 43.8 74.1 42.1 1996 28.2 39.3 67.5 38.7 1997 29.4 42.1 71.5 41.1 1998 28.9 42.1 71.0 40.7 1999 28.2 40.8 69.0 39.9 2000 30.0 44.0 74.0 42.5 2001 33.2 47.6 80.8 45.5 2002 32.6 45.1 77.7 43.3 2003 32.1 43.6 75.7 42.0 2004 34.3 45.4 79.7 44.1 Source : National Statistics Institute, Ministry of Development and International Cooperation and BCT B. TRENDS IN TRADE BY SECTOR OF ACTIVITY Foreign trade was marked in 2004 by faster pace of exports by mechanical/ electrical industries and agriculture/fishing/agrofood industries. The structure of trade shows that for exports, the share held by textiles- clothing/leather-footwear was down from 47.2% in 2003 to 42.4% in 2004, while that held by agriculture/fishing/agrofood increased from 7.2% to 11.4%.
108 TRENDS IN FOREIGN TRADE BY SECTOR OF ACTIVITY 2 0 0 3 2 0 0 4 Share Share Description Value in Variation Value in Variation of total of total MTD (in %) MTD (in %) (in %) (in %) Exports 10,342.6 6.1 100.0 12,054.9 16.6 100.0 -Agriculture/fishing & agrofood industries 749.9 7.9 7.2 1,368.9 82.5 11.4 .Agriculture and fishing 300.7 0.4 2.9 334.6 11.3 2.8 .Agrofood industries 449.2 13.6 4.3 1,034.3 130.3 8.6 -Energy 1,032.6 13.2 10.0 1,151.0 11.5 9.5 -Mining products 70.2 - 10.1 0.7 61.9 - 11.8 0.5 -Non-food manuf. industries 8,489.9 5.3 82.1 9,473.1 11.6 78.6 .Textile, leather & footwear 4,880.6 3.1 47.2 5,111.8 4.7 42.4 .Mechanical & electrical indust. 2,149.8 13.9 20.8 2,597.9 20.8 21.5 .Phosphate by-products 615.7 - 4.8 5.9 803.0 30.4 6.7 .Other manufactured products 843.8 6.1 8.2 960.4 13.8 8.0 of which : * Building materials, ceramics and glass 153.6 7.3 1.5 176.4 14.8 1.5 * Chemical products 328.6 4.8 3.2 326.0 - 0.8 2.7 Imports 14,038.9 3.9 100.0 15,965.1 13.7 100.0 -Agriculture/fishing and agrofood industries 1,261.6 -12.3 9.0 1,531.3 21.4 9.6 .Agriculture and fishing 626.4 - 27.4 4.5 725.5 15.8 4.5 .Agrofood industries 635.2 10.5 4.5 805.8 26.9 5.1 -Energy 1,456.2 18.7 10.4 1,658.0 13.9 10.4 -Mining products 43.1 14.9 0.3 32.8 -23.9 0.2 -Non-food manuf. industries 11,278.0 4.3 80.3 12,743.0 13.0 79.8 .Textile, leather & footwear 3,409.6 2.6 24.3 3,326.6 -2.4 20.8 .Mechanial & electrical indust. 5,404.7 6.7 38.5 6,528.5 20.8 40.9 .Phosphate by-products 275.6 50.6 1.9 336.7 22.2 2.1 .Other manufactured products 2,188.1 - 2.1 15.6 2,551.2 16.6 16.0 of which : * Building materials, Ceramics & glass 132.5 - 19.6 0.9 152.6 15.2 1.0 * Chemical products 1,316.1 4.5 9.4 1,478.8 12.4 9.3 Source : National Statistics Institute For imports, the increase reflected trends in the international environment, particularly the higher cost of oil, raw materials and semi-finished products as well as basic foodstuff taken together.
STRUCTURE OF FOREIGN TRADE BY SECTOR OF ACTIVITY IN 2004 EXPORTS FOB IMPORTS CIF
Agric.& Other Mine, Agric.& fishing & manuf. phosph.& fishing & Other manuf. Energy agro-food 8.0% prod's agro-food 16.0% 10.4% ind. 7.2% ind. 11.4% 9.6% Mechan. & Mine, Energy elect. phosph.& 9.5% Industries prod's 21.5% 2.3% Elect. Leather & Industries Textile, footwear 12.6% Clothing & leather & 5.2% Other Mechan. accessories footwear textile Industries 26.7% 20.8% prod's 28.3% 10.5%
109 1. Agriculture, fishing and agrofood industries Influenced mainly by the sharp increase in production of olive oil and import control, the deficit in the balance of this sector fell to 162.4 MTD (vs. 511.7 MTD in 2003) and the rate of coverage increased by 30 percentage points from 2003 to 2004 to 89.4%. In effect, exports grew at a faster pace than imports, with rates of 82.5% and 21.4% respectively. Record sales for olive oil in 2004 accounted for 96% of the overall increase in exports by the sector. In reaching 708 MTD vs. 114.3 MTD in 2003 they increased more than six times, influenced by a strong increase in quantities exported, rising to 211,200 tons vs. about 40,000 tons in 2003. Italy and Spain were the main destinations and private operators handled almost 75% of the total, with average unit prices up to 3245.5 dinars per ton vs. 2888 dinars in 2003. The National Oil Board exported 48,500 tons worth about 180 MTD. Seafood sales were up 5.9% thanks to higher prices, amounting to 153.2 MTD. Similarly, sales of dates were up 10.4% and that of citrus fruit 17.6%. The countries of the European Union were the main destinations for these products. After a year of lower figures, import of this sector grew by 21.4% to more than 1,531 MTD. This involved in particular purchases of soft wheat, mainly from France, the Ukraine, Russia and the United States, up 56.8% to 216.2 MTD under the combined effect of higher international prices and the 21.6% increase in imported quantities. Imported corn was also up (48.4%) after a year of lower figures, with quantities rising 19.4% and higher buying prices. Argentina and Canada were the main suppliers, with respective shares of 91% and 8.6%. Small quantities were also provided by France, Italy and Turkey. Barley imports were up 211.6% in terms of value and 179.6% in terms of volume, shipped from the Ukraine, Russia and Bulgaria. Large quantities of meat were imported, mainly from Germany and Ireland, to make up for the higher deficit in national production, especially during the month of Ramadan. They amounted to 9900 tons worth 34.1 MTD vs. just 1400 tons worth 4.7 MTD in 2003. Imports of soy cakes for animal feed were up a sharp 97.2%, influenced by both higher quantities (+44.7%) and prices. Purchases of vegetable oil for food, which represent almost 10% of imports for the sector, fell by 6.6% in terms of volume, but increased by 6.8% in terms of value, in line with higher prices. Oil was imported mostly from Spain, Germany, Holland and Brazil. But imports were down for other products, especially hard wheat (-78.4%), with quantities reaching just 102,000 tons vs. 472,400 tons in 2003. Most exports and imports in this sector were handled under the general regime: 90% and 88% respectively.
110 BALANCE OF TRADE IN AGRICULTURE/FISHING AND AGROFOOD INDUSTRIES Variat. 2004/2003 Quantity in 1,000 tons Value in MTD Description in % 2002 2003 2004 2002 2003 2004 Quantity Value Exports 694.9 749.9 1,368.9 82.5 Human food 457.1 351.3 588.6 556.5 565.6 1,227.4 67.5 117.0 Of which : .Olive oil 22.5 39.9 211.2 55.8 114.3 708.0 429.3 519.4 .Seafood 17.5 14.8 15.2 134.6 144.7 153.2 2.7 5.9 .Dates 41.9 37.1 40.4 97.5 95.2 105.1 8.9 10.4 .Citrus fruits 22.7 17.1 17.7 12.0 11.9 14.0 3.5 17.6 .Cereal-based preparations 51.1 57.2 58.4 54.7 49.3 53.9 2.1 9.3 .Concentrated tomato paste 25.8 5.5 13.8 37.6 8.4 17.5 150.9 108.3 .Harissa 2.9 5.2 5.2 8.1 12.9 14.1 0.0 9.3 .Cereal flours 91.8 11.1 14.1 33.3 3.7 6.2 27.0 67.6 Other products 138.4 184.3 141.5 -23.2 Imports 1,438.3 1,261.6 1,531.3 21.4 Human food 4,330.0 2,742.4 2,880.2 1,143.0 894.1 1,042.0 5.0 16.5 of which : .Cereals 3,539.1 1,948.3 1,992.9 650.5 381.9 434.2 2.3 13.7 of which : -Soft wheat 1,013.9 773.6 940.4 172.9 137.9 216.2 21.6 56.8 -Hard wheat 801.8 472.4 102.0 203.5 125.1 26.9 -78.4 -78.5 - Corn1 884.3 606.0 723.3 145.6 101.2 150.2 19.4 48.4 - Barley1 825.3 75.1 210.0 124.0 11.2 34.9 179.6 211.6 .Sugar 342.9 326.2 368.2 110.7 87.7 99.4 12.9 13.3 .Vegetable oils2 186.1 200.4 187.2 111.6 138.3 147.7 - 6.6 6.8 .Dairy products 23.4 29.1 31.8 34.7 41.8 52.9 9.3 26.6 .Meat 0.0 1.4 9.9 0.0 4.7 34.1 607.1 625.5 .Tea 9.5 9.2 9.6 20.6 14.6 14.4 4.3 -1.4 .Coffee 12.6 5.6 13.9 15.2 5.9 17.4 148.2 194.9 .Bananas 16.3 13.8 54.3 7.1 5.0 18.6 293.5 272.0 .Potatoes 46.2 36.6 46.7 25.6 20.8 25.9 27.6 24.5 .Various prepared foods 4.3 4.6 4.6 39.6 35.5 36.8 0.0 3.7 Other products 295.3 367.5 489.3 33.1 of which :Soy bean cakes 338.7 270.3 391.2 100.8 79.7 157.2 44.7 97.2 .Raw tobacco 5.5 7.0 8.0 21.2 23.7 26.4 14.3 11.4 Food balance -586.5 -328.5 +185.4 -156.4 Rate of coverage (in %) 48.7 63.3 117.8 54.5 pts Overall balance -743.4 -511.7 -162.4 -68.3 Rate of coverage (in %) 48.3 59.4 89.4 30.0 pts Source : National Statistics Institute 2. Energy Since the beginning of 2004, ongoing uncertainty about the geopolitical situation in a context of economic recovery worldwide brought about a steep hike in the price of energy products. In effect, crude oil prices, in terms of annual average, went up to about $39 per barrel, with peaks of $50 per barrel sometimes during the year. This was due mainly to the increase in world demand, essentially from the US and China. Global supply was not high enough to meet growing demand as cold weather took hold in a number of areas around the world. Natural disasters took their toll, such as the hurricanes that devastated the Gulf of Mexico, causing serious damage to production capacity. There were also incidents of a political nature, such as ongoing
1 Part of imports is destined to animal feed. 2 This includes oil for food, another part of this product being classified in the sector under raw material and semi- finished products. 111 instability in Iraq, conflict in Venezuela, and strikes in Nigeria. Speculation was also an issue on the world market for energy products. In any case, Tunisia’s balance of energy deficit widened by just 19.7%, well below the previous year’s 34.4% figure. The rate of coverage fell by 1.5 of a percentage point, to 69.4%. Despite the drop in sales of refined products, exports of energy products progressed overall by 11.5%, thanks to stronger sales of crude oil both in terms of quantity and value. They went up from almost 2,415,000 tons in 2003 to 2,798,000 tons in 2004. 70% of crude oil sales were handled by resident companies, about 43% by the Tunisian Oil Activities Company (ETAP) and almost 14% by the Tunisian Refining Industries Company (STIR). The main markets were Italy (35.9%), France (31.2%), Spain (19.8%) and Holland (5.7%). Sales of refined products were down 45.1%, with a 56.4% drop in quantities, totalling just 756,000 tons. The majority of these products were handled by STIR and shipped mainly to Italy (85.6%). Imports were up 13.2% despite a 13.1% drop in volume. It should be noted that stocks had been built up considerably in 2003 for fear that the geopolitical situation in the Gulf would have adverse repercussions. As for import of energy products made up besides refined products (68.2%) and crude oil (23.8%) of natural gas (7.6%) and coke and coal (0.4%), the overall increase was attributable to higher prices, since imported quantities were down for the two main products. The volume of purchases of crude oil was down by almost 8%, not enough to entirely cover a marked increase in prices, bringing about a 14.9% increase in the value of purchases. Crude oil imports came almost entirely from Libya, while refined products came mainly from Italy (almost 50%), Russia (16.4%), Spain (7.8%) and Libya (5.3%). Imported natural gas went mainly to the Tunisian Electricity and Gas Company (STEG) to produce electricity and gas and to the private plants Rades II and El Bibene, up 22.1% despite the 17.4% drop in the purchased quantity. Imports of coal and coke, mainly from Algeria, Egypt, Spain and Germany were down 32.7%, following a reduction by almost one half of imported volume: 32,600 tons vs. 63,500 tons in 2003. As in the past, trade in energy products took place entirely in the framework of the general regime. BALANCE OF TRADE IN THE ENERGY SECTOR Quantity in 1,000 tons Value in MTD Variat.2004/2003 in % Description 2002 2003 2004 2002 2003 2004 Quantity Value Exports 911.9 1,032.6 1,151.0 11.5 Crude oil 2,932.5 2,414.9 2,797.8 715.2 640.2 935.5 15.9 46.1 Refined products 778.9 1,733.2 756.2 196.7 392.4 215.5 -56.4 -45.1 Imports 1,227.1 1,456.2 1,658.0 13.9 Crude oil 1,434.9 1,199.3 1,105.0 305.2 343.6 394.8 -7.9 14.9 Refined products 2,811.2 3,312.5 2,878.7 835.8 999.1 1,130.5 -13.1 13.2 Natural gas 726.5 814.3 673.0 82.3 102.8 125.5 -17.4 22.1 Coal & coke 20.4 63.5 32.6 3.8 10.7 7.2 -48.7 -32.7 Deficit 315.2 423.6 507.0 19.7 Rate of coverage -1.5 (in %) 74.3 70.9 69.4 point Source : National Statistics Institute 112 3. Mining, phosphates and by-products As was the case the year before, soaring buying prices for sulphur and ammonium nitrate as well as for sea freight were the determining factors for 2004, leading fertiliser producers to adjust prices upward. For this sector, 2004 was marked by major recovery in exports (26.1% vs. 5.4% in 2003), taking place in conjunction with slower growth in imports: 15.9% vs. 44.5%. Thus the trade surplus was up 34.9% to 495.4 MTD and the rate of coverage gained almost 19 percentage points, to 234.1% vs. 215.2%. The range of increase for export prices expressed in US dollars was between 1% and 29%, along with an increase in volume for most exported products. This progress took place despite tough foreign competition, especially from the US, further complicated by the merger of two major US producers, aggressive selling by Russian and Lithuanian operators, and the emergence of China as the number two world exporter of triple superphosphate (TSP). The increase in the value of exports involved mainly phosphoric acid (42.5%), under the combined effect of higher volume sold (27.8%), notably to India, and average prices in dollars (15.3%). Its share in the sector’s global exports increased by more than 3 percentage points, to 26.1% vs. 23.1% in 2003. Shipments went mainly to India (46.8%), France (13.9%), Italy (9.2%) and Turkey (6.9%). DAP, the sector’s number one export with a 40% share, also enjoyed sales that were up by 17.6%, following an increase of almost 29% in average prices expressed in dollars, despite the drop in quantities sold, especially to Pakistan, Algeria and Italy. Sales of triple superphosphate were also on the rise (+29.8%) under the combined effects of an 18% hike in average prices in dollars and a 12.7% increase in volume, exported mainly to Brazil and the United States. Export of other products was on the decline, especially for lime phosphate which was down 23.6% because of aggressive selling by Syrian, Algerian and Egyptian competitors on far-off markets like Malaysia and New Zealand and the drop in sales to Turkey, which normally accounted for almost a quarter of total exported volume. Almost 51% of Tunisian phosphates were exported to Poland. Sales of dicalcium phosphate (DCD), mainly to Great Britain, Spain and Morocco, were up 179.4% following 142.2% increase in the exported quantities. Imports grew but at a slower pace (15.9% vs. 44.5% in 2003), influenced by trends in sales of non-refined sulphur (15.2% vs. 61.8%) and ammonium nitrate (7.7% vs. 67.8%). About 61% of purchases of non-refined sulphur were shipped to Russia, which also provided all imported ammonium nitrate. Trade in this sector took place solely in the framework of the general regime.
113 BALANCE OF TRADE IN MINING, PHOSPHATES AND BY-PRODUCTS Quantity in 1,000 tons Value in MTD Variat 2004/2003 Description in % 2002 2003 2004 2002 2003 2004 Quantity Value Exports 724.9 685.9 864.9 26.1 Fertilisers 2,055.4 2,132.0 2,155.7 410.5 446.3 544.4 1.1 22.0 .Triple superphosph. 785.6 774.9 873.5 137.3 142.8 185.3 12.7 29.8 .DAP 1,217.8 1,304.8 1,219.1 267.3 297.3 349.5 -6.6 17.6 .Other chemical fertilisers 52.0 52.3 63.1 5.9 6.2 9.6 20.7 54.8 Phosphoric acid 1,037.0 863.4 1,103.0 214.3 158.3 225.6 27.8 42.5 Lime phosphate 1,113.9 865.3 661.2 45.7 33.1 24.6 -23.6 -25.7 Dicalcium phosphate 91.2 51.7 125.2 25.1 12.6 35.2 142.2 179.4 Zinc 66.9 63.8 49.4 15.3 15.5 14.9 -22.6 -3.9 Other products 14.0 20.1 20.2 0.5 Imports 220.5 318.7 369.5 15.9 Non-refined sulphur 1,715.3 1,833.2 1,766.5 81.1 131.2 151.2 -3.6 15.2 Ammonium nitrate 372.8 407.6 340.8 60.5 101.5 109.3 -16.4 7.7 Oil bitumen 132.9 138.9 234.0 29.2 31.6 48.4 68.5 53.2 Fluorine spa 61.9 72.1 46.0 12.4 13.5 8.8 -36.2 -34.8 Cellulose padding 3.2 2.5 2.6 8.0 8.5 9.1 4.0 7.1 Fertilisers 17.8 66.4 83.1 6.6 15.7 22.5 25.2 43.3 Other products 22.7 16.7 20.2 21.0 Surplus 504.4 367.2 495.4 34.9 Rate of coverage (in %) 328.8 215.2 234.1 18.9 pts Source : National Statistics Institute 4. Textile-clothing The signs of weakening activity that began three years ago continued to characterise exports, up just 5.4%. But still the sector’s surplus improved by 14.3%, since imports increased by just 1.5%. The sector has retained its top ranking in the country’s overall exports with a share of 37.2%. This is however 3.9 points short of the 2003 figure. It reflects strong competition from Asian countries and the greater difficulty encountered in placing Tunisian textile products, which is likely to get worse with total dismantling of the multi-fibre Agreements at the beginning of 2005. Higher exports by the sector were handled by sales under the offshore regime (5%), accounting for 97.4% of the total and especially the general regime (26.1%). By product, export of clothing and accessories which represented 71.8% of sales in the sector, increased by just 5.6%, shipped mainly to Italy, France and Spain. Fabric sales were up markedly (+21.5%), followed by apparel and second-hand clothes (9.8%). 66.2% of these products were shipped to France and to a number of African countries such as the Congo, Libya, Algeria, Mali and Morocco. Import of these same products was dominated by fabric , which is the basis for turning out finished products for export, accounting for almost 58% of imports for the sector. After remaining more or less stationary in 2003 (0.7%), imports of fabrics were on the rise once again (+1.9%). Purchases of clothing and accessories (some of which are sold on the local market) increased by 3.2% vs. 2.9% a year earlier. The share of imports under the offshore regime amounted to about 90% of overall purchases in the sector. Imports by the textile and clothing sector came from France (31.4%) and Italy (30.2%). Germany was in third place with a 7.3% share, while China moved up to
114 seventh place, becoming the foremost source of imports from a non EU country with a share of about 2.4%. While it continues to enjoy good relations between labour and management, geographic proximity to Europe and readily-available manpower at reasonable cost that is increasingly well qualified, Tunisia’s textile industry can no longer be limited to these advantages to maintain its standing in an international environment that is becoming more and more difficult. The profession needs to accelerate the jump to total manufacture of finished products and to concentrate on «upmarket» items, moving from subcontracting to co-contracting status along the lines of free trade agreements signed with a number of Mediterranean countries such as Turkey. Tunisian companies would do well to keep on top of production factors and improve productivity, notably by providing better supervision and training for staff. Only in this way will companies be able to break into European distribution channels with their own brand names. BALANCE OF TRADE IN THE TEXTILE AND CLOTHING SECTOR Variat 2004/2003 Quantity in 1,000 tons Value in MTD Description in % 2002 2003 2004 2002 2003 2004 Quant. Value Exports 4,141.9 4,252.8 4,483.6 5.4 Clothing and accessories 103.7 95.6 92.9 2,967.7 3,050.2 3,221.4 -2.8 5.6 Hosiery 30.7 28.7 28.2 824.7 834.8 849.2 -1.7 1.7 Fabric 19.6 17.5 20.0 119.8 103.9 126.2 14.3 21.5 Textile yarns and thread 11.7 12.1 11.2 54.2 54.6 59.1 -7.4 8.2 Apparel & second- hand clothes 40.0 36.2 34.7 160.6 189.2 207.8 -4.1 9.8 Others 14.9 20.1 19.9 -1.0 Imports 2,910.4 2,944.5 2,987.9 1.5 Fabric 124.2 116.9 115.0 1,678.8 1,691.2 1,723.0 -1.6 1.9 Textile yarns and thread 43.1 42.2 43.2 191.7 196.4 200.5 2.4 2.1 Cotton in bulk 24.8 20.3 22.8 34.9 31.8 43.0 12.3 35.2 Apparel & second- hand clothes 80.8 85.0 91.4 84.2 90.7 83.8 7.5 -7.6 Clothing & access. 22.8 20.0 19.0 527.0 542.5 559.9 -5.0 3.2 Hosiery 17.5 16.0 14.2 326.3 319.8 305.9 -11.3 -4.3 Others 67.5 72.1 71.8 -0.4 Surplus 1,231.5 1,308.3 1,495.7 14.3 Rate of coverage (in %) 142.3 144.4 150.1 5.7 pts Source : National Statistics Institute 5. Leather and footwear The share of the leather/footwear sector in overall export of goods fell from 6.1% in 2003 to 5.2% in 2004, following stationary exports (628.2 MTD vs. 627.8 MTD) along with virtual stagnation (0.9%) of sales under the offshore regime, which represent 96.8% of total sales in the sector. Sales under the general regime dropped by 19.5%. With a 27.2% drop in imports, this situation yielded a higher trade surplus of 289.5 MTD compared to 162.7 MTD a year earlier. Exported footwear, which represented almost 85% of total sales in the sector (either in the form of finished products or of uppers, soles and other shoe parts) was
115 shipped mainly to Italy (almost 42%), followed by France (39.3%) and Germany (8.2%). Exports of leather goods were up 2.4%, despite unchanged quantities. Sales of skins and leather fell by 26.6% because of the drop in quantities. There was a drop in import of almost all products, especially footwear and its components and leather goods. Skins and leather imported in their raw state, mainly from the European Union, China, India and Hong Kong, were up by 5.7%. Several challenges, both domestic and external, need to be met by the sector if it is to consolidate its position on European markets and conquer new ones. Of major concern on the domestic side are greater productivity and lower production costs. External challenges are linked to the negative impact of European companies that have moved operations to Asian and Eastern European countries and of highly competitive products from China on European Union markets. BALANCE OF TRADE IN THE LEATHER AND FOOTWEAR SECTOR Variat 2004/2003 Quantity in 1,000 tons Value in MTD Description in % 2002 2003 2004 2002 2003 2004 Quant. Value Exports 592.8 627.8 628.2 0.1 Skins and leather 3.4 3.7 2.6 34.9 27.8 20.4 -29.7 -26.6 Leather goods 2.2 2.1 2.1 65.4 67.8 69.4 0.0 2.4 Footwear 22.6 23.4 22.3 487.2 528.8 531.6 -4.7 0.5 .Shoe uppers&parts 5.3 4.7 4.0 218.0 214.3 202.3 -14.9 -5.6 .Shoes 17.3 18.7 18.3 269.2 314.5 329.3 -2.1 4.7 Others 5.3 3.4 6.8 100.0 Imports 412.8 465.1 338.7 -27.2 Skins and leather 10.4 10.9 11.5 204.0 205.0 216.6 5.5 5.7 Leather goods 1.4 1.2 1.6 11.2 17.7 14.9 33.3 -15.8 Shoes 16.0 16.9 5.8 183.1 226.8 93.1 -65.7 -59.0 .Shoe uppers&parts 7.0 5.9 5.0 89.6 103.7 83.3 -15.3 -19.7 .Shoes 9.0 11.0 0.8 93.5 123.1 9.8 -92.7 -92.0 Others 14.5 15.6 14.1 -9.6 Surplus 180.0 162.7 289.5 77.9 Rate of coverage (in %) 143.6 135.0 185.5 50.5 pts Source : National Statistics Institute 6. Mechanical and electrical industries Exports and imports in this sector both rose by 20.8%, compared to 13.9% and 6.7% respectively in 2003. Thus the deficit grew by 675.7 MTD to 3,930.6 MTD, while the rate of coverage remained stable at 39.8%. Its share in Tunisian trade increased from 20.8% to 21.5% for exports and from 38.5% to 40.9% for imports. 88% of exports for this sector were made under the offshore regime, while 75% of imports were handled under the general regime.
116 BALANCE OF TRADE IN MECHANICAL AND ELECTRICAL INDUSTRIES (In MTD unless otherwise indicated) Variation In % Description 2002 2003 2004 2003/2002 2004/2003 Exports 1,887.1 2,149.8 2,597.9 13.9 20.8 Imports 5,066.0 5,404.7 6,528.5 6.7 20.8 Deficit 3,178.9 3,254.9 3,930.6 2.4 20.8 Coverage rate (in %) 37.3 39.8 39.8 2.5 points 0.0 point Source : National Statistics Institute. For mechanical industries, the rate of progression for exports practically doubled, up from 7.7% in 2003 to 14.6% in 2004, while imports (which had stagnated in 2003) were up 21.7%. Consequently, the trade deficit increased by 24.1% after decreasing by 2.4% in 2003, coming in at 3,430.3 MTD, while the rate of coverage lost 1.5 of a percentage point, held to 24.1%. Faster growth in exports was the result mainly of strong progress in sales of automotive components and spare parts (27.9%). The main markets for these products were France, Spain, Italy and Germany, with respective shares of 58.3%, 12.7%, 12.4% and 11%. A sizeable increase was recorded for cables and optic fibres: 70.4% vs. 1.8% in 2003. Sales of cast iron, iron, steel and worked articles benefited from higher prices on the international market. They registered an increase of 14.2% despite the strong decrease in volume (-47.9%). The main markets for these products were Libya (26.2%), Italy (17.5%) and France (16.6%). A number of products suffered a drop in exports. This was the case for engine ignition apparatus (-82%) and mechanical apparatus and engines (-4.1%), due mainly to price decrease. Imports were up 21.7% after stagnating at 3,715 MTD in 2003. 30% involved purchases of iron and steel (bars, semi-finished products and machine wires…). This constituted an increase of 57%, in line with soaring prices on the international market, influenced in particular by rising demand, notably, from China. The Ukraine and Turkey were the two main sources of supply. There was a 45.7% increase in imported lorries and small trucks (especially from France and Japan) and a commensurate increase for turbines, motors and turbo- reactors, a 15.2% increase in private cars (especially from France and Germany), a 21.7% increase in undercarriages, bodywork and spare parts and a 47.9% increase in copper and copper articles (47.9%). Imports of several products were down, such as transport material for sea navigation (-59.1%), apparatus for hoisting, drilling and handling (-8.9%) and machines for the textile industry (-23.8%).
117 BALANCE OF TRADE IN MECHANICAL INDUSTRIES Quantity in 1,000 tons Value in MTD Variat 2004/2003 in % Description 2002 2003 2004 2002 2003 2004 Quantity Value Exports 883.2 951.6 1,090.7 14.6 Machines and mechanical devices 22.3 16.3 19.1 179.2 171.5 164.4 17.2 -4.1 Transport equipment 224.0 221.4 284.7 28.6 of which : vehicles, cycles & tractors 23.6 27.8 31.7 205.8 209.0 262.1 14.0 25.4 Other vehicle machines 0.4 0.7 1.2 23.3 14.1 23.7 71.4 68.1 Cast iron, iron, steel and finished prod. of which : 203.2 259.8 135.4 110.7 146.3 167.1 -47.9 14.2 * Tubes, pipes and accessories 31.5 25.5 24.0 21.3 30.0 31.4 -5.9 4.7 * Cast iron, iron and steel 141.1 194.4 75.0 27.8 37.1 44.8 -61.4 20.8 * Iron and steel springs 9.1 8.6 11.2 16.3 18.2 25.2 30.2 38.5 * Metal structures 8.6 12.4 10.6 13.4 19.2 17.7 -14.5 -7.8 Cables and optical fibres 3.3 3.6 4.9 90.5 92.1 156.9 36.1 70.4 Ignition apparatus 1.4 1.4 0.2 77.5 82.0 14.8 -85.7 -82.0 Optics, scientific equip. 1.7 2.3 2.0 45.8 74.2 85.5 -13.0 15.2 Aluminium and finished products 7.5 9.1 6.6 28.5 29.6 26.3 -27.5 -11.1 Metalworks 4.6 3.6 4.2 20.1 21.0 31.3 16.7 49.0 Other products 83.6 99.4 136.0 36.8 Imports 3,715.2 3,715.8 4,521.0 21.7 Cast iron, iron, steel and finished products 760.9 1,045.8 1,318.7 504.5 662.4 949.7 26.1 43.4 * of wh: cast iron, iron & steel 652.7 939.1 1,186.3 272.8 423.5 665.1 26.3 57.0 * Tubes, pipes and accessories 54.4 40.0 72.9 80.1 62.8 99.6 82.3 58.6 * Other iron and steel- made products 7.9 8.5 9.0 33.4 37.6 45.9 5.9 22.1 * Metal structures 4.7 13.9 8.8 12.2 28.8 21.0 -36.7 -27.1 Tools 3.4 3.5 4.5 46.8 49.3 53.2 28.6 7.9 Machines, mechanical devices of which : 126.8 111.4 132.3 1,426.0 1,343.8 1,576.0 18.8 17.3 * Hoisting, drilling and handling equipment 23.8 19.8 17.2 186.4 150.7 137.3 -13.1 -8.9 * Turbines, engines and turbo jets 9.8 11.4 15.3 160.7 194.1 282.9 34.2 45.7 * Pomps & compressors 9.7 8.9 11.9 114.1 115.9 162.2 33.7 39.9 * Machines with specific tasks 4.1 6.1 4.7 65.8 80.7 90.9 -23.0 12.6 * Sewing machines/units 2.6 2.3 2.6 57.4 53.1 64.7 13.0 21.8 * Fridges and freezers 9.5 6.5 10.5 64.6 49.5 71.7 61.5 44.8 * Bearings and taps 4.6 4.7 4.9 73.9 70.4 80.1 4.3 13.8 * Textile machinery 3.2 2.8 2.7 36.4 45.0 34.3 -3.6 -23.8 * Agricultural machinery 2.3 3.1 4.3 15.8 19.3 23.0 38.7 19.2 Transport equipment of wh: 1,109.4 998.8 1,210.5 21.2 * Air transport 162.1 24.7 34.5 39.7 * Sea transport 24.3 25.7 10.5 -59.1 * Vehicles, cycles & tractors, of which : 89.4 83.0 99.7 910.5 935.8 1,162.2 20.1 24.2 - Private cars 21.6 30.0 34.2 322.1 416.2 479.3 14.0 15.2 - Frames and bodies 24.0 22.0 26.8 192.9 211.7 257.7 21.8 21.7 - Lorries & small trucks 15.2 15.6 20.3 169.7 204.2 297.6 30.1 45.7 - Mass transit vehicles 13.3 0.7 0.9 120.0 6.7 10.1 28.6 50.7 - Tractors 4.3 5.4 6.6 31.0 39.5 51.8 22.2 31.1 Optical & scientific material 3.6 3.3 3.1 169.4 175.3 173.8 -6.1 -0.9 Copper and copper made products 31.5 31.8 33.6 94.2 94.6 139.9 5.7 47.9 Aluminium & finished prod. 16.8 17.0 20.5 72.3 75.2 90.1 20.6 19.8 Tools and electro- mechanical cables 11.1 9.9 10.5 140.1 142.2 159.5 6.1 12.2 Other products 152.5 174.2 168.3 -3.4 Deficit 2,832.0 2,764.2 3,430.3 24.1 Rate of coverage (in %) 23.8 25.6 24.1 -1.5 point Source : National Statistics Institute.
118 Export and import of electrical articles were up by 25.8% and 18.9% respectively, compared to 19.4% and 25% a year earlier. This caused a 2% widening of the deficit and a 4.2 percentage point increase in the rate of coverage to 75.1%. Exports were up for most products, mainly electrical wires and cables (21.7%), components and parts for electrical apparatus (83.4%) and switches and circuit breakers (15.7%). Imports grew but at a slower pace, mainly for components and parts for electrical apparatus (24.5% vs. 109.2% in 2003), electrical transformers (0.2% vs. 17.1%) and radio broadcasting apparatus (20% vs. 84.8%). This slowdown was amplified by the drop in electrical apparatus for telephony (-32.5%) and special purpose machines (-79.3%).
BALANCE OF TRADE IN ELECTRICAL INDUSTRIES Quantity in 1,000 tons Value in MTD Variat.2004/2003 Description in % 2002 2003 2004 2002 2003 2004 Quantity Value Exports 1,003.9 1,198.2 1,507.2 25.8 Electrical machines and apparatus 57.7 60.3 72.6 948.1 1,145.5 1,429.5 20.4 24.8 of which : * Electrical cables and wires 28.8 28.2 34.1 370.7 414.5 504.4 20.9 21.7 * Switches and circuit breakers 4.8 7.3 7.6 177.3 273.6 316.5 4.1 15.7 * Electricity transformers 9.1 8.3 8.4 138.9 154.9 165.6 1.2 6.9 * Integrated circuits and micro assembly 1.0 1.4 1.7 60.3 66.0 79.5 21.4 20.5 * Parts for electrical apparatus 1.6 1.9 2.8 57.9 91.0 166.9 47.4 83.4 * Machines with specific tasks 0.2 0.2 0.0 38.9 34.6 4.4 -100.0 -87.3 * Microphones and loudspeakers 3.1 4.7 4.5 39.9 46.9 44.0 -4.3 -6.2 Fridges and Freezers 3.6 1.0 0.7 17.1 4.9 3.7 -30.0 -24.5 Optics and scientific material 0.6 0.6 0.7 18.6 22.8 21.4 16.7 -6.1 Other products 20.1 25.0 52.6 110.4 Imports 1,350.8 1,688.9 2,007.5 18.9 Electrical machines and apparatus, 56.6 64.0 81.8 1,040.4 1,369.1 1,653.7 27.8 20.8 of which : * Parts for electrical apparatus 5.8 8.5 10.9 138.1 288.9 359.8 28.2 24.5 * Switches and circuit breakers 8.5 9.7 12.0 185.6 222.1 303.4 23.7 36.6 * Electricity transformers 6.6 6.9 8.4 69.1 80.9 81.1 21.7 0.2 * Electrical cables and wires 12.2 11.9 22.8 141.2 169.4 274.1 91.6 61.8 * Broadcasting apparatus 0.7 1.9 1.3 104.9 193.9 232.6 -31.6 20.0 * Electrical apparatus for telephony 0.9 0.9 0.7 89.3 80.7 54.5 -22.2 -32.5 * Machines with specific tasks 0.4 0.4 0.1 35.1 36.7 7.6 -75.0 -79.3 * Boards and control boxes 0.9 0.6 0.7 22.0 24.4 31.1 16.7 27.5 Computer equipment 3.7 4.0 4.3 179.8 192.1 218.9 7.5 14.0 Optics and scientific material 1.6 1.3 1.4 76.6 77.1 80.4 7.7 4.3 Other products 54.0 50.6 54.5 7.7 Deficit 346.9 490.7 500.3 2.0 Rate of coverage (in %) 74.3 70.9 75.1 4.2 points Source : National Statistics Institute 119 7. Other manufacturing industries Trends in trade for this sector, which includes building materials/ceramics/glass, chemical industries exclusive of phosphate processing, and miscellaneous industries, were marked in 2004 by faster growth for exports (13.8% vs. 6.1% in 2003) and by recovery in imports (16.6% vs. -2.1%). Thus the trade deficit widened by 18.3% after reducing 6.7% in 2003. The rate of coverage went down one percentage point, from 38.6% in 2003 to 37.6% in 2004. 50% of exports by this sector were made under the general regime, as were 81% of imports. The sector held an 8% share in overall Tunisian exports and a 16% share in imports. Faster growth in exports was due to higher sales by building materials/cereamics/glass companies (14.8% vs. 7.3% in 2003) and by miscellaneous manufacturing industries (26.7% vs. 6.9%) ; while export of chemical products decreased by 0.8%, compared to 4.8% growth the previous year. Building materials/ceramics/glass enjoyed exports that grew steadily thanks to renewed sales of ceramics (23.9% vs. 5.2%), shipped mainly to France (24.4%) and Libya (22.2%). Cement sales grew more slowly, both in terms of value (7.4% vs. 32.8%) and in terms of volume (17.6% vs. 48%). Algeria, Libya and Italy were the main buyers. Imports of building materials/ceramics/glass were once again on the rise (15.2% vs. -19.6% in 2003). This trend held for almost all products, especially drinking glasses and glass articles (21.3% vs. -4.6%) and ceramic items (15.8% vs. -22.1%). Export of chemical products, which had posted 4.8% growth in 2003, then dropped slightly (by 0.8%) because of the 22.4% decrease in the value of essential oils and perfume sales. These decreases were offset by the increase in sales of pharmaceutical products (92.1%) and rubber/rubber articles (7.6%). Imports of chemical products were up 12.4% vs. 4.5% in 2003, influenced in particular by the increase in purchases of pharmaceutical products (13.3% vs. 1.2%), miscellaneous chemical products such as insecticides (11.5% vs. 7.6%) and rubber/rubber articles (10.3% vs. 8.2%). Exports by miscellaneous manufacturing industries represented almost 48% of sales by the sector, growing at a rate of 26.7% vs. 6.9% in 2003, after renewed sales of their main products, especially plastics and plastic items (43% vs. -10.8%) sold mostly to France and Germany. Renewed growth in imports (24.4% vs. -8.9% in 2003) was mainly the result of higher purchases of plastics and plastic items (18.7% vs. 3.3%).
120 BALANCE OF TRADE IN OTHER MANUFACTURING INDUSTRIES Variat.2004/2003 Quantity in 1,000 tons Value in MTD Description in % 2002 2003 2004 2002 2003 2004 Quant Value Exports 795.1 843.8 960.4 13.8 Building materials, ceramics and glass, of which : 143.1 153.6 176.4 14.8 * Cement 562.0 831.5 978.2 37.8 50.2 53.9 17.6 7.4 * Ceramics 134.7 133.0 187.5 70.6 66.9 82.9 41.0 23.9 Chemical products of which : 313.6 328.6 326.0 -0.8 * TPPS phosphate 101.9 101.4 106.7 62.2 55.2 58.3 5.2 5.6 * Essential oils and perfume 5.9 3.6 4.2 43.9 44.6 34.6 16.7 -22.4 * Aluminium fluoride 47.5 44.3 35.2 44.6 39.0 33.2 -20.5 -14.9 * Rubber & rubber products 12.3 12.1 11.3 48.8 49.7 53.5 -6.6 7.6 * Tanning agents and paints 30.5 35.5 37.8 25.1 28.9 28.7 6.5 -0.7 * Soap, care products 20.7 20.5 19.0 23.4 21.8 22.6 -7.3 3.7 * Pharmaceutical products 0.4 0.5 0.9 9.3 10.1 19.4 80.0 92.1 Miscellaneous manufacturing industries, of which : 338.4 361.6 458.0 26.7 * Plastics and plastic items 32.0 29.3 31.4 130.2 116.2 166.2 7.2 43.0 * Toys, games & sport wear 1.4 1.2 1.1 21.9 19.8 23.7 -8.3 19.7 * Furniture, bedding & lustres 8.3 6.5 5.7 28.5 26.8 26.6 -12.3 -0.7 * Cork and worked products 5.1 7.5 10.0 17.4 25.4 28.9 33.3 13.8 Imports 2,235.8 2,188.1 2,551.2 16.6 Building materials, ceramics and glass, of which : 164.8 132.5 152.6 15.2 * Ceramics 49.0 43.3 44.8 35.7 27.8 32.2 3.5 15.8 * Glass & glassware 41.0 45.6 53.1 50.2 47.9 58.1 16.4 21.3 * Cement 518.5 5.7 7.1 24.2 1.4 1.9 24.6 35.7 * Kaolin and other clays 115.3 119.5 109.9 13.5 13.1 14.4 -8.0 9.9 * Marbels 89.2 78.0 76.6 8.9 8.0 7.6 -1.8 -5.0 Chemical products of which : 1,259.6 1,316.1 1,478.8 12.4 * Pharmaceutical products 9.0 4.8 4.7 269.0 272.1 308.4 -2.1 13.3 * Chemical products (antibiotics and others) 51.6 56.0 52.6 146.1 145.5 169.7 -6.1 16.6 * Miscellaneous chemical products 41.6 83.4 41.3 109.7 118.0 131.6 -50.5 11.5 * Rubber & rubber products 19.8 18.3 20.2 85.3 92.3 101.8 10.4 10.3 * Tanning agents and paints 39.2 41.0 41.8 91.3 93.8 98.9 2.0 5.4 * Essential oils and perfume 3.5 4.5 5.3 44.8 52.0 56.0 17.8 7.7 * Soap and care products 17.0 18.1 20.0 34.3 36.3 43.7 10.5 20.4 Miscellaneous manufacturing industries of which : 811.4 739.5 919.8 24.4 * Plastics and plastic items 292.0 286.0 288.8 564.9 583.8 693.1 1.0 18.7 Deficit 1,440.7 1,344.3 1,590.8 18.3 Rate of coverage (in %) 35.6 38.6 37.6 -1.0 point Source : National Statistics Institute C. TRENDS IN TRADE BY REGIME In 2004, contrary to the previous year, the traditional deficit for operations carried out under the general regime worsened, while the surplus balance of trade carried out under the offshore regime rose. The rate of coverage improved significantly for both regimes. 1. General regime Trade carried out under this regime was marked by a sustained increase, both for exports and imports: 31.6% and 18.2 % respectively vs. 6.1% and 0.7% in 2003. The deficit thus deepened by 10.9% to 6,490.6 MTD, while the rate of coverage increased by 4 percentage points, up from 35.2% to 39.2%.
121 Trends in exports were influenced mainly by the jump in sales in agriculture, fishing and agrofood industries (104.8% vs. 12.4% in 2003) and renewed growth in sales of textiles/clothing and leather/footwear (16.6% vs. -10.5%), mining/phosphates/by- products (26.1% vs. -5.4%) and mechanical/electrical industries (3.2% vs. 0.6 %). But there was slower growth in sales of energy and lubricating products, carried out entirely under the general regime (11.5% vs. 13.2%) and that of other manufacturing industries (10.6% vs. 12.2%). Faster growth in imports was due to increased purchases by the mechanical and electrical sector (19.2% vs. 1.7%) and major recovery in purchases by agriculture/fishing/agrofood industries (22.9% vs. -17.7% in 2003), by other manufacturing industries (18.2% vs. -5%) and by textiles-clothing/leather-footwear sector (10.3% vs. -2.2%). The share of exports and imports under the general regime in Tunisia’s overall trade rose from 2003 to 2004 from about 31% to 35% for the former and from 64% to 67% for the latter. TRENDS IN FOREIGN TRADE UNDER THE GENERAL REGIME (in MTD unless otherwise indicated) Variation (in %) Description 2002 2003 2004 2003/2002 2004/2003 Exports FOB 2,995.9 3,179.7 4,183.2 6.1 31.6 Imports CIF 8,971.6 9,030.9 10,673.8 0.7 18.2 Deficit 5,975.7 5,851.2 6,490.6 - 2.1 10.9 Rate of coverage (in %) 33.4 35.2 39.2 1.8 point 4 points Source : National Statistics Institute 2. Offshore regime The 19.7% increase in the surplus balance of commercial transactions in 2004 carried out in the framework of this regime and the 5.8 percentage point increase in the rate of coverage were the result of the combined effect of the 9.9% higher level of exports and slower growth in imports (5.7% vs. 10.3%). The faster pace of exports resulted mainly from sustained sales in mechanical and electrical industries (23.8% vs. 16.5%) and other manufacturing industries (17.2% vs. 0.3%). Slower growth in imports was due to the 29.6% drop in sales for leather and footwear, compared to a 14.1% increase in 2003. 33% of Tunisia’s total imports were carried out under the offshore regime (compared to 36% in 2003), as were 65% of exports (compared to 69% in 2003). TRENDS IN FOREIGN TRADE OF THE OFFSHORE REGIME (in MTD unless otherwise indicated) Variation in % Description 2002 2003 2004 2003/2002 2004/2003 Exports FOB 6,752.7 7,162.9 7,871.7 6.1 9.9 Imports CIF 4,539.3 5,008.0 5,291.3 10.3 5.7 Surplus 2,213.4 2,154.9 2,580.4 -2.6 19.7 Rate of coverage (in %) 148.8 143.0 148.8 -5.8 points 5.8 points Source : National Statistics Institute
122 D. GEOGRAPHICAL DISTRIBUTION The geographic structure of Tunisian trade shows that, as in the past, Europe and especially the European Union were predominant, keeping in mind that the zone was expanded on 1 May 2004 to include 10 new countries. Africa continued to stand in second place among Tunisia’s trading partners, followed by Asia and America. 1. Trade with Europe Tunisian exports to Europe amounted to 10,226.2 MTD, an increase of 17.3% compared to its 2003 level. Imports totalled 12,450.1 MTD, up 12.1%. The trade deficit fell by 6.9%, while the rate of coverage rose by 3.6 points to 82.1%. The European Union remained Tunisia’s first trading partner, the destination for 83.3% of its exports and supplier of almost 70% of its imports, compared to respective shares of 81% and 72.3% in 2003. Exports were up 19.9% over 2003, while imports grew at a slower pace (9.1%). Consequently the trade deficit fell by 41.9% to just 26.4% of the country’s global deficit, compared to 48% a year earlier. At the same time the rate of coverage reached a record high of 90.7%, 8.2 percentage points higher than the year before. The shares of the 10 new EU countries in total exports and imports remained marginal at just 0.4% and 1% respectively. Trade with the European Union focused mainly on the French, Italian and German markets. The balance of trade with France, traditionally Tunisia’s number one partner, yielded an 8.5 MTD surplus vs. a 292.6 MTD deficit the year before, following increases of 18.5% for exports and 8.8% for imports. The increase in sales concerned mainly electrical machines and apparatus, clothing and accessories other than hosiery and energy products, with the following respective shares in total exports : 18.7%, 34.5% and 7.7%. The increase in imports concerned mainly mechanical machines, electrical apparatus and rolling stock. The trade balance with Italy yielded a surplus of 40.3 MTD, following 2003’s 523.3 MTD deficit. This was in line with the sharp 33.8% increase in exports that was attributable mainly to record sales of olive oil, along with a moderate increase in purchases (7.4%). Virtual stagnation in exports to Germany (1,105.2 MTD vs. 1,105.6 MTD in 2003) and the 5.9% higher volume of imports contributed to a 75.4 MTD widening of the trade deficit, amounting to 234.2 MTD Trade with the countries of the E.F.T.A was down 75.5% for exports and up 7% for imports. The drop in exports was due to the decrease in sales of refined oil products to Switzerland. The balance of trade with this group of countries yielded a deficit of 127.9 MTD vs. a surplus of 52.6 MTD in 2003 and the rate of coverage fell from 130.8% in 2003 to 29.9% in 2004.
123 Imports from other European countries went up mainly because of increased purchases from Russia (69.1%) and Turkey (56.6%), causing a deepening of the trade deficit with each of these countries. TUNISIAN TRADE BY GROUP OF COUNTRIES Exports Imports Balance Group of In MTD Share in % In MTD Share in % In MTD Countries 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 Europe 8,718.2 10,226.2 84.3 84.8 11,105.9 12,450.1 79.1 78.0 -2,387.7 -2,223.9 EU, of which : 8,376.9 10,040.6 81.0 83.3 10,152.9 11,072.3 72.3 69.4 -1,776.0 -1,031.7 Euro Zone, 7,966.4 9,603.4 77.0 79.7 9,491.9 10,296.6 67.6 64.5 -1,525.5 -693.2 of which : France 3,365.5 3,986.7 32.5 33.1 3,658.1 3,978.2 26.1 24.9 -292.6 8.5 Italy 2,281.4 3,051.4 22.1 25.3 2,804.7 3,011.1 20.0 18.9 -523.3 40.3 Germany 1,105.6 1,105.2 10.7 9.2 1,264.4 1,339.4 9.0 8.4 -158.8 -234.2 Spain 481.8 729.5 4.7 6.1 748.8 839.1 5.3 5.3 -267.0 -109.6 Belgium 405.9 358.9 3.9 3.0 413.8 445.0 2.9 2.8 - 7.9 -86.1 United Kingdom 337.3 346.6 3.3 2.9 314.1 345.5 2.2 2.2 23.2 1.1 Sweden 29.4 34.3 0.3 0.3 166.1 226.5 1.2 1.4 -136.7 -192.2 10 new countries 33.5 49.5 0.3 0.4 142.3 166.5 1.0 1.0 -108.8 -117.0 EFTA, of which : 223.2 54.6 2.2 0.4 170.6 182.5 1.2 1.1 52.6 -127.9 Norway 4.5 4.7 0.0 0.0 5.4 6.3 0.0 0.0 - 0.9 - 1.6 Switzerland 218.2 49.0 2.1 0.4 165.1 175.8 1.2 1.1 53.1 -126.8 Other Eurpean countries, 118.1 131.0 1.1 1.1 782.4 1,195.3 5.6 7.5 -664.3 -1,064.3 of which : Russia 2.2 6.5 0.0 0.1 287.5 486.1 2.0 3.0 -285.3 -479.6 Turkey 102.6 107.4 1.0 0.9 256.0 400.9 1.8 2.5 -153.4 -293.5 Ukraine 0.4 0.7 0.0 0.0 119.4 218.7 0.9 1.4 -119.0 -218.0 Africa of which : 798.2 820.8 7.7 6.8 829.7 957.5 5.9 6.0 - 31.5 -136.7 Arab countries 699.1 712.2 6.8 5.9 763.3 891.1 5.4 5.6 - 64.2 -178.9 of which : - UMA of which : 661.0 669.4 6.4 5.6 690.0 800.6 4.9 5.0 - 29.0 -131.2 .Algeria 133.4 135.6 1.3 1.1 167.5 194.4 1.2 1.2 - 34.1 -58.8 .Libya 453.8 432.6 4.4 3.6 460.4 526.9 3.3 3.3 - 6.6 -94.3 .Morocco 69.7 92.4 0.7 0.8 60.2 78.1 0.4 0.5 9.5 14.3 - Egypt 36.0 38.8 0.3 0.3 62.8 77.9 0.4 0.5 - 26.8 -39.1 America 158.5 257.6 1.5 2.1 741.2 947.1 5.3 5.9 -582.7 -689.5 NAFTA, of which : 70.9 155.0 0.7 1.3 471.5 505.4 3.4 3.2 -400.6 -350.4 USA 62.5 143.5 0.6 1.2 345.5 445.7 2.5 2.8 -283.0 -302.2 Canada 8.1 10.4 0.1 0.1 117.3 52.3 0.8 0.3 -109.2 -41.9 Latin America 87.6 102.6 0.8 0.8 269.7 441.7 1.9 2.7 -182.1 -339.1 of which : Brazil 57.1 81.0 0.6 0.7 87.9 187.8 0.6 1.2 - 30.8 -106.8 Argentina 19.5 13.6 0.2 0.1 144.8 209.4 1.0 1.3 -125.3 -195.8 Cuba 4.7 0.0 0.0 0.0 11.4 7.2 0.1 0.0 - 6.7 - 7.2 Ecuador 0.0 0.0 0.0 0.0 5.5 16.8 0.0 0.1 -5.5 -16.8 Asia 307.2 377.2 3.0 3.2 1,159.1 1,496.4 8.3 9.4 -851.9 -1,119.2 Arab countries, 97.9 103.0 1.0 0.9 227.2 246.2 1.6 1.6 -129.3 -143.2 of which : - Gulf coop. cntr. 48.0 50.8 0.5 0.4 195.9 207.1 1.4 1.3 -147.9 -156.3 of which : Saudi Arabia 32.6 29.8 0.3 0.2 133.7 141.0 1.0 0.9 -101.1 -111.2 - Iraq 29.9 34.2 0.3 0.3 7.8 3.3 0.1 0.0 22.1 30.9 - Syria 4.4 6.4 0.0 0.1 7.4 16.2 0.1 0.1 - 3.0 - 9.8 Other Asian Cont’s, of which: 209.3 274.2 2.0 2.3 931.9 1,250.2 6.7 7.8 -722.6 -976.0 China 22.3 31.8 0.2 0.3 238.7 362.5 1.7 2.3 -216.4 -330.7 Japan 17.7 28.0 0.2 0.2 255.9 317.6 1.8 2.0 -238.2 -289.6 India 59.7 106.9 0.6 0.9 98.6 136.2 0.7 0.9 - 38.9 -29.3 Indonesia 4.3 2.5 0.0 0.0 22.7 18.2 0.2 0.1 - 18.4 -15.7 Hong Kong 3.8 5.4 0.0 0.0 15.7 27.4 0.1 0.2 - 11.9 -22.0 Other countries 360.5 373.1 3.5 3.1 203.0 114.0 1.4 0.7 157.5 259.1 TOTAL 10,342.6 12,054.9 100.0 100.0 14,038.9 15,965.1 100.0 100.0 -3,696.3 -3,910.2 Source : National Statistics Institute 124 2. Trade with Africa The trade deficit with Africa worsened sharply by 334%, as imports grew at a pace (15.4% vs. 8.1% in 2003) well above the 2.8% increase in exports. The share of purchases from these countries in overall imports was up from 5.9% in 2003 to 6% in 2004, while that of exports fell from 7.7% in 2003 to 6.8% in 2004. Trade with the countries of the Arab Maghreb Union, which accounts for 82.7% of trade flows with Africa, was up 16% for imports compared to a weak 1.3% increase in exports, resulting in a trade deficit that widened from 29 MTD to 131.2 MTD. There was a higher volume of imports from Libya, mainly involving crude oil, cast iron, iron, steel, worked articles and plastic materials. Imports from Algeria concerned natural gas and there was a higher volume of cast, iron, steel and refined oil products coming in from Morocco. Higher exports were attributable to sales to Morocco (up 32.6%), which more than made up for the drop in sales to Libya (-4.7%). Cast iron, iron, steel and worked items, dates and rubber were the main items shipped to Morocco. Exports to Egypt were up 7.8%, in line with sales of sodium tripolyphosphate, while the 24% increase in imports was due mainly to the increase in purchases of cast iron, iron, steel and potatoes. These trends yielded a trade deficit that was up by 45.9% and a rate of coverage that fell to 49.8% (-7.5 points). Trade with sub-Saharan Africa, notably Senegal, posted a 9.6% increase in exports and virtual stagnation in imports, leading to a higher trade surplus.
GEOGRAPHICAL BREAKDOWN OF TRADE DURING 2004 EXPORTS FOB IMPORTS CIF
Italy France 18.9% 33.1% Italy France 25.3% 24.9% Germany 8.4%
Other EU Rest of the Germany countries world 9.2% 17.2% 7.9% Rest of the Asia world Other EU Asia America 3.2%UMA 10.3% UMA countries 9.4% 5.9% 5.6% 5.0% 15.7%
3. Trade with America The United States of America, Brazil and Argentina are Tunisia’s main trading partners in this region, with respective shares of 1.2%, 0.7% and 0.1% in overall exports and 2.8%, 1.2% and 1.3% in overall imports. Trade with the American continents increased by 62.5% for exports and by 27.8% for imports. The trade deficit increased by 18.3% and the rate of coverage improved by 5.8 points (from 21.4% to 27.2%). Exports to the United States increased at a faster pace (129.6%) than
125 imports (29%), yielding a rate of coverage that rose by 14.1 percentage points to 32.2%. Exports and imports with Brazil grew by 41.9% and 113.7% respectively. Exports to Argentina dropped by 30.3% while imports from that country increased by 44.6%. 4. Trade with Asia With imports growing more rapidly than exports (29.1% vs. 22.8%), the trade deficit with Asian countries widened by 31.4% to 1,119.2 MTD. The shares of exports and imports with Asia in Tunisia’s overall trade increased from 3% and 8.3% respectively in 2003 to 3.2% and 9.4% in 2004. The deficit with Arab Asian countries (mainly Saudi Arabia, Iraq and Syria) increased from 129.3 MTD in 2003 to 143.2 MTD in 2004, as imports grew faster than exports: 8.4% vs. 5.2%. For other Asian countries, the 31% increase in exports and the 34.2% increase in imports yielded a trade deficit that was 35.1% higher. The increase in trade involved mainly India, Japan and China.
126 VIII. EXTERNAL PAYMENTS
The status of external payments improved markedly in 2004. The general balance of payments posted a sizeable 1,213 MTD surplus, compared to 496 MTD in 2003. This positive result was made possible by the lower current deficit in conjunction with a sharp increase in net inflows of capital. TRENDS IN THE MAIN BALANCES OF THE BALANCE OF PAYMENTS (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 A – Current payments - 1,126 - 1,209 - 1,060 -941 -691 Current deficit/GDP (%) 4.2 4,2 3,5 2,9 2,0 - Merchandise (FOB) - 3,088 - 3,408 - 3,019 -2,924 -3,032 - Services 2,122 2,138 1,750 1,707 2,048 - Factor income - 228 - 49 105 182 151 - current transfers 68 110 104 94 142 B – Capital & financial transactions account 835 1,618 1,307 1,477 1,952 of which : - Capital transactions 4 76 108 76 134 - Capital shares 1,001 629 1,133 713 767 - Medium & long term loan borrowings 305 1,270 1,089 1,061 1,179 C – Adjustment operations (net flows) - 42 - 32 - 47 - 40 - 48 General balance - 333 377 200 496 1,213
THE MAIN BALANCES ENTERING INTO THE BALANCE OF PAYMENTS (IN MTD)
2500 2002 2000 2003 1500
1000 2004 500 0 -500 -1000 -1500 Current Payments Capital and Financial Overall Balance Transactions Account
Consequently net assets in foreign currency rose to 4,733 MTD at the end of 2004, corresponding to 107 days of imports. This compares to 3,503 MTD and 90 days at the end of 2003. Several factors made this development possible. Abroad, relatively calm geopolitical conditions meant higher receipts from services, especially tourism, which grew by a sizeable 20.3% in 2004 after drops in 2003 and 2002. And renewed economic growth world-wide, particularly in countries with which Tunisia is partner, boosted export of goods by 16.6% in 2004, following a 6.1% increase in 2003.
127 2004 domestic growth was recorded at 6%, compared to 5.6% a year earlier. This made for a significant surplus in production for export in all product groups, especially foodstuffs for which exports were up 117% in 2004. Export promotion and the policy of flexible foreign exchange helped boost sale of Tunisian products abroad while maintaining their competitive edge. This positive trend in export of goods and services in 2004 helped narrow the current deficit, which was more than covered by the significant increase in capital inflows, mostly in the form of drawings on external loans. Tunisia once again turned to the international financial market to mobilise a debenture loan «euro bond» type funding for the equivalent of 450 million euros. This debenture loan, bearing a 4.75% interest rate, will come to maturity in seven years. Foreign investment continued to progress, despite the absence of new privatisation transactions, as foreign investors become more and more convinced that Tunisia’s investment climate will continue to improve. A. CURRENT TRANSACTIONS The current deficit fell from 941 MTD in 2003 to 691 MTD in 2004, representing 2.9% and 2% of GDP respectively. CURRENT TRANSACTIONS BALANCE (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 13,096 15,325 15,307 15,960 18,665 Annual variations (%) 12.6 17.0 0.1 4.3 16.9 Expenditure 14,222 16,534 16,367 16,901 19,356 Annual variations (%) 16.9 16.3 - 1.0 3.2 14.5 Balance -1,126 -1,209 -1,060 -941 -691
GROWTH RATES : GOODS AND SERVICES EXPORTS AND GDP IN CURRENT PRICES
In % 20
15
10
5 0 -5 1996 1997 1998 1999 2000 2001 2002 2003 2004
GDP GOODS AND SERVICES EXPORTS
This was because the balance of services improved significantly thanks to higher receipts from tourism and the balance of factor income remained positive for the third straight year. Still, the trade balance ended up with a slightly higher deficit.
128 1. Trade1 The trade deficit in terms of FOB CIF values rose to 3,910 MTD in 2004 vs. 3,696 MTD in 2003, up 214 MTD (5.8%) after a slight 66 MTD (1.8%) narrowing a year earlier. This happened despite exports that grew faster (16.6%) than imports (13.7%), allowing for a rate of coverage of imports by exports that increased from 73.7% in 2003 to 75.5% in 2004. BALANCE OF TRADE Description 2000 2001 2002 2003 2004
Exports FOB (in MTD) 8,005 9,536 9,749 10,343 12,055 Annual variation (%) 14.9 19.1 2.2 6.1 16.6 Imports CIF (in MTD) 11,738 13,697 13,511 14,039 15,965 Annual variation (%) 16.6 16.7 - 1.4 3.9 13.7 Balance - 3,733 - 4,161 - 3,762 - 3,696 - 3,910 Source : National Statistics Institute Imports increased by 1,926 MTD (13.7%) over the 2003 figure to 15,965 MTD in 2004, involving all groups of products but to different degrees. Imports of foodstuffs in particular were up by a high 16.5% to 1,042 MTD after dropping by 21.8% in 2003. Imports of soft wheat alone were up 56.8% or 78 MTD, due to both prices and quantities. Purchases of vegetable oil were up 6.8% (9 MTD), mostly tied to prices effect, quantities were rather down by 6.6%. Worth of note that unlike other foodstuffs, hard wheat purchases went down sharply, from 125 MTD to 27 MTD from one year to the next. Acquisition of capital goods and raw materials/semi-finished products also increased by 15.5% and 20.2%, compared to -3.3% and 12.6% respectively in 2003, influenced by enhanced economic activity and a revival of investment. Purchase of consumer goods was up by 6.5% rate of increase (compared to 4.1% in 2003), to reach 5,044 MTD. Among these purchases, those of textile and clothing, which are predominant grew by 1.5% vs. 1.1% in 2003. Import of energy products also increased in 2004, but at a lower rate than the previous year : 13.9% and 18.7% respectively, amounting to 1,658 MTD, with crude oil and diesel oil the main components. But while quantities were down by 7.9%, crude oil imports were up by 14.9% (51 MTD) compared to 12.6% (38 MTD) in 2003, strongly influenced by the increase in world prices for this strategic commodity. With both prices and quantities on the rise, imports of diesel oil grew by 49.5% (203 MTD). Exports rose to 12,055 MTD in 2004, up 1,712 MTD (16.6%) vs. 594 MTD (6.1%) in 2003, involving all product groups to a greater or lesser degree. Exported foodstuffs more than doubled, up from 566 MTD to 1,227 MTD from one year to the next, attributable to a large degree to the 519.4% increase in sales of
1 These data are expressed as CIF value for imports and as FOB value for exports, unless otherwise indicated 129 olive oil, up from 114 MTD in 2003 to 708 MTD. Exports of raw materials and semi- finished products also increased by 20.1% to 3,028 MTD, compared to just 5.7% the year before. Export of capital goods amounted to about 1,002 MTD in 2004, up 16.8% vs. 9.3% in 2003, retaining their share in total exports at 8.3%. Export of energy products also continued to grow, though more slowly than a year earlier: 11.5% and 13.2% respectively. Higher sales of crude oil were due not only to higher prices but also to the 15.9% (382,900 ton) increase in quantitative terms. Sales of consumer goods, which continue to represent almost half of the total, were up just 5.2% in 2004 vs. 5% the year before, amounting to 5,647 MTD. In this context, the balance of food showed a 186 MTD surplus in 2004, compared to a deficit of 329 MTD in 2003, while the rate of coverage of imports by exports rose from 63.3% in 2003 to 117.8% in 2004. On the other hand, the deficit in the balance of raw materials/semi-finished products grew by 320 MTD (20.4%) in 2004, amounting to 1,885 MTD. But the rate of coverage remained virtually unchanged at 61.6%. The deficit in the balance of capital goods also grew by 299 MTD (14.9%) to 2,307 MTD. In any case, the rate of coverage grew at a slightly faster pace, up from 29.9% to 30.3%. Over the same time frame, the energy deficit widened, from 424 MTD in 2003 to 507 MTD in 2004, the rate of coverage thus fell from 70.9% to 69.4%. The surplus in the balance of consumer goods declined in 2004 by 26 MTD (4.1%), to 603 MTD and thus the rate of coverage fell, coming in at 112% vs. 113.3% in 2003. TREND IN THE BALANCE OF TRADE BY CATEGORY OF PRODUCTS (In MTD) Description 2000 2001 2002 2003 2004 Food - 154 - 250 - 587 -328 186 Raw materials & semi-finished products -1,036 -1,327 -1,241 -1,565 -1,885 Capital goods -2,507 -2,539 -2,180 -2,008 -2,307 Consumer goods 194 351 561 629 603 Energy - 230 - 396 - 315 -424 -507 General balance -3,733 -4,161 -3,762 -3,696 -3,910 Source : National Statistics Institute An analysis of the balance of trade by regime shows a widening of the deficit for the general regime, while the offshore regime posted a higher surplus. Indeed, offshore regime exports grew at a faster pace, from 6.1% in 2003 to 9.9% in 2004, while imports grew more slowly (5.7% vs. 10.3%). At the same time the surplus for this regime grew from 2,155 MTD to 2,580 MTD, an increase of 19.7%. Similarly, the rate of coverage was up 5.8 percentage points to 148.8%. Textiles, clothing and leather exports grew moderately, imports were down. While foodstuffs experienced diverging trends. Both exports and imports of mechanical and electrical industries continued to progress at a sustained pace. For the general regime, the balance of trade in 2004 posted a steep deficit of some 6,491 MTD vs. 5,851 MTD in 2003, an increase of some 10.9%. But the rate of coverage improved by 4 percentage points, increasing to 39.2% in the wake of exports that grew faster than imports: 31.6% and 18.2% respectively. 2. Services The surplus in the balance of services amounted to 2.048 MTD in 2004, 341 MTD (20%) more than in 2003. This development occurred after two straight years of 130 decreases, thanks to receipts that were up by 19.5%. This compares to a drop of 0.8% in 2003, benefiting from better performance in tourism and air/sea transport. Expenditure grew at a slower pace than receipts, up 19.1% vs. 0.7% in 2003. SERVICES BALANCE (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 3,792 4,189 3,813 3,784 4,521 Annual variation (%) 9.5 10.5 - 9.0 - 0.8 19.5 Expenditure 1,670 2,051 2,063 2,077 2,473 Annual variation (%) 14.1 22.8 0.6 0.7 19.1 Balance 2,122 2,138 1,750 1,707 2,048 Recovery in receipts from services helped to increase their share in total current receipts to 24.2%. a. Transport The deficit in the balance of transport was significantly higher in 2004 : 94 MTD vs. 51 MTD a year earlier, as expenditure far outstripped receipts. TRANSPORT BALANCE (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 815 918 870 937 1,139 Annual variation (%) 14.8 12.6 -5.2 7.7 21.6 Expenditure 750 941 929 988 1,233 Annual variation (%) 9.8 25.5 -1.3 6.4 24.8 Balance 65 -23 -59 -51 -94 Total receipts amounted to 1,139 MTD in 2004 vs. 937 MTD in 2003, influenced in particular by greater tourist activity in Tunisia, a situation stemming in particular from the 27.2% increase in passenger travel receipts for both air and sea transport. In effect, after suffering from adverse international conditions for the past three years, Tunisian airlines, especially the national carrier Tunisair, posted positive results for 2004, with faster growing ticket sales. Likewise, the Tunisian Navigation Company (CTN), the main Tunisian operator in passenger maritime transport, enjoyed significantly higher receipts from tickets. Receipts from freight were up 15.9% in 2004 to 131 MTD, due mainly to dynamic export of merchandise, handled to a large degree by Tunisian companies like the Tunisian Navigation Company (CTN), the New Kerkennah Transport Company, and other private companies specialised in transporting hydrocarbons. Receipts from airfreight, the main component of ‘other items’ in the balance of transport, improved from one year to the next, thanks to business generated by private airlines like Nouvelair and Karthago Airlines. Nouvelair, specialised in chartered aircraft for various tour operators, posted exceptionally high performance in 2004 on the strength of almost 1.2 million passengers. Similarly, Karthago Airlines, the newest of Tunisia’s airlines, posted good performance with about 500,000 passengers from April to October 2004 for all market segments. Gas royalties paid to the Tunisian State for the transcontinental pipeline that cuts across Tunisia on its way from Algeria to Italy amounted to 200 MTD in 2004 vs. 138 MTD a year earlier. This was due to greater quantities of gas sent to Italy 131 along with higher prices; but the increase was somewhat offset by depreciation of the dollar, which is the currency of payment. TRENDS IN GAS ROYALTIES In cash In kind Total Year In MTD In % of total In MTD In % of total in MTD 2000 119 74.4 41 25.6 160 2001 126 75.0 42 25.0 168 2002 82 64.1 46 35.9 128 2003 89 64.5 49 35.5 138 2004 97 48.5 103 51.5 200 In kind receipts grew at a faster pace than cash receipts in 2004, amounting to 103 MTD for the former (vs. 49 MTD in 2003) and 97 MTD for the latter (vs. 89 MTD in 2003). Their share in the total evolved from 35.5% to 51.5% and from 64.5% to 48.5% respectively. Expenditure for transport rose by 24.8% in 2004 to 1,233 MTD, compared to 6.4% and 988 MTD in 2003. Being the main component, expenditure for freight, rose by 12.4% to 790 MTD in line with an increase in imported merchandise which is largely transported by foreign companies. Similarly, expenditure for passenger travel was up 51.4% in 2004 to 109 MTD. For other items in the balance of transport (principally air royalties and chartering of planes and boats) expenditure was up 56.8% to 334 MTD. b. Travel After decreasing for two straight years, the surplus in the balance of travel was 22.9% (379 MTD) higher in 2004 than in 2003, amounting to 2,031 MTD, thanks to receipts that was up by 20.4% in line with the rebound in tourist activity, while expenditure grew by just 9.3%. BALANCE OF TRAVEL-RELATED TRANSACTIONS Description 2000 2001 2002 2003 2004 Receipts (in MTD) 2,307 2,519 2,166 2,039 2,454 Annual variation (%) 6.5 9.2 - 14.0 - 5.9 20.4 Expenditure (in MTD) 360 393 370 387 423 Annual variation (%) 26.8 9.2 - 5.9 4.6 9.3 Balance 1,947 2,126 1,796 1,652 2,031 Tourism, the main component for receipts from travel, was up 20.3% in 2004 to 2,290 MTD, after drops of 5.8% in 2003 and 13.7% in 2002. Tourism took advantage of better international conditions, with higher economic growth and a lower level of geopolitical tension. Depreciation of the dinar against the euro also contributed to the competitive standing of Tunisian products. TRENDS IN THE MAIN INDICATORS OF TOURISM Description Units 2000 2001 2002 2003 2004 Tourist receipts MTD 2,095.1 2,340.6 2,021.0 1,902.9 2,290.0 Annual variation % 7.2 11.7 - 13.7 - 5.8 20.3 Non resident bednights 103 bednights 33,168 33,006 25,897 25,301 30,664 Annual variation % 0.1 - 0.5 - 21.5 - 2.3 21.2 Non resident entries 103 persons 5,057 5,387 5,064 5,114 5,998 Annual variation % 4.7 6.5 - 6.0 1.0 17.3
132 All basic indicators were up significantly in 2004. An analysis of tourist flows by country of origin shows a revival of activity with European countries. In effect, bednights and entries were up 22% and 22.6% respectively, compared to drops of 3.1% and 2.7% in 2003. Consequently, their shares of the total increased as follows: from 84.2% in 2003 to 86.2% in 2004 for bednights and from 56% to 58.1% for entries, with receipts from these countries up from 1,552 MTD to 1,899 MTD. French, German, Italian and British bednights alone accounted for 63.9% of the total of non residents, bringing in 1,354 MTD, up 20.9% and over the previous year’s level. Tourists receipts from the Arab Maghreb increased by 8.7%, bringing in 311 MTD vs. 286 MTD in 2003, due to the larger number of tourists from this region (9.9% vs. 6.1%). Libyans and Algerians entries, with 23.9% and 15.2% of the overall total, represented the bulk of tourism from the Maghreb. Related receipts came to 214 MTD and 93 MTD respectively in 2004, up from 197 MTD and 84 MTD in 2003. As in the past, these results were not reflected in number of bednights, which remains relatively low, accounting for just 0.8% for the Libyans and 1.8% for the Algerians of the total of non residents bednights. Receipts from the other components making up the balance of travel also rose in 2004. Receipts from business travel amounted to 45 MTD, 18.4% more than the year before, reflecting the growing popularity of Tunisia as an international convention site. The 35 MTD in receipts from medical care was up 22.8%, thanks to the steady improvement in health services. Receipts from studies and internships came to 17 MTD in 2004, up from 15 MTD in 2003, as more and more foreign students opted to study in Tunisian universities, which are growing in number and diversity. Expenditure from travel increased by 9.3% in 2004 to 423 MTD vs. 4.6% and 387 MTD in 2003. This trend will undoubtedly grow in the wake of new measures, undertaken in November 2004, that provide for more generous foreign exchange allowances for residents travelling abroad : - The tourist allocation has gone up from 1000 to 2000 Tunisian dinars a year, cumulative for two successive years. Children are allowed 50% of this allocation.1 - The allowance for installation and living costs for studies has increased from 1500 to 2000 TD per calendar year and the monthly student allocation from 700 to 1000 TD.2 - The tuition and study costs, exclusive of living costs, as billed by the foreign educational institution are fully granted and no longer ceiled at 6,000 dinars.2 - The medical care allowance has risen from 750 TD to 1000 TD per patient per calendar year and from 500 TD to 750 TD per travel for the person accompanying the patient.3 2004 expenditure for tourism was up 12 MTD (5.1%) to 246 MTD. This compares to 234 MTD the year before, strongly influenced by depreciation of the dinar against the
1 Cf. Central Bank of Tunisia circular to authorised intermediaries n° 2004-05 of 1 November 2004. 2 Cf. Central Bank of Tunisia circular to authorised intermediaries n° 2004-07 of 1 November 2004. 3 Cf. Central Bank of Tunisia circular to authorised intermediaries n° 2004-06 of 1 November 2004.
133 euro. Expenditure related to studies and internships also increased by 4.6% in 2004 to 68 MTD vs. 65 MTD in 2003. Expenditure for business and official travel was up by 12.5% in 2004, from 40 MTD in 2003 to 45 MTD in 2004. Expenditure related to travel for medical care amounted to 7 MTD in 2004, up from 4 MTD in 2003. c. Government transactions. The balance of Government transactions in 2004 posted a 8 MTD deficit, compared to 10 MTD a year earlier, with receipts growing at a faster pace than expenditure : 12.3% and 9.8% respectively. BALANCE OF GOVERNMENT TRANSACTIONS (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 119 119 111 122 137 Annual variation (%) 2.6 0 - 6.7 9.9 12.3 Expenditure 136 133 139 132 145 Annual variation (%) 21.4 - 2.2 4.5 -5.0 9.8 Balance - 17 - 14 - 28 - 10 -8 Receipts received by foreign diplomatic missions and the offices of international institutions in Tunisia rose from 122 MTD in 2003 to 137 MTD in 2004. Expenditure by Tunisian governmental institutions abroad rose from 132 MTD in 2003 to 145 MTD in 2004, influenced by depreciation of the dinar against the euro. d. Other services The surplus of the balance of other services increased slightly in 2004, to 119 MTD compared to 116 MTD in 2003, despite expenditure increase at a more sustained pace than receipts (17.9% and 15.3% respectively). BALANCE OF TRANSACTIONS RELATED TO OTHER SERVICES (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 551 633 666 686 791 Annual variation (%) 16.7 14.9 5.2 3.0 15.3 Expenditure 424 584 625 570 672 Annual variation (%) 10.1 37.7 7.0 -8.8 17.9 Balance 127 49 41 116 119 Receipts from trade costs and international trade were up 11.8% in 2004 to 189 MTD, linked to dynamic foreign trade. Receipts from public works and technical services, supplied largely through subcontracting and technical assistance, were up 28 MTD (17.8%) to 185 MTD. Receipts from office costs (operating costs paid by non- residents for branches and offices in Tunisia) came in at 111 MTD in 2004 vs. 98 MTD the year before. Receipts from insurance premiums and payments were up 46.2% (12 MTD) to 38 MTD. On the other hand, receipts from financial services were down slightly in 2004, coming to just 69 MTD compared to 71 MTD in 2003. Receipts from computer and information services fell from 25 MTD to 23 MTD. Offered services were particularly for computer applications and to a lesser degree in the framework of subcontracting for foreign companies. This promising sector, which seems capable of acquiring new
134 foreign markets for Tunisia, would do well to take action to be more present internationally and to assert its comparative advantages. Receipts from commu- nication services were up 41.7% in 2004 to 17 MTD. Receipts from royalties and license fees and from personal and cultural services reached 22 MTD and 13 MTD respectively in 2004 vs. 23 MTD and 7 MTD in 2003. Expenditure for other services rose to 672 MTD in 2004, up from 570 MTD. This upward trend was in evidence for all components of ‘other services’. Expenditure for public works and technical services, the largest category by far of ‘other services’, amounted to 228 MTD in 2004, up from 206 MTD a year earlier. This expenditure largely concerned technical assistance services to Tunisian companies by foreign companies, especially in energy, cement industries and air transport. 2004 was also marked by construction of the sports arena in Rades by a consortium made up of two Tunisian companies (Somatra Get and Bonna) and two Spanish companies (Bredero and Lanik). With imports on the rise in 2004, expenditure for insurance premiums/payments and for trade costs/international trade increased in 2004 to 123 MTD and 107 MTD respectively vs. 97 MTD and 94 MTD a year earlier. Expenditure for financial services (made up mainly of banking fees and commissions and brokerage fees) was up 11 MTD in 2004 to 56 MTD. Expenditure for communication services and computer/information services rose to 27 MTD and 13 MTD in 2004, compared to 18 MTD and 9 MTD in 2003. Expenditure for office costs incurred by Tunisian companies for their offices and branches abroad increased from 9 MTD in 2003 to 11 MTD in 2004. Expenditure by residents for royalties and license fees and those related to personal and cultural services also rose in 2004, to 10 MTD and 8 MTD, up from 8 MTD and 5 MTD in 2003. 3. Factor income The balance of factor income posted a 151 MTD surplus in 2004, compared to 182 MTD in 2003, as receipts (made up largely of remittances by Tunisians resident abroad) grew at a slower pace than expenditure : 12.2 and 15.7% respectively. BALANCE OF FACTOR INCOME (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 1,220 1,471 1,624 1,715 1,925 Annual variation (%) 8.4 20.6 10.4 5.6 12.2 Expenditure 1,448 1,520 1,519 1,533 1,774 Annual variation (%) 23 5.0 -0.1 0.9 15.7 Balance - 228 - 49 105 182 151 a. Worker remittances Savings from salaries sent home by the 844,000 Tunisians working abroad (about 85% in Europe) continued to grow in 2004 at a faster pace (10.7% vs. 5.8% in 2003), amounting to 1,783 MTD. Boosted by depreciation of the dinar against the euro, inflow of funds in cash had amounted to 1,346 MTD in 2004,up by 10.7% vs. 8.2% a year earlier. Their share in total thus remained at the same 75.5% rate of 2003.
135 WORKER REMITTANCES BY MODE OF TRANSFER Total Cash input In kind input Year Annual In % of In % of MTD MTD MTD variation (%) total total 2000 1,091 7.0 810 74.2 281 25.8 2001 1,334 22.3 1,014 76.0 320 24.0 2002 1,522 14.1 1,124 73.9 398 26.1 2003 1,611 5.8 1,216 75.5 395 24.5 2004 1,783 10.7 1,346 75.5 437 24.5 Inputs in kind, which had fallen slightly in 2003 due to implementation of new decreases in customs duties on vehicles, went up by 10.6% in 2004 to 437 MTD. b. Capital income Continuing on an upward trend, the deficit in the balance of capital income amounted to 1,616 MTD in 2004 vs. 1,407 MTD the year before. BALANCE OF CAPITAL INCOME (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 129 137 102 104 142 Annual variation (%) 22.9 6.2 - 25.5 2.0 36.5 Expenditure 1,419 1,490 1,501 1,511 1,758 Annual variation (%) 22.2 5.0 0.7 0.7 16.3 Balance -1,290 -1,353 - 1,399 -1,407 -1,616 Expenditure, which had remained virtually unchanged over the two previous years, was up 16.3% to 1,758 MTD due to an increase in income from direct investment. The latter was up 22.1% to 845 MTD, especially income from investment by oil companies, in particular income in kind, strongly influenced by higher oil prices. Income from direct investment repatriated by companies working in other sectors remained virtually unchanged. Expenditure to cover interest on medium and long-term debt, another major component of transfers effected in the framework of remuneration of foreign capital, increased 8.1% in 2004 to 771 MTD. The highest interest payments were made in the context of multilateral cooperation: 305 MTD compared to 258 MTD for loans contracted on the international financial market and 208 MTD in the framework of bilateral cooperation. Revenue from capital income, made up mainly of interest on foreign currency investments made by the Central Bank, was up 36.5% in 2004 to 142 MTD. 4. Current transfers After regressing in 2003, the surplus in the balance of current transfers was up 48 MTD in 2004 to 142 MTD, due to receipt recovery and expenditure decrease. BALANCE OF CURRENT TRANSFERS (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 80 129 121 118 164 Annual variation (%) 12.7 61.3 -6.2 - 2.5 39.0 Expenditure 12 19 17 24 22 Annual variation (%) 140.0 58.3 - 10.5 41.2 -8.3 Balance 68 110 104 94 142 136 On the receipts side, funds to the private sector, made up mostly of grants, scholarships and other transfers benefiting households, grew at a faster pace to 94 MTD in 2004, compared to 66 MTD a year earlier. Transfers without counterparts received by the public sector and made up mainly of taxes and levies paid by direct investment companies to the Treasury rose from 53 MTD in 2003 to 71 MTD in 2004. Virtually all expenditure was made by private operators, down slightly in 2004 to 22 MTD. B. CAPITAL AND FINANCIAL TRANSACTIONS The surplus in the balance of capital and financial transactions grew sharply in 2004. BALANCE OF CAPITAL AND FINANCIAL TRANSACTIONS (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 3,718 3,714 4,207 3,495 4,262 Annual variation (%) 25.7 - 0.1 13.3 - 16.9 21.9 Expenditure 2,883 2,064 2,900 2,018 2,310 Annual variation (%) 79.0 - 28.4 40.5 - 30.4 14.5 Balance 835 1,650 1,307 1,477 1,952 This increase concerned all components, especially the balance of loan-borrowings, which yielded a surplus of 1,051 MTD in 2004 vs. 689 MTD in 2003. A higher level of drawings more than covered higher expenditure to draw down medium and long-term debt. The balance of foreign investment and that of capital transactions also improved to 767 MTD and 134 MTD respectively in 2004, compared to 713 MTD and 76 MTD in 2003. 1. Capital transactions After decreasing in 2003, the surplus in the balance of capital transactions was up sharply in 2004, reaching 134 MTD vs. 76 MTD a year earlier. This significant increase in receipts took place in conjunction with expenditure tightening. BALANCE OF CAPITAL TRANSACTIONS (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 12 80 118 85 141 Annual variations (%) - 86.0 566.7 47.5 - 28.0 65.9 Expenditure 8 4 10 9 7 Annual variations (%) -50.0 -50.0 150.0 10.0 -22.2 Balance 4 76 108 76 134 Receipts were up from 85 MTD to 141 MTD, due mainly to the higher level of grants from the European Union: 120 MTD. These funds are meant mainly to support economic and social reforms in Tunisia. Expenditure for proceeds to liquidate real estate holdings belonging to foreigners who have left Tunisia definitively fell from 9 MTD to 7 MTD.
137 2. Foreign investment After dropping in 2003, the surplus in the balance of investment improved in 2004, influenced by recovery in receipts and slower growth in expenditure. BALANCE OF FOREIGN INVESTMENT (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 1,138 718 1,194 794 862 Annual variation (%) 122.3 -36.9 66.3 -33.5 8.6 Expenditure 137 89 61 81 95 Annual variation (%) 55.7 -35.0 -31.5 32.8 17.3 Balance 1,001 629 1,133 713 767 This increase concerned both the balance of direct investment and the balance of portfolio investment. (i) Direct investment At 737 MTD in 2004, the surplus in the balance of foreign direct investment (FDI) increased by 42 MTD over the 2003 level. BALANCE OF DIRECT INVESTMENT (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 1,068 700 1,170 757 799 Annual variation (%) 144.4 - 34.5 67.1 -35.3 5.5 Expenditure 40 50 46 62 62 Annual variation (%) 60.0 25.0 - 8.0 34.8 0 Balance 1,028 650 1,124 695 737 Direct investment flows to Tunisia increased by 5.9% to 796 MTD, up from 752 MTD in 2003. This is a significant level, given that there have been no major privatisation transactions in the past two years. In rising from 283 MTD to 312 MTD, funds for manufacturing industries increased share in total from 37.6% to 39.2%. Mechanical/electrical industries alone absorbed 82 MTD in 2004 (vs. 77 the year before) and textiles/clothing received 69 MTD (vs. 59). There was 78 MTD in FDI for new undertakings and 214 MTD for ongoing extension or implementation initiatives Resident capital share transfer to non-residents accounted for 20 MTD. Direct investment to the energy sector was down 13.3% to 274 MTD, 34.4% of total FDI compared to 316 MTD and 42% in 2003. Investment for research and development in hydrocarbons amounted to 241 MTD, 170 MTD of which went to development and 71 MTD to exploration. Tourism and real estate received about 22 MTD in investment, up from 19 MTD in 2003, mainly by the Accor Group (TANIT Residence in Jerba) and the Dutch company Vinci Med that acquired ownership of a hotel. Agriculture and fishing received 10 MTD in 2004, compared to 4 MTD in 2003. Services also continued to attract a high level of FDI: 178 MTD in all, mainly for the financial sector and telecommunications. These developments led to the creation of 13,556 new jobs in 2004, compared to 12,885 in 2003.
138 RECEIPTS FROM DIRECT INVESTMENT BY BENEFICIARY SECTOR (Commitment) (In MTD) Description 2000 2001 2002 2003 2004 Energy 323 327 428 316 274 Tourism and real estate 42 101 22 19 22 Manufacturing industries 688 251 255 283 312 Other 15 21 462 134 188 Total 1,068 700 1,167 752 796 Expenditure in this respect stood at the same level as in 2003 (62 MTD), mainly for equipment repatriated by oil companies (worth 34 MTD) and sell-off of stock in Tunisian companies by non residents (worth 23 MTD). (ii) Portfolio investment The surplus in the balance of portfolio investment continued on the upward trend in effect since 2002, amounting to 30 MTD in 2004 vs. 18 MTD in 2003. BALANCE OF PORTFOLIO INVESTMENT (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Receipts 70 18 24 37 63 Annual variation (%) - 6.7 - 74.3 33.3 54.2 70.3 Expenditure 97 39 15 19 33 Annual variation (%) 54.0 - 59.8 - 61.5 26.7 73.7 Balance - 27 - 21 9 18 30 63 MTD worth of corporate shares were acquired by non-residents on the Tunis Stock Market, up from 37 MTD in 2003, while sales in the same time frame grew by just 14 MTD to 33 MTD in 2004. 3. Medium and long term borrowing capital The surplus balance of medium and long-term borrowing was up again in 2004, influenced by higher drawings on capital, the amount of which increased in absolute terms at a more sustained pace than the one destined to debt reimbursement (despite the latter’s net increase). BALANCE OF MEDIUM AND LONG TERM BORROWING CAPITAL Description 2000 2001 2002 2003 2004 Receipts (in MTD) 2,189 2,650 2,664 2,437 3,035 Annual variation (%) 23.4 21.1 0.5 - 8.5 24.5 Expenditure (in MTD) 1,884 1,380 1,575 1,376 1,856 Annual variation (%) 53.5 -26.8 14.1 -12.6 34.9 Balance 305 1,270 1,089 1,061 1,179 (i) Drawings Drawings on external borrowings amounted to 3,035 MTD in 2004, up 24.5% over the previous year’s figure. Drawings on international financial markets grew over this period from 921 MTD to 1,319 MTD, up by 398 MTD. Drawings in the framework of multilateral and bilateral cooperation increased from 900 MTD in 2003 to 1,061 MTD in 2004 and from 616 MTD to 654 MTD respectively.
139 BREAKDOWN OF DRAWINGS BY TYPE OF COOPERATION 2 0 0 3 2 0 0 4 Description In MTD Share (%) In MTD Share (%) Administration 1,680 100 1,462 100 Bilateral cooperation 324 19.3 295 20.2 Multilateral cooperation 560 33.3 482 33.0 Financial market 796 47.4 685 46.8 Companies 757 100 1,573 100 Bilateral cooperation 292 38.6 359 22.8 Multilateral cooperation 340 44.9 580 36.9 Financial market 125 16.5 634 40.3 Total 2,437 100 3,035 100 Bilateral cooperation 616 25.3 654 21.5 Multilateral cooperation 900 36.9 1,062 35.0 Financial markets 921 37.8 1,319 43.5 48.2% of these loans were contracted by the Administration and 51.8% by companies. This compares to 68.9% and 31.1% in 2003. Drawings by the Administration amounted to just 1,462 MTD, down 13% : 78 MTD less from multilateral cooperation (to 482 MTD) and 111 MTD less from international financial markets (to 685 MTD). Funding secured from bilateral cooperation fell, from 324 MTD to 295 MTD. TRENDS IN DRAWINGS ON MEDIUM AND LONG TERM LOANS (In MTD) Variation (%) Description 2000 2001 2002 2003 2004 2003/2002 2004/2003 Administration 1,490 1,980 1,599 1,680 1,462 5.1 -13.0 Public origin 694 1,296 630 879 736 39.5 -16.3 Private origin 796 684 969 801 726 - 17.3 -9.4 Companies 699 670 1,065 757 1,573 - 28.9 107.8 Public origin 228 366 725 434 758 - 40.1 74.7 Private origin 471 304 340 323 815 - 5.0 152.3 Total 2,189 2,650 2,664 2,437 3,035 - 8.5 24.5 Public origin 922 1,662 1,355 1,313 1,494 - 3.1 13.8 Private origin 1,267 988 1,309 1,124 1,541 - 14.1 37.1 On the bilateral side, drawings by the Administration were down, especially from Italy (falling from 37 MTD in 2003 to 27 MTD in 2004) and from Japan (down from 112 MTD to 92 MTD). Drawings from multilateral cooperation were down, with funds from the World Bank from 302 MTD in 2003 to 115 MTD in 2004. Funds mobilised on international financial markets decreased by 111 MTD to 685 MTD, corresponding to the «eurobond» type debenture loan issued by the Central Bank of Tunisia for the Administration in the amount of 450 million euros, with a seven-year maturity and an annual interest rate of 4.75%. Corporate drawings practically doubled, up from 757 MTD in 2003 to 1,573 MTD in 2004. This was due mainly to a 170% sharp increase in funds mobilised on international capital markets in 2004 which increased to 634 MTD vs. 125 MTD in 2003, 40.3% and 16.5% of the total respectively. Flows from multilateral cooperation increased by 70.6%, accounting for 36.9% of total corporate drawings, compared to 44.9% a year earlier. The main reason for this faster pace was the sharp increase in drawings by the telecommunications sector. Similarly, flows from bilateral sources
140 were up 22.9% to 359 MTD. But their share in total corporate drawings was down from 38.6% to 22.8%. Financial drawings tied to transfer of funds represented 73.7% of total resources mobilised in 2004, amounting to 2,237 MTD vs. 83% and 2,022 MTD in 2003. The balance of 798 MTD (26.3%) was in medium and long-term commercial loans, compared to 415 MTD (17%) in 2003. (ii) Retirement of medium and long term debt Retirement of medium and long-term debt increased by 34.9% in 2004, to 1,856 MTD. BREAKDOWN OF MEDIUM AND LONG TERM DEBT RETIREMENT BY TYPE OF COOPERATION 2 0 0 3 2 0 0 4 Description In MTD Share (%) In MTD Share (%) Administration 872 100 1,240 100 Bilateral cooperation 364 41.7 396 31.9 Multilateral cooperation 429 49.2 506 40.8 Financial market 79 9.1 338 27.3 Companies 504 100 616 100 Bilateral cooperation 310 61.5 364 59.1 Multilateral cooperation 161 31.9 190 30.8 Financial market 33 6.6 62 10.1 Total 1,376 100 1,856 100 Bilateral cooperation 674 49.0 760 40.9 Multilateral cooperation 590 42.9 696 37.5 Financial markets 112 8.1 400 21.6 This increase was due mainly to the higher level of repayment by the Administration, up from 872 MTD to 1,240 MTD, mainly higher reimbursement to international financial markets : 338 MTD, all for redemption of the 30 billion yen Samurai I loan. Payments to multilateral organisations increased by 77 MTD to 506 MTD, after early repayments were made in August 2004 to the ADB. Repayment to countries that are Tunisia’s partners also increased from 364 MTD in 2003 to 396 MTD in 2004. Of this total, 21 MTD were settled to Russia in January 2004. Corporate expenditure to draw down debt increased from 504 MTD in 2003 to 616 MTD in 2004. This was due mainly to the higher level of repayments to partner countries and international financial markets, up from 310 MTD in 2003 to 364 MTD in 2004 and from 33 MTD to 62 MTD respectively. MEDIUM AND LONG TERM DEBT RETIREMENT (In MDT) Variation in % Description 2000 2001 2002 2003 2004 2003/2002 2004/2003 Administration 1,371 886 1,060 872 1,240 -17.7 42.2 Public origin 787 787 809 745 841 -7.9 12.9 Private origin 584 99 251 127 399 -49.4 214.2 Companies 513 494 515 504 616 -2.1 22.2 Public origin 262 234 249 180 213 -27.7 18.5 Private origin 251 260 266 324 403 21.8 24.3 Total 1,884 1,380 1,575 1,376 1,856 -12.6 34.9 Public origin 1,049 1,021 1,058 925 1,054 -12.6 14.0 Private origin 835 359 517 451 802 -12.8 77.8
141 C. OVERALL EXTERNAL POSITION The overall external position in 2004 showed net commitments abroad amounting to 37,247.5 MTD, an increase of 2,107.4 MTD (6%) over the previous year’s figure. This increase was due mainly to the significant rise in net inflows of capital tied to the higher level of drawings on medium and long-term borrowing capital. Similarly, commitments in foreign direct investment increased in 2004 along with FDI flows. Aside from the volume effect, the increase in financial commitments was influenced by price and foreign exchange effects, notably depreciation of the Tunisian dinar against the euro, the main currency of commitments. OVERALL EXTERNAL POSITION OF TUNISIA (Year-end outstanding, in MTD) Description 2001 2002 2003 2004 Direct investments -16,867.3 -18,442.7 -19,557.3 -21,084.7 Assets 46.9 48.8 51.7 55.7 Liabilities -16,914.2 -18,491.5 -19,609.0 -21,140.4 Portfolio investments 1 -632.7 -598.0 -679.3 -719.1 Assets 64.8 66.5 68.0 70.7 Investment securities 64.8 66.5 68.0 70.7 Claim securities 0 0 0 0 Liabilities -697.5 -664.5 -747.3 -789.8 Investment securities -697.5 -664.5 -747.3 -789.8 Claim securities 0 0 0 0 Other investments -17,555.1 -17,625.3 -18,508.1 -20,261.2 Medium and long term loans and borrowings to the Admininstration -11,264.0 -11,688.4 -12,528.7 -13,208.5 Assets 0 0 0 0 Liabilities -11,264.0 -11,688.4 -12,528.7 -13,208.5 Public origin -7,915.7 -7,655.5 -7,838.1 -7,863.4 Private origin -3,348.3 -4,032.9 -4,690.6 -5,345.1 Medium and long term loans and borrowings to the companies -3,625.1 -4,293.2 -4,707.5 -5,909.6 Assets 143.9 133.4 120.8 119.9 Liabilities -3,769.0 -4,426.6 -4,828.3 -6,029.5 Public origin -1,667.9 -2,233.8 -2,596.5 -3,239.4 Private origin -2,101.1 -2,192.8 -2,231.8 -2,790.1 Short term loan -2,666.0 -1,643.7 -1,271.9 -1,143.1 Financial -1,214.8 -1,231.4 -1,382.5 -1,741.8 Assets 802.9 947.6 847.4 862.0 Liabilities -2,017.7 -2,179.0 -2,229.9 -2,603.8 Commercial 2 -1,451.2 -412.3 110.6 598.7 Assets 410.4 1,519.2 2,171.2 2,508.9 Liabilities -1,861.6 -1,931.5 -2,060.6 -1,910.2 Reserve assets 2,909.3 3,108.9 3,604.6 4,817.5 Monetary gold 4.4 4.4 4.4 4.4 Special drawing rights 13.3 14.3 13.6 15.5 Reserve position at IMF 36.5 37.6 36.4 37.3 Foreign currency 2,855.1 3,052.6 3,550.2 4,760.3 Total -32,145.8 -33,557.1 -35,140.1 -37,247.5 Assets, made up mostly of international reserves, grew in 2004, affected mainly by the marked improvement in the balance of the balance of payments.
1 A new methodology was adopted to determine the stock of investment portfolio as of 2001. 2 As of 2001, stock of short term commercial loans is calculated in gross terms instead of net terms. 142 1. Direct investment The value of Tunisia’s gross commitments in the form of direct investment was up 1,531.4 MTD at the end of 2004, amounting to 21,140.4 MTD. The impact of these increased flows was amplified by the price and foreign exchange effect. Assets continued to post low levels : 55.7 MTD at the end of 2004 vs. 51.7 MTD at the end of the previous year. As a result of these trends, net commitments in direct investments had increased to 21,084.7 MTD by the end of 2004 compared to 19,557.3 MTD at the end of 2003. 2. Portfolio investment As of the end of 2004, net commitments in portfolio investments amounted to 719.1 MTD vs. 679.3 MTD at the end of 2003. On the strength of higher inflows of funds from purchase of shares in resident companies by non-resident companies, gross commitments in portfolio investment had increased by the end 2004 by 42.5 MTD to 789.8 MTD. Assets continued to involve only modest amounts : 70.7 MTD at the end of 2004 vs. 68 MTD at the end of 2003. 3. External indebtedness There was 19,238 MTD in the outstanding balance of medium and long-term external debt as of the end of 2004, compared to 17,357 MTD at the end of 2003. This is explained by the high level of drawings on medium and long-term borrowing capital, the total of which was greater than the amount of redemption of medium and long- term debt. Aside from the volume effect, the value of the outstanding balance of debt was further amplified by the foreign exchange effect of depreciation of the Tunisian dinar against the euro, the main currency of indebtedness. The major portion of such commitments was made by the Administration, involving 68.7% of the total. Corporate commitments thus remained at 31.3% of the total, despite the higher level of mobilised funds. In light of these developments, external debt parameters increased somewhat in 2004. Thus the rate of indebtedness expressed as a ratio of the outstanding balance of medium/long term debt and gross national available income (GNAI) was up slightly in 2004, to 54.2% vs. 53.4% a year earlier. MAIN PARAMETERS OF EXTERNAL DEBT (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 Outstanding debt 13,691 15,033 16,115 17,357 19,238 Rate of indebtedness (% of GNAI) 51.7 52.1 53.5 53.4 54.2 Medium & long term debt service 2,536 2,032 2,278 2,089 2,627 Principal 1,884 1,380 1,575 1,376 1,856 Interest 652 652 703 713 771 Debt service ratio (in %) 1 19.4 13.3 14.9 13.1 14.1
1 Calculated with reference to current receipts. 143 Similarly, the debt service ratio, expressed as a percentage of current receipts, was up one percentage point, to 14.1%, a trend attributable to the 25.8% increase in 2004 debt service, following an 8.3% decrease in 2003. Net transfers of medium and long- term loan capital were up from 348 MTD in 2003 to 408 MTD in 2004.
NET TRANSFERS OF MEDIUM AND LONG TERM BORROWING CAPITAL (In MTD) Description 2000 2001 2002 2003 2004 Drawings 2,189 2,650 2,664 2,437 3,035 Medium and long term debt service 2,536 2,032 2,278 2,089 2,627 Net transfers -347 618 386 348 408 4. Reserve assets Supported by a considerable improvement in external payments in 2004, the level of reserves had increased 33.6% (1,212.9 MTD) by the end of 2004 to 4,817.5 MTD. Gross assets in foreign currency, the main component of reserves, posted a sizeable increase in 2004 to 4,760.3 MTD, 98.8% of the total vs. 3,550.2 MTD (98.5%) at the end of 2003. At the same time, net assets in foreign currency increased by 1,229.7 MTD (35.1%) to 4,733 MTD as of the end of 2004, the equivalent of 107 days of imports vs. 3,503.3 MTD and 90 days of imports as of the end of 2003. Assets in special drawing rights and Tunisia’s reserve position at the IMF were up slightly at the end of 2004, from 13.6 MTD to 15.5 MTD for the former and from 36.4 MTD to 37.3 MTD for the latter. Monetary gold reserves remained at the same level as the previous year : 4.4 MTD.
144 TUNISIA’S EXTERNAL PAYMENTS : TREND IN CURRENT RECEIPTS AND CAPITAL INFLOWS (5th edition) (In MTD) Description 2001 2002 2003 2004 A – CURRENT RECEIPTS 15,325.3 15,306.9 15,960.1 18,665.5
EXPORT OF GOODS (FOB) 9,536.2 9,748.6 10,342.6 12,054.9 4,189.5 3,812.9 3,783.5 4,521.1 SERVICES
TRANSPORTS 918.3 869.7 936.7 1,139.5 Freight 113.1 104.4 112.8 130.8 Passengers 446.7 438.0 452.6 575.6 Other transports 358.5 327.3 371.3 433.1 Of which : gas royalties 168.1 127.6 138.3 199.9
TRAVEL 2,519.2 2,165.6 2,038.8 2,454.0 Tourism 2,340.6 2,021.0 1,902.9 2,290.0 Professional and official travel 46.9 40.4 38.1 45.4 Studies and training 14.0 14.4 14.6 17.4 Medical care 14.8 15.4 28.1 34.5 Other living expenses 102.9 74.4 55.1 66.7
GOUVERNEMENT TRANSACTIONS 119.2 111.3 121.8 136.5 Tunisian government 0 0 0 0 Foreign governments 119.2 111.3 121.8 136.5
OTHER SERVICES 632.8 666.3 686.2 791.1 Insurance premiums and benefits 31.5 28.9 26.0 38.3 Office costs 105.1 107.2 98.0 110.5 Commercial & international trade costs 145.6 164.4 169.2 189.2 Public works & technical services 102.4 127.3 156.9 184.5 Communication services 19.1 15.6 11.9 16.9 Financial services 54.6 60.5 71.1 69.2 Computer and information services 29.7 26.1 25.3 22.9 Royalties and licence rights 21.6 23.2 22.7 21.8 Staff and cultural services 5.6 4.4 6.8 13.1 Miscellaneous 117.6 108.7 98.3 124.7
FACTOR INCOME 1,471.0 1,624.0 1,715.1 1,924.7 Capital income 137.1 102.3 104.2 142.0 Interest on loans and investments 130.2 89.0 84.0 111.5 Dividends and profits 2.4 4.0 8.2 15.7 Direct investment income 4.5 9.3 12.0 14.8 Labour income 1,333.9 1,521.7 1,610.9 1,782.7 Worker remittances 1,189.7 1,372.3 1,426.7 1,579.6 Other labour income 144.2 149.4 184.2 203.1
CURRENT TRANSFERS 128.6 121.4 118.9 164.8 Tunisian private sector 45.3 62.3 65.8 94.0 Tunisian public sector 83.3 59.1 53.1 70.8
145 (In MTD) Description 2001 2002 2003 2004
B – CAPITAL & FINANCIAL TRANSACTIONS 3,714.1 4,207.3 3,495.7 4,261.8
CAPITAL TRANSACTIONS 79.9 118.4 84.6 141.0
FINANCIAL TRANSACTIONS 3,634.2 4,088.9 3,411.1 4,120.8
DIRECT INVESTMENTS 700.0 1,169.8 757.1 799.2 Assets 0 2.5 5.2 3.3 Liabilities 700.0 1,167.3 751.9 795.9 Shareholding 696.1 1,162.8 748.7 794.4 Other 3.9 4.5 3.2 1.5
PORTFOLIO INVESTMENTS 18.3 23.8 36.9 62.6 Public sector 0 0 0 0 Assets 0 0 0 0 Liabilities 0 0 0 0 Private sector 18.3 23.8 36.9 62.6 Assets 0 0 0 0 Liabilities 18.3 23.8 36.9 62.6
MEDIUM AND LONG TERM LOANS TAKEN BY THE GOVERNMENT 1,979.5 1,599.2 1,680.1 1,462.6 Liabilities 1,979.5 1,599.2 1,680.1 1,462.6 Public origin 1,295.4 630.4 878.9 736.3 Private origin 684.1 968.8 801.2 726.3
MEDIUM AND LONG TERM LOANS BY AND TO BUSINESSES 670.3 1,064.9 757.0 1,572.9 Loans 0 0 0 0 Borrowings 670.3 1,064.9 757.0 1,572.9 Public origin 366.0 724.4 434.5 758.1 Private origin 304.3 340.5 322.5 814.8
SHORT TERM CAPITAL (net movements) 266.1 231.2 180.0 223.5 Loans 0 0 0 0 Borrowings 266.1 231.2 180.0 223.5
C-ADJUSTMENT OPERATIONS 0 0 0 0 (net movements)
GENERAL TOTAL 19,039.4 19,514.2 19,455.8 22,927.3
146 TUNISIA’S EXTERNAL PAYMENTS : TREND IN CURRENT EXPENDITURE AND CAPITAL OUTFLOWS (5th edition) (In MTD) Description 2001 2002 2003 2004 A - CURRENT EXPENDITURE 16,534.4 16,367.1 16,901.0 19,356.1
IMPORT OF GOODS (FOB) 12,943.9 12,767.8 13,266.8 15,087.0
SERVICES 2,051.5 2,062.7 2,076.9 2,473.2
TRANSPORTS 941.5 928.3 987.9 1,233.2 Freight 651.7 668.8 703.0 790.3 Passengers 71.5 61.0 71.9 108.6 Other transport 218.3 198.5 213.0 334.3
TRAVEL 392.9 370.1 386.8 423.4 Tourism 251.1 228.8 234.1 246.3 Professional and official travel 34.9 37.1 40.0 45.4 Studies and training 64.1 56.1 64.9 68.2 Medical care 4.7 5.4 4.4 7.3 Other living expenses 38.1 42.7 43.4 56.2
GOVERNMENT TRANSACTIONS 132.8 139.1 132.0 144.6 Tunisian Government 132.8 139.1 132.0 144.6 -Technical assistance 2.4 14.1 9.0 4.5 - Other 130.4 125.0 123.0 140.1 Foreign governments 0 0 0 0
OTHER SERVICES 584.3 625.2 570.2 672.0 Insurance premiums and benefits 78.5 97.2 96.7 123.3 Office costs 14.0 6.0 8.9 10.6 Commercial & international trade costs 109.2 101.8 93.8 106.7 Public works & technical services 194.3 226.8 205.6 228.0 Communication services 19.3 19.9 18.3 27.0 Financial services 58.8 48.3 44.9 56.1 Computer and information services 11.2 9.9 8.8 12.6 Royalties and licence rights 8.5 9.0 7.8 10.0 Staff and cultural services 15.1 7.1 5.0 7.5 Miscellaneous 75.4 99.2 80.4 90.2
FACTOR INCOME 1,520.3 1,519.1 1,533.2 1,773.7 Capital income 1,490.2 1,500.7 1,511.1 1,757.6 Interest on medium & long term loans 652.4 702.4 712.9 771.2 Interest on short term loans 45.9 31.9 24.6 27.3 Dividends and profits 98.1 85.8 70.3 102.1 Direct investment income 690.3 671.7 691.8 844.5 Rent 3.5 8.9 11.5 12.5 Labour income 30.1 18.4 22.1 16.1 Work remittances 16.0 10.3 13.6 8.2 Other labour income 14.1 8.1 8.5 7.9
CURRENT TRANSFERS 18.7 17.5 24.1 22.2 Tunisian private sector 18.5 17.1 23.8 22.1 Tunisian public sector 0.2 0.4 0.3 0.1
147 (In MTD) Description 2001 2002 2003 2004
B – CAPITAL & FINANCIAL TRANSACTIONS 2,096.2 2,900.2 2,018.4 2,310.2
CAPITAL TRANSACTIONS 4.3 10.6 8.9 7.3
FINANCIAL TRANSACTIONS 2,091.9 2,889.6 2,009.5 2,302.9
DIRECT INVESTMENTS 50.4 46.2 62.0 61.7 Assets 8.3 9.2 7.0 5.2 Liabilities 42.1 37.0 55.0 56.5 Shareholding 36.4 35.0 51.9 50.7 Other 5.7 2.0 3.1 5.8
PORTFOLIO INVESTMENTS 39.0 14.5 19.2 32.9 Public sector 0 0 0 0 Assets 0 0 0 0 Liabilities 0 0 0 0 Private sector 39.0 14.5 19.2 32.9 Assets 0 0 0 0 Liabilities 39.0 14.5 19.2 32.9
MEDIUM AND LONG TERM LOANS TAKEN BY THE GOVERNMENT 885.7 1,060.0 872.4 1,239.9 Liabilities 885.7 1,060.0 872.4 1,239.9 Public origin 787.0 888.6 745.3 841.3 Private origin 98.7 171.4 127.1 398.6
MEDIUM AND LONG TERM LOANS BY AND TO BUSINESSES 493.9 515.4 504.1 616.1 Loans from businesses 0 0 0 0 Loans taken by businesses 493.9 515.4 504.1 616.1 Public origin 234.1 240.3 180.3 213.3 Private origin 259.8 275.1 323.8 402.8
SHORT TERM CAPITAL (net movements) 622.9 1,253.5 551.8 352.3 Loans granted 622.9 1,253.5 551.8 352.3 Loans taken 0 0 0 0
C-ADJUSTMENT OPERATIONS 31.5 47.3 40.7 48.1 (net movements)
GENERAL TOTAL 18,662.1 19,314.6 18,960.1 21,714.4
BALANCE 377.3 199.6 495.7 1,212.9
148 IX. FOREIGN EXCHANGE MARKET
Tunisia’s foreign exchange market recorded a 27% increase in the global volume of spot transactions in 2004, reflecting higher volume for both operations from one foreign currency to another and between foreign currency and the dinar. As for exchange rates, the dinar depreciated against the euro and appreciated against the US dollar, as the euro gained strength on international markets. From the start to the end of the year, the euro gained 8.5% against the dollar, going from a rate of 1.2571 to 1.3639.
I. TRENDS IN ACCOUNT AND SPOT TRANSACTIONS CONCERNING THE TUNISIAN DINAR AGAINST THE MAIN FOREIGN CURRENCIES In terms of annual averages, the dinar depreciated in 2004 by 7.9% against the pound sterling, 5.9% against the euro, 4.5% against the Moroccan dirham and 3.7% against the Japanese yen. However, it appreciated by 3.4% against the US dollar.
AVERAGE RATES OF MAIN FOREIGN CURRENCIES AGAINST THE DINAR (1) (Spot and in account transactions) Variation (%)(2) Description 2000 2001 2002 2003 2004 2003/02 2004/03
1 US dollar 1.3716 1.4390 1.4212 1.2877 1.2456 10.4 3.4
1 euro 1.2633 1.2877 1.3418 1.4573 1.5486 -7.9 -5.9
1 pound 2.0702 2.0649 2.1242 2.0943 2.273 1.4 -7.9 sterling 1,000 Japanese 12.6904 11.7993 11.3004 11.0600 11.4812 2.2 -3.7 yens 10 Moroccan 1.2905 1.2737 1.2887 1.3391 1.4021 -3.8 -4.5 dirhams (1) These are rates on the interbank market. (2) (-) means a depreciation of the dinar, (+) an appreciation.
These same trends held, although to differing degrees, for end-of-period rates, which showed the dinar down by 6.8% against the euro, 6.1% against the pound sterling, 5.7% against the Moroccan dirham and 3% against the Japanese yen. It appreciated by 0.7% against the US dollar. It was the yen/dinar ratio that fluctuated the most in 2004 (by 8.4%), followed by the euro/dinar (8.2%), the dirham/dinar (7.6%) and the dollar/dinar (7.4%).
149 RANGE OF FLUCTUATION OF MAIN FOREIGN CURRENCIES AGAINST THE DINAR Description 1 USD/TND 1 EUR/TND 1,000 JPY/TND 10 MAD/TND Highest level 1.2840 1.6379 12.0087 1.4625 Lowest level 1.1954 1.5139 11.0741 1.3586 Range of fluctuation (%) 7.4 8.2 8.4 7.6
The dinar experienced two main phases in trends against the US dollar. The first lasted from the start of the year until 14 May, when the dinar’s value fell, depreciating by 5.8%. Then until the end of the year the dinar gained value, moving from 1.2840 to 1.1994 TND to the USD, appreciating by 7.1%. The same trends held for monthly averages, with the dinar depreciating by 4.8% from January to May (with the rate ranging from 1.2105 to 1.2715 TND to the dollar), then appreciating until the end of the year by 5%, reaching 1.2109 TND to the dollar. Against the euro, the dinar was quite stable for the first eight months of the year, ranging from a minimum of 1.5139 TND to a maximum of 1.5447 TND for one euro, a variation of some 2%. Starting in September, the dinar took a downward turn against the euro, depreciating by 6.1%, from 1.5366 to 1.6361 TND to the euro on 31 December 2004. In terms of monthly averages, the dinar depreciated by 5.9% in 2004, from 1.5273 TND to the euro in January 2004 to 1.6235 TND in December.
Y e a r 2 0 0 4
1 USD/TND 1 EUR/TND 1.29 1.29 1.65 1.65
1.60 1.60 1.24 1.24
1.55 1.55
1.19 1.19 1.50 1.50 Jan Jun Dec Jan Jun Dec
From the start of the year until 9 March 2004 the dinar appreciated against the Japanese yen by 1.7%, then the trend reversed and there was a period of 7.7% depreciation until 31 March. Since then the trend returned to 7.5% appreciation. Depreciation set in again starting 17 May, amounting to 3.6% to close the year at 11.5943 TND for 1,000 yen. In terms of monthly averages, the dinar initially depreciated by 3.5% until April, moving from 11.3365 to 11.7477 TND for 1,000 yen, then appreciated by 3.5%, posting 11.3537 TND in May 2004. From that time until December 2004 the dinar depreciated by 2.1% to close for the year at 11.5984 TND for 1,000 yen.
150
Y e a r 2 0 0 4
1,000 JPY/TND 10 MAD/TND
12.2 12.2 1.47 1.47
1.45 1.45
11.8 11.8 1.43 1.43 1.41 1.41 11.4 11.4 1.39 1.39 1.37 1.37 11.0 11.0 1.35 1.35 Jan Jun Dec Jan Jun Dec
The dinar depreciated by 5% against the Moroccan dirham in 2004, moving from 1.3703 TND for 10 dirhams at the beginning of the year to 1.4481 TND on 31 December 2004. In terms of monthly averages the dinar also depreciated in 2004, by 4.5%, moving from 1.3786 TND for 10 dirhams in January to 1.4442 TND in December. II. TRENDS IN FOREIGN EXCHANGE MARKET TRANSACTIONS A. Spot transactions Transactions on the spot foreign exchange market in 2004 amounted to 26,600 MTD, up 5,639 MTD or 27% over 2003. This was the result of the higher volume of transactions both for foreign currency/dinars (1,965 MTD) and from one foreign currency to another (3,674 MTD). The share of transactions from one foreign currency to another in overall foreign exchange spot transactions increased from 61% in 2003 to 62% in 2004. TRENDS IN SPOT TRANSACTIONS (In MTD unless otherwise indicated) Variation in MTD Description 2002 2003 2004 2003/02 2004/03 Transactions from foreign 8,902 8,191 10,156 - 711 + 1,965 currency to dinars Transactions from one foreign 12,667 12,770 16,444 + 103 + 3,674 currency to another Total 21,569 20,961 26,600 - 608 + 5,639 1. Transactions concerning foreign currency against the dinar Transactions on this segment of the market amounted to 10,156 MTD in 2004, an average 39.5 MTD a day, compared to 8,191 MTD and 32.7 MTD a year earlier, representing an increase of 1,965 MTD or 24%. The share of Interbank transactions accounted for 85% of the total in 2004 and the one of the Central Bank of Tunisia for 15%. This compares to 83% and 17% in 2003, reflecting greater market liquidity. The Central Bank handled some 1,480 MTD in transactions in 2004, compared to 1,417 MTD in 2003, an increase of 63 MTD or 4%. The breakdown of interbank
151 transactions by category of bank shows that deposit banks dominated this market segment, handling a 73% share of global volume, compared to 24% for offshore banks and just 3% for development banks.
TRENDS IN FOREIGN CURRENCY/DINAR TRANSACTIONS (In MTD unless otherwise indicated) Variation (%) Description 2002 2003 2004 2003/02 2004/03 Interbank market 6,324 6,774 8,676 7.1 28.1 Resident banks 4,774 5,027 6,615 5.3 31.6 Off-shore banks 1,550 1,747 2,061 12.7 18.0 Central Bank of Tunisia 2,578 1,417 1,480 -45.0 4.4 Total 8,902 8,191 10,156 -8.0 24.0 Breakdown by foreign currency shows that the share of euro/dinar transactions rose to 55% of total volume in 2004, compared to 50% in 2003, while the share of dollar/dinar transactions fell from 47% to 42%. Transactions in yen continued to represent a 1% share. BREAKDOWN BY FOREIGN CURRENCY OF TRANSACTIONS ON THE SPOT FOREIGN EXCHANGE MARKET Interbank market Central Bank Total Year Currency Amount Share Amount Share Amount Share In MTD In % In MTD In % In MTD In % USD 3.544 40,8 761 51,4 4.305 42,4 EURO 4.894 56,4 644 43,5 5.538 54,5 2004 YEN 126 1,5 0 0,0 126 1,3 Others 112 1,3 75 5,1 187 1,8 Total 8.676 100,0 1.480 100,0 10.156 100,0 USD 2.918 43,1 952 67,2 3.870 47,2 EURO 3.703 54,7 366 25,8 4.069 49,7 2003 YEN 78 1,1 0 0,0 78 1,0 Others 75 1,1 99 7,0 174 2,1 Total 6.774 100,0 1.417 100,0 8.191 100,0 USD 2.942 46,5 1.001 38,8 3.943 44,3 EURO 3.157 49,9 1.486 57,6 4.643 52,1 2002 YEN 77 1,2 0 0,0 77 0,9 Others 148 2,4 91 3,6 239 2,7 Total 6.324 100,0 2.578 100,0 8.902 100,0
2. Transactions from foreign currency to convertible dinar Transactions involving exchange between foreign currency and convertible dinars carried out between Authorised Intermediaries and foreign correspondents increased by 30% in 2004, amounting to 1,236 MTD vs. 948 MTD in 2003, 4.8 and 3.8 MTD per day respectively. Purchase of convertible dinars by foreign correspondents represented 70% of global volume vs. 30% for sales. In total, the share of the US dollar fell from 53% in 2003 to 33% in 2004, while that of the euro increased from 47% to 67%.
152
3. Transactions from one foreign currency to another Transactions to exchange one foreign currency for another amounted to 16,444 MTD in 2004, compared to 12,770 MTD in 2003, an increase of 3,674 MTD or 29%. Consequently their share in the global volume of spot exchange transactions increased from 61% to 62%. Transactions carried out with foreign correspondents represented 93% of all transactions in 2004 vs. 94% in 2003. TRENDS IN TRANSACTIONS FROM ONE FOREIGN CURRENCY TO ANOTHER (In MTD unless otherwise indicated) Variat. (%) Description 2002 2003 2004 2004/2003 Transactions between Tunisian Authorised Intermediaries 884 748 1,144 52.9 Transactions with foreign correspondents 11,783 12,022 15,300 27.3 Total 12,667 12,770 16,444 28.8
B. Forward transactions The total amount of forward exchange transactions increased from 964 MTD in 2003 to 1,430 MTD in 2004, up 466 MTD or 48%. The share of transactions carried out between Tunisian Authorised Intermediaries and businesses remained a stable 98% of global volume.
TRENDS IN FORWARD TRANSACTIONS (In MTD unless otherwise indicated) Description 2002 2003 2004 Variations in % 2003/02 2004/03 Transactions between Tunisian Authorised Intermediaries and businesses 946.0 945.0 1,398.1 -0.1 47.9 Transactions on the interbank market 29.3 19.0 32.2 -35.2 69.5 Total 975.3 964.0 1,430.3 -1.2 48.4 Transactions between Authorised Intermediaries and businesses were marked by higher forward sales by banks to cover imports, up 1063 MTD vs. 753 MTD in 2003, an increase of 310 MTD or 41.2%. On the other hand, their share of the total fell from 80% to 76% from one year to the next. Forward purchases by Authorised Intermediaries to cover exports also increased between 2003 and 2004, by 143 MTD or 74.4%. Their share in the volume handled between banks and businesses increased over this same period from 20 to 24%. VOLUME OF FORWARD BUYING AND SELLING BY AUTHORISED INTERMEDIARIES TO COMPANIES (In MTD) Description 2002 2003 2004 Forward buying 227.1 192.3 335.4 Forward selling 718.9 752.8 1,062.7 Total 946.0 945.1 1,398.1 The structure by currency of foreign exchange forward transactions to cover imports shows a drop for the euro, from 49% in 2003 to 47% in 2004. The US dollar, on the other hand, saw its share increase from 47% to 49%. The structure by currency of foreign exchange forward transactions to cover exports shows an increase for the
153 euro, from 64% in 2003 to 75% in 2004,while the US dollar’s share fell from 33% to 24%.
STRUCTURE BY CURRENCY OF FORWARD BUYING AND SELLING BY AUTHORISED INTERMEDIARIES TO BUSINESSES IN 2004 Euro US Dollar Other currencies Total Description MTD % MTD % MTD % MTD % Forward buying 251.6 75.0 80.0 23.9 3.8 1.1 335.4 100.0 Forward selling 495.0 46.6 515.7 48.5 52.0 4.9 1,062.7 100.0 Total 746.6 53.4 595.7 42.6 55.8 4.0 1,398.1 100.0
C. FOREIGN EXCHANGE SWAPS AND FORWARD RATE AGREEMENT “F.R.A.” 1. Foreign currency/dinar exchange swap transactions The volume of exchange swaps amounted to 483 MTD in 2004, a daily average of 1.9 MTD, compared to 450 MTD and 1.9 MTD the year before. The cumulative volume of these transactions since their creation in June 2001 amounted to 5,146.2 MTD. The share of exchange swaps handled by foreign correspondents amounted to 76%, compared to 23% for those handled by Authorised Intermediaries and 1% for those contracted with businesses.
Variations in MTD Description 2002 2003 2004 2003/02 2004/03 Interbank market 1,129.2 9 110.4 - 1,120.2 + 101.4 Transactions with foreign correspondents 861.5 429.8 366.4 - 431.7 - 63.4 Transactions between Tunisian Authorised Intermediaries and businesses 0.4 11.1 5.9 + 10.7 - 5.2 Total 1,991.1 449.9 482.7 - 1,541.2 + 32.8 72% of exchange swaps are denominated in dollars and 28% in euros. 2. F.R.A. transactions In 2004 the volume of transactions involving forward rate agreements (F.R.A.) amounted to 53.9 MTD vs. 29.4 MTD a year earlier, most of which were contracted on the interbank market. The cumulative volume of these transactions since they were created in June 2001 amounted to 265.3 MTD.
154
X. PUBLIC FINANCES 1
The 2004 State budget was marked by adoption in November of a supplementary finance law (SFL) required by the heavy repercussion of soaring world oil prices on the national economy in general and on a balanced State budget in particular. SUMMARY STATEMENT OF CENTRAL GOVERNMENT BUDGETARY FLOWS (In MTD unless otherwise indicated) 2004 Variation in % 2002 2003 2003 2004 Description SFL Actual 2002 2003 Core resources 7,852.5 7,821.0 8,514.0 8,716.2 -0.4 11.4 Tax revenue 6,429.2 6,630.8 7,117.0 7,253.8 3.1 9.4 Non tax revenue 1,423.3 1,190.2 1,397.0 1,462.4 -16.4 22.9 Borrowed resources 3,368.1 3,738.9 4,319.0 4,024.5 11.0 7.6 Internal 1,760.0 2,082.1 2,959.0 2,596.8 18.3 24.7 External 1,608.1 1,656.8 1,360.0 1,427.7 3.0 -13.8 Total resources 11,220.6 11,559.9 12,833.0 12,740.7 3.0 10.2 Expenditure exclusive of debt redemption 8,430.9 8,835.8 9,413.0 9,516.2 4.8 7.7 Operating expenditure 5,010.7 5,335.4 5,872.0 5,911.5 6.5 10.8 Expenditure for capital and loan grants 2,505.1 2,596.1 2,511.0 2,615.8 3.6 0.8 Debt interest 915.1 904.3 1,030.0 988.9 -1.2 9.4 Debt principal redemption 2,991.9 2,214.5 3,420.0 3,479.7 -26.0 57.1 Total expenditure 11,422.8 11,050.3 12,833.0 12,995.9 -3.3 17.6 Budget deficit exclusive of debt redemption and privatisation proceeds -917.4 -1,022.4 -1,024.0 -925.1 In % of GDP 3.1 3.2 2.9 2.6 Budget deficit including privati- sation proceeds -578.4 -1,014.8 -899.0 -800.0 In % of GDP 1.9 3.2 2.6 2.3 Net Financing of the deficit (exclusive of debt redemption) 578.4 1,014.8 899.0 800.0 Net domestic financing -104.7 206.8 674.0 586.8 Net external financing 683.1 808.0 225.0 213.2 In this context the overall budget deficit (exclusive of debt redemption), although forecast at 899 MTD for 2004, actually came in at 800 MTD, 2.3% of GDP, compared to 1,015 MTD and 3.2% a year earlier. The figure would have been higher if it had not been for the high level of core resources, thanks to both higher tax revenue and sizeable income from privatisation. Unlike the year before, 73% of the funds needed to finance the deficit came from net domestic resources (587 MTD) with net external funds providing 213 MTD. A. STATE BUDGET RESOURCES The supplementary finance law initially projected income of 12,833 MTD for 2004, but State budget resources came in at 12,741 MTD, an increase of 10.2% compared to a year earlier. 68% came from core resources and 32% from various borrowings, the same proportions as in 2003.
1 Provisional statistical data for 2004. Source : Ministry of Finance.
155 TREND IN STATE BUDGET RESOURCES (In MTD unless otherwise indicated) 2004 Variation in % Description 2002 2003 SFL Actual 2003/2002 2004/2003 Core resources 7,852.5 7,821.0 8,514.0 8,716.2 -0.4 11.4 - Tax revenue 6,429.2 6,630.8 7,117.0 7,253.8 3.1 9.4 - Non tax revenue 1,423.3 1,190.2 1,397.0 1,462.4 -16.4 22.9 Borrowed resources 3,368.1 3,738.9 4,319.0 4,024.5 11.0 7.6 - Domestic1 1,760.0 2,082.1 2,959.0 2,596.8 18.3 24.7 - External 1,608.1 1,656.8 1,360.0 1,427.7 3.0 -13.8 Total 11,220.6 11,559.9 12,833.0 12,740.7 3.0 10.2 1. Tax revenue Representing 83% of core State budget resources, tax revenue in 2004 amounted to 7,254 MTD, an increase of 623 MTD (9.4%) compared to the previous year’s level. This trend was in line with the higher volume of direct taxes, which acted in conjunction with higher indirect levies and taxes. Consequently the tax burden, projected at 20.3% of GDP, in fact came in at 20.6%, the same figure as in 2003. TREND IN CURRENT TAX REVENUE (In MTD unless otherwise indicated) 2004 Variation in % Description 2002 2003 SFL Actual 2003/2002 2004/2003 Ordinary tax revenue 6,032.7 6,230.6 6,722.0 6,811.2 3.3 9.3 Direct taxes 2,024.6 2,176.9 2,347.0 2,385.2 7.5 9.6 -Income tax 1,213.9 1,309.0 1,436.0 1,436.8 7.8 9.8 of which : Payroll taxes 913.4 1,005.8 1,090.0 1,082.1 10.1 7.6 -Corporate taxes 810.7 867.9 911.0 948.4 7.1 9.3 Indirect levies and taxes 4,008.1 4,053.7 4,375.0 4,426.0 1.1 9.2 -Customs duties and taxes 594.8 553.6 550.0 556.7 -6.9 0.6 -V.A.T. 1,895.1 2,006.3 2,204.0 2,257.8 5.9 12.5 -Consumer taxes 1,044.9 1,073.1 1,166.5 1,150.4 2.7 7.2 -Other indirect levies & taxes 473.3 420.7 454.5 461.1 -11.1 9.6 Tax revenue allocated to Treasury funds 396.5 400.2 395.0 442.6 0.9 10.6 Total 6,429.2 6,630.8 7,117.0 7,253.8 3.1 9.4 Fiscal pressure (in %) 21.5 20.6 20.3 20.6 a. Direct taxes Direct taxes, forecast at 2,347 MTD in the supplementary finance law for 2004, came in at 2,385 MTD, up 9.6% vs. 7.5% a year earlier. This increase concerned both income taxes and corporate taxes. Income tax for private individuals increased from 1,309 MTD in 2003 to 1,437 MTD in 2004, up 9.8% vs. 7.8% a year earlier, influenced by the increase (although at a slower pace than in 2003) of payroll taxes : (7.6% vs. 10.1%), as the third and final portion of the 2002-2004 wage increase came into effect. Corporate taxes, expected to amount to 911 MTD in 2004, in fact came in at 948 MTD, 81 MTD more than in 2003 vs. 57 MTD a year earlier. Taxes collected from non-oil companies, the majority share, totalled 708 MTD vs. 694 MTD in 2003. Taxes from
1 This does not include Treasury bonds with a duration of less than one year, which are accounted for as Treasury transactions. 156 oil companies grew from 174 MTD in 2003 to 240 MTD in 2004, in line with higher earnings for oil companies in the wake of higher world crude oil prices. b. Indirect levies and taxes With much more money coming in from VAT, income in 2004 from ordinary indirect levies and taxes was up 9.2%, compared to just 1.1% in 2003. With tax revenue assigned to special Treasury funds and contingency funds, indirect taxes and levies totalled 4,869 MTD, an increase of 9.3% over their 2003 level. Income from VAT is the main component of indirect taxes and levies. It was expected to come in at 2,204 MTD for 2004 but in fact contributed 2,258 MTD to the State budget, 12.5% more than in 2003. This occurred despite the reduction from 18% to 10% of VAT on oil products starting in August, except for gases (diesel, LPG and lighting oil), having an impact of some 41 MTD for 2004. Domestic taxes contributed 1,139 MTD in revenue, while customs duties on imports brought in 1,119 MTD. Consumer taxes, the second source of indirect revenue, which is levied on cars, fuel, tobacco, alcoholic beverages and other products brought 1,150 MTD into State coffers in 2004. While this was short of projections (1,167 MTD), it was well above the 2003 figure. 700 MTD came in from the domestic regime and 450 MTD from customs, compared to 645 MTD and 429 MTD respectively a year earlier. After decreasing for two years in a row because of the ongoing dismantling of tariffs implemented in the framework of the association Agreement with the European Union that targets the establishment of a free trade zone, customs duties and levies rose to practically the same level as foreseen in the framework of the supplementary finance law : 557 MTD vs. 554 MTD in 2003. 2. Non tax revenue After a steep drop in 2003 because of the lack of privatisation transactions, non-tax revenue grew considerably in 2004, involving all components except grants. It amounted to 1,462 MTD, 65 MTD more than projected and 272 MTD more than in 2003 when privatisation generated sizeable proceeds. Tax income from shareholdings and profits paid to the State by companies and various public institutions, the main component of non tax revenue, was up 16 MTD (3.1%) in 2004 to 508 MTD, compared to 116 MTD (30.8%) in 2003. These results were achieved thanks in particular to payment of the State’s share of Central Bank of Tunisia profits for 2003, in the amount of 100 MTD (exclusive of the 4.5 MTD paid to the foreign exchange equalisation fund) after 2003’s 120 MTD figure. Slated at 64 MTD for 2004, revenue to the State from oil earnings actually amounted to 61 MTD, an increase of 23.7% over 2003, after a drop of 29.7% from 2002 to 2003. This increase involves mainly royalties for Miskar gas (22 MTD vs. 16 MTD in 2003) and payments from oil companies for additional taxes, up from 30 MTD in 2003 to 35 MTD in 2004.
157 Similarly, the lump sum paid to the State as tax on the transit of Algerian gas across Tunisia amounted to 160 MTD in 2004, an increase of 18.1% vs. 8.7% in 2003, a favourable development made possible by increasing export prices for gas ($153.83 per ton of oil equivalent - toe- vs. $128.65 per toe in 2003), in line with higher prices for crude oil and higher volume of quantities transported (609 K toe vs. 521 K toe in 2003). Proceeds from privatisation amounted to the projected figure of 125 MTD. Other non tax resources were up 25.1% in 2004 to 572 MTD. TREND IN NON TAX REVENUE (In MTD unless otherwise indicated) 2004 Variation in % Description 2002 2003 SFL Actual 2003/2002 2004/2003 Oil revenue 70.1 49.3 64.0 61.0 -29.7 23.7 Gas royalties 124.7 135.6 140.0 160.2 8.7 18.1 Shareholding revenue 376.8 492.7 522.0 508.2 30.8 3.1 External grants 83.9 48.0 66.0 36.4 -42.8 -24.2 Privatisation proceeds 339.0 7.6 125.0 125.1 -97.8 - Other non tax revenue 428.8 457.0 480.0 571.5 6.6 25.1 Total 1,423.3 1,190.2 1,397.0 1,462.4 -16.4 22.9 Revenue from external grants was the only category that decreased in 2004, coming in at 36 MTD vs. 66 MTD projected and 48 MTD in 2003. 3. Borrowed resources The supplementary finance law projected 4,319 MTD in borrowed funds for 2004, exclusive of Treasury bonds with a duration of less than one year, but the total came in at 4,025 MTD, up 7.6% vs. 11% in 2003. The increase in domestic resources (+24.7%) was accompanied by a 13.8% drop in external resources. Funds mobilised on the domestic market amounted to 2,597 MTD in 2004, up by 515 MTD, compared to an increase of 322 MTD the year before. Most of these funds (1,916 MTD or 74% of the total) were handed over against bonds equivalent to Treasury bonds (compared to 1,038 MTD and 50% respectively in 2003), the rest being 52-week Treasury bonds. Drawings on external borrowings amounted to 1,428 MTD in 2004, down 13.8% from their 2003 level. 48% of this total was raised on the capital market, 32.2% from multilateral sources and 19.8% from bilateral sources. B. STATE BUDGET EXPENDITURE State budget expenditure, given the external borrowings onloaned to public enterprises, amounted to 12,996 MTD in 2004, 17.6% over the previous year’s figure. It was influenced by the State’s direct intervention to offset the higher cost of fuel, pushed very high by soaring world prices for crude oil and by higher outlays to redeem public debt. Representing almost 73% of the total, operating, capital and loan grants expenditure along with money paid out as interest on loans grew by 7.7% in 2004, compared to 4.8% in 2003. This increase reflected operating expenditure (10.8% vs. 6.5%) and
158 higher interest on debt (9.4% vs. a drop of 1.2%). Expenditure for capital goods, on the other hand, and the granting of loans grew at a slower pace (0.8% vs. 3.6%). TREND IN STATE BUDGET EXPENDITURE (In MTD unless otherwise indicated) 2004 Variation in % Description 2002 2003 SFL Actual 2003/2002 2004/2003 Operating, capital and loan grants expenditure 7,515.8 7,931.5 8,383.0 8,527.3 5.5 7.5 -Operating expenditure 5,010.7 5,335.4 5,872.0 5,911.5 6.5 10.8 -Expenditure for capital and loan grants 2,505.1 2,596.1 2,511.0 2,615.8 3.6 0.8 Debt service 3,907.0 3,118.8 4,450.0 4,468.6 -20.2 43.3 -Principal 2,991.9 2,214.5 3,420.0 3,479.7 -26.0 57.1 -Interest 915.1 904.3 1,030.0 988.9 -1.2 9.4 Total 11,422.8 11,050.3 12,833.0 12,995.9 -3.3 17.6
Functional analysis of State expenditure, exclusive of debt service, shows that social sectors absorbed 50% of expenses, the other half being divided practically equally between common services and outlays of an economic character.
BREAKDOWN OF STATE BUDGET EXPENDITURE 2003 2004 Variation in % Description In MTD In % of total In MTD In % of total 2003/2002 2004/2003 Common services 1,993.8 25.1 2,057.4 24.1 6.7 3.2 Operating expenditure 1,637.6 20.6 1,725.7 20.2 6.6 5.4 Expenditure for capital and loans 356.2 4.5 331.7 3.9 7.2 -6.9 Economic services 1,969.0 24.8 2,223.3 26.1 1.0 12.9 Operating expenditure 415.6 5.2 628.8 7.4 7.2 51.3 Expenditure for capital and loans 1,553.4 19.6 1,594.5 18.7 -0.5 2.6 Social services 3,968.7 50.1 4,246.6 49.8 7.3 7.0 Operating expenditure 3,282.2 41.4 3,557.0 41.7 6.4 8.4 Expenditure for capital and loans 686.5 8.7 689.6 8.1 12.2 0.5 Total 7,931.5 100.0 8,527.3 100.0 5.5 7.5 Operating expenditure 5,335.4 67.3 5,911.5 69.3 6.5 10.8 Expenditure for capital and loans 2,596.1 32.7 2,615.8 30.7 3.6 0.8 1. Operating expenditure Operating expenditure, projected at 5,872 MTD for 2004, came in at 5,912 MTD, an increase of 10.8% vs. 6.5% in 2003. This occurred mainly through the granting in 2004 (in line with the supplementary finance law) of a budgetary subsidy of 203 MTD to offset fuel costs. If this subsidy were excluded, the rate of increase would be no more than about 7%.
159 OPERATING EXPENDITURE (In MTD unless otherwise indicated) 2004 Variation in % Description 2002 2003 SFL Actual 2003/2002 2004/2003
Wages and salaries 3,684.0 3,968.0 4,270.4 4,252.7 7.7 7.2
Means of services 502.0 521.0 530.7 552.6 3.8 6.1
Interventions 824.7 846.4 1,070.9 1,106.2 2.6 30.7
Total 5,010.7 5,335.4 5,872.0 5,911.5 6.5 10.8 Making up 71.9% of operating expenditure vs. 74.4% a year earlier, salaries and wages increased by 7.2% in 2004, compared to 7.7% in 2003. Their share in GDP thus fell from 12.3% in 2003 to 12.1% in 2004. Operating expenditure went mostly for social purposes, amounting to 3,557 MTD vs. 3,282 the year before, especially education and training (1,722 MTD), public health (583 MTD) and higher education/scientific research (506 MTD). These sectors received 79% of funds allotted to the social sector. 2. Expenditure for capital and loan grants Expenditure for capital and grants amounted to 2,616 MTD in 2004, more than the 105 MTD foreseen amount in the supplementary finance law and actual expenditure in 2003 (+20 MTD). But its share in GDP expressed in current prices amounted to 7.4%, 0.7 of a percentage point below 2003’s figure. The moderate increase in expenditure for capital and the granting of loans came from higher Treasury funds (+28.3%), direct investments (+3.5%) and public financing (+1%), lessened by the sharp drop in direct payments on external resources (-18.4%) caused by the lower volume of funds onloaned to public enterprises (-56.4%). EXPENDITURE FOR CAPITAL AND LOAN GRANTS (In MTD unless otherwise indicated) 2004 Variation in % Description 2002 2003 SFL Actual 2003/2002 2004/2003 Direct investment 843.4 895.3 983.7 926.1 6.2 3.5 Public financing 528.1 548.7 586.3 554.0 3.9 1.0 Direct payments on external resources 657.3 734.2 500.0 599.3 11.7 -18.4 -State direct investment 555.7 522.3 500.0 507.0 -6.0 -2.9 -Loans onloaned to public enterprises 101.6 211.9 0.0 92.3 108.6 -56.4 Treasury funds 412.6 438.8 441.0 563.0 6.3 28.3 - Special funds 398.9 432.3 441.0 553.2 8.4 28.0 - Contingency funds 13.7 6.5 0.0 9.8 -52.6 50.8 Sub-total 2,441.4 2,617.0 2,511.0 2,642.5 7.2 1.0 Advances and net loans to Treasury 63.7 -20.9 0.0 -26.7 -132.8 27.8 Total 2,505.1 2,596.1 2,511.0 2,615.8 3.6 0.8
160 Direct State investments amounted to 926 MTD, up 3.5% compared to the previous year’s level, going mainly for equipment and housing (200 MTD), agriculture, environment and hydraulic resources (175 MTD), higher education and scientific research (130 MTD) and education and training (102 MTD). Public financing totalled 554 MTD in 2004, compared to 549 MTD in 2003. 206 MTD of this total went to the agricultural sector. On the other hand, direct payments on external resources, forecast at 500 MTD, came in at 599 MTD, a level well below that of 2003 (734 MTD). This drop was due almost entirely to the decrease in funds onloaned to public enterprises, because of the accounting entry in 2003 of a sizeable amount onloaned to leasing companies. Broken down by sector, direct payments went mainly to agriculture (175 MTD). 3. Debt retirement After 2003’s sharp decrease, due mainly to 26% drop in reimbursement of principal, State budget expenditure to service debt was up significantly in 2004 to 4,469 MTD, 1,350 MTD more than the year before. This development reflected the higher volume of disbursements for redeeming debt principal (+57.1% vs. -26%) and higher interest (+9.4% vs. -1.2%). Representing 60% of the overall total for servicing debt, expenditure to redeem domestic debt rose to 2,683 MTD in 2004, compared to 1,725 MTD in 2003. Redemption of principal involved 52-week short-term Treasury bonds : BTCT (1,252 MTD), bonds equivalent to Treasury bonds : BTA (847 MTD) and Treasury bonds negotiable on the stock market : BTNB (35 MTD) vs. 899 MTD, 214 MTD and 35 MTD respectively in 2003. Outlays to redeem external debt were up 28% in 2004, affected by the steep increase in expenditure to redeem principal (+43.1%), mainly attributable to repayment of the Samurai I debenture loan in the amount of 348.2 MTD. DEBT RETIREMENT (In MTD unless otherwise indicated) 2004 Variation in % Description 2002 2003 SFL Actual 2003/2002 2004/2003 Domestic debt 2,447.3 1,724.5 2,715.0 2,683.4 -29.5 55.6 Principal 2,066.9 1,365.7 2,285.0 2,265.2 -33.9 65.9 Interests 380.4 358.8 430.0 418.2 -5.7 16.6 External debt 1,459.7 1,394.3 1,735.0 1,785.2 -4.5 28.0 Principal 925.0 848.8 1,135.0 1,214.5 -8.2 43.1 Interests 534.7 545.5 600.0 570.7 2.0 4.6 Total 3,907.0 3,118.8 4,450.0 4,468.6 -20.2 43.3 Principal 2,991.9 2,214.5 3,420.0 3,479.7 -26.0 57.1 Interests 915.1 904.3 1,030.0 988.9 -1.2 9.4 C. FINANCING THE BUDGET DEFICIT The budget deficit, including privatisation proceeds came to 800 MTD in 2004, 2.3% of GDP, compared to 1,015 MTD and 3.2% respectively the year before. If income from privatisation were excluded, the figure would be 925 MTD and 2.6% of GDP vs. 1,022 MTD and 3.2% in 2003.
161 73% of the deficit was financed by net domestic borrowings and 27% by net external funds, vs. 20% and 80% respectively in 2003. FINANCING THE DEFICIT 2002 2003 2004 Description In % In % In % In MTD In MTD In MTD of Total of Total of Total Net domestic financing -104.7 -18.1 206.8 20.4 586.8 73.3 *Domestic borrowed resources 1,760.0 2,082.1 2,596.8 * Redemption of debt principal -2,066.9 -1,365.7 -2,265.2 * Treasury resources 202.2 -509.6 255.2 Net external financing 683.1 118.1 808.0 79.6 213.2 26.7 *External borrowed resources 1,608.1 1,656.8 1,427.7 *Redemption of debt principal -925.0 -848.8 -1,214.5 Total 578.4 100.0 1,014.8 100.0 800.0 100.0 D. TRENDS IN THE OUTSTANDING BALANCE OF SOVEREIGN DEBT The outstanding balance of sovereign debt amounted to 20,904 MTD as of 31 December 2004, up 7.4% over its level at the end of 2003, compared to 5.8% a year earlier. This development was due to the 11.1% increase in the outstanding balance of domestic debt in conjunction with a more moderate increase in the outstanding balance of external debt (+5.3%). Continuing on its downward trend, its share in GDP dipped from 60.4% in 2003 to 59.3% in 2004. THE OUTSTANDING BALANCE OF PUBLIC DEBT 2002 2003 2004 Description In % In % In % In MTD* In MTD* In MTD* of Total of Total of Total External debt 11,688.4 63.5 12,528.7 64.4 13,197.4 63.1 Variation in % 16.6 7.2 5.3 Domestic debt 6,714.5 36.5 6,934.1 35.6 7,707.0 36.9 Variation in % 3.6 3.3 11.1 Total 18,402.9 100.0 19,462.8 100.0 20,904.4 100.0 Variation in % 11.5 5.8 7.4 * Unless otherwise indicated. Overall outstanding balance of Treasury bonds went up to 5,160 MTD in 2004, an increase of 9.8% compared to the previous year’s level, influenced by the strong increase in BTA while the outstanding balance of BTCT went down. Public issues in 2004 were made up, to different degrees, of BTA (1,916 MTD) and BTCT (680 MTD). For the former, ten-year issues were predominant with 69% of total BTA issues while the latter involved solely 52-week BTCT. 13 and 26-week bonds were redeemed in their entirety in 2003. Total reimbursement amounted to 2,134 MTD in 2003, mostly for 52-week BTCT.
162 The outstanding balance of 52-week State securities, in reaching 660 MTD on 31 December 2004, was down sharply from the previous year’s level of 1,232 MTD. Consequently, its share in total fell from 26.2% to 12.8%. Meanwhile, the outstanding balance of securities with a duration of more than one year was up sharply, rising from 3,465 MTD in 2003 to 4,499 MTD in 2004, an increase of 29.8%. The increase affected all terms except for four-year securities, which were down sharply by 43%, while 12-year securities stagnated at 889 MTD. 2004 was characterised by the higher level of ten-year Treasury bond issues (1,320 MTD) and, to a lesser degree, two-year securities (65 MTD), contrary to the previous year when the Treasury made no issues of this category of security. The outstanding balance of three and five-year securities increased by 14% and 24.5% respectively. TREASURY BONDS (BTC , BTCT, BTA ET BTNB)1 BY MATURITY (Outstanding in thousand TD; WAR2 in %) Description 2000 2001 2002 2003 2004 13 weeks Outstanding 8,000 262,000 101,500 W A R 5.9389 6.3040 6.1672 26 weeks Outstanding 240,000 147,500 393,000 W A R 6.0317 6.4187 6.2849 52 weeks Outstanding 875,200 1,219,300 1,087,300 1,232,200 660,400 W A R 6.1424 6.6766 6.5280 5.8658 5.1380 2 years Outstanding 195,200 229,700 192,600 65,000 W A R 6.3901 6.7509 7.0154 5.4020 3 years Outstanding 560,806 445,501 277,800 267,100 304,400 W A R 7.1161 6.9060 7.0758 7.1102 5.5870 4 years Outstanding 736,000 873,825 962,300 1,100,900 627,100 W A R 7.0603 7.0437 7.0331 7.0023 7.0270 5 years Outstanding 647,669 478,004 237,658 493,608 614,300 W A R 7.1361 6.8500 6.6922 6.5172 6.6090 7 years Outstanding 2,000 - - W A R 9.5000 - - 10 years Outstanding 787,584 774,359 750,034 714,710 1,999,635 W A R 7.4826 7.1614 7.2499 7.1104 6.9280 12 years Outstanding 338,800 888,900 888,900 W A R 8.3055 8.2352 8.2350 Outstanding 4,052,459 4,430,189 4,340,992 4,697,418 5,159,735 Total W A R 6.8696 6.8487 6.9387 6.9051 6.8010 1 BTC = transferable Treasury bonds ; BTCT= short term Treasury bonds ; BTA = bonds equivalent to Treasury bonds ; BTNB = Treasury bonds negotiable on the stock market. 2 WAR = Weighted Average interest Rate of auctions not yet issued. Globally, the weighted average interest rate, regardless of duration was 6.8010% in 2004 vs. 6.9051% in 2003. The drop in yields affected 52-week, three-year, ten-year and twelve-year bonds, four year and five-year bonds having rather improved slightly.
163
MONETARY DEVELOPMENT
AND DISTRIBUTION OF CREDIT
I. MAIN ECONOMIC, MONETARY AND FINANCIAL MEASURES
The reform process that was launched several years ago continued in 2004 with a view to helping the national economy accede to a higher level of growth and attain a far better level of development so as to ensure successful integration in the world economy. The main measures involved finer-tuned monetary policy, ongoing liberalisation of external finances, and a better business environment on the institutional and regulatory fronts. In operational areas, attention was focused on investment and employment promotion. A. ADJUSTMENT OF THE FRAMEWORK FOR CONDUCTING MONETARY POLICY Two critical measures were taken in this area. One involves adoption of a new approach for calculating the interest rate on the money market (a prior condition both for moving from assessment of calls for bids on the basis of a fixed rate to one based on multiple rates) and the other making available to banks a typical outline agreement governing sales with option to repurchase. 1. New approach for calculating the interest rate on the money market Average rates weighted by the amounts of day-to-day loans and those for other durations on the interbank market will henceforth be rounded off to the nearest 1/100th of a percentage point, vs. 1/32th previously. This means of calculation, in allowing for greater fluctuation in interest rates on the interbank market, will contribute to more dynamic activity. The savings interest rate is thus rounded off to the nearest 1/20th of a percentage point, compared to 1/8th previously1. In the second half of the year the Central Bank also modified modalities for intervening on the money market, adopting the mixed method for considering breaking down calls for bids to replace the fixed rate method. Based on interest rates instead of collaterals, the new procedure helped reduce the difference between the rates of the various bank submissions, thus contributing to meeting needs in a more rational manner. 2. Adoption of a typical outline agreement governing sales with option to repurchase (repos) In line with law n°2003-49 of 25 June 2003 concerning purchase transactions with a commitment to sell back stocks and commercial paper - especially article 2 – the Central Bank adopted a typical outline agreement that sets the conditions and modalities governing the transactions known as ‘repos’ (sale with option to repurchase), as detailed in circular n°2004-04. The introduction of repos, while contributing to more diversity in financial products, allows for greater security for transactions on capital markets in general and favours more dynamic performance, especially on the interbank market.
1 Cf. Central Bank of Tunisia circular to banks n°2004-02 of 26 May 2004. 166
From now on any bank that wants to deal in repos will have to issue a notification to this effect to the Central Bank and sign a typical outline agreement each time with its co-contractor, be it another bank, a financial institution, or a stockbroker authorised by the Ministry of Finance to implement repos as foreseen in article 3 of the law n°2003-49 mentioned above. The banks that sign the typical outline agreement must transmit on a daily basis to the Central Bank a statement of all such transactions. The day after receiving this data, the Issuing Institution transmits the aggregate amounts for transactions that have taken place, broken down by duration and related weighted average rates. It should be specified that the securities subject of repos concern stocks as defined by law n°2000-35 of 21 March 2000 involving dematerialization of securities, except for shares and priority dividend shares that do not confer the right to vote. They are also applicable to commercial paper (cash vouchers, promissory notes, and bills of exchange). As for transactions, contracting parties can agree to replace securities that have already been sold with option to repurchase with other securities, on condition that on the date of substitution the value of the replacement securities is no less than that of those being replaced. To take into account trends in the value of securities used as pawns, each sale with option to repurchase leads to constitution or onlending of a margin, unless otherwise stipulated at the outset. On the date of valuation, the person authorised to exercise this activity is responsible for determining the gap between the value of repos with margin and the margin to be constituted or onlended, and to inform parties accordingly1. B. STRENGTHENING FINANCIAL SECTOR COMPETITIVENESS 2004 was characterised by ongoing implementation of institutional reforms, meant to make banks more effective in their role of financing the economy and by consolidating financial foundations so as to increase competitiveness and strengthen their role in financial mediation. 1. Pursuit of the programme to restructure the banking system The programme to restructure the financial sector which began with the sale of the share of public holdings in Bank of the South capital in 1997, the merger-take over of the Economic Development Bank of Tunisia (BDET) and National Tourism Development Bank (BNDT) by the Tunisian Banking Company (STB) in 2000, the liquidation of the Arab Maghreb Cooperation Bank (BCMA) in 2001 and privatisation of the International Banking Union (UIB) in 2002 continued in 2004 with the transformation of venture capital development banks into all-purpose banks namely : the Tunisian Qatari Bank (TQB), the Tuniso-Emirates Investment Bank (BTEI named currently BTE), and the Tuniso-Kuwaiti Development Bank (BTKD). STUSID will
1 Cf. Central Bank of Tunisia circular to banks n°2004-04 of 1st October 2004. 167 make the move in April 2005. Additional conventions were signed and approved in 2004 at these four banks putting an end to application of their founding conventions1. The Tunisian banking scene has also been enriched by the founding in early March 2005 of a bank to finance small and medium businesses «BFPME». This gives concrete form to the presidential electoral programme to promote employment by encouraging initiative and the setting up of 70,000 companies or projects over the five-year period 2005-2009. With initial capital of 50 MTD, the BFPME which is a public bank (30 MTD in State holdings) approved by law n°2001-65 of 10 July 2001 concerning lending institutions, seeks to enhance the policy of public support to the small and medium scale businesses that dominate the Tunisian economy by facilitating their access to bank financing. This stake for the nation as a whole is a sound dynamics to support to overcome the financing difficulties met by this category of businesses which do not hold any real collateral, lack sufficient capital equity, record a high level of default in this field and are unable to identify new initiatives. This bank helps build partnerships with various operators working in the financing of small and medium scale businesses with investment needs of between 100,000 dinars and 4 MTD, especially in high added value sectors like information and communication technologies and a knowledge-based economy in general. The goal is to provide an effective instrument for sharing small and medium scale business risk, through either cofinancing and coparticipation with the banking system and venture capital investment companies (SICAR) or by provision of guarantees for repaying financing from guarantee and insurance structures. Thus the BFPME intervenes as a federator of structures active in the financing of small and medium scale businesses, by providing appropriate financing solutions that will favour new initiatives, help small and medium scale businesses throughout the various phases of development, and seek out people to take over small and medium scale businesses that are in trouble.2 2. Additional measures for ongoing stabilisation of the financial sector Action taken in 2004 in the framework of upgrading of the banking sector sought mainly to solidify financial foundations at banks, to strengthen the prudential framework and to put into place an operational structure to provide efficient means to combat money laundering and terrorist financing.
1 Cf. Law n°2004-23 of 15 March 2004 published in the Official Journal of the Tunisian Republic n°22 of 16 March 2004 and approvals by the Minister of Finance on 2 April 2004 and 20/21 May 2004 and law n°2004-69 of 2 August 2004 published in the Official Journal of the Tunisian Republic n°62 of 3 August 2004. 2 Cf. Limited ministerial council meeting on 24 November 2004 and article 23 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 168 a. Increasing the rate for deductible provisions and extending write-offs for unrecoverable claims at leasing companies In the framework of ongoing efforts to strengthen financial foundations at banks and leasing companies and to encourage the latter to increase coverage of its non performing loans, authorities raised the ceiling for deductible provisions at these establishments from 75% to 85% of taxable profit1. Conscious of the role played by leasing companies in financing of the economy (especially small and medium scale companies) and the need to support efforts to consolidate their financial foundations, authorities extended the system for writing off unrecoverable claims to leasing companies, with a view to harmonising the tax system as it applies to various financing modes2. b. Organisation and operating modalities at the Tunisian Commission for Financial Analysis (CTAF) In the framework of transparency of financial transactions and measures to fight against illegal financing, law n°2003-75 of 10 December 2003 has provided for a new structure at the Central Bank of Tunisia called the «Tunisian Commission for Financial Analysis ». It is mainly in charge of establishing general guidelines likely to help banking and non-banking financial institutions to detect, receive and process declarations concerning suspicious or unusual operations and transactions and to issue a notification about follow up. The commission can decide to order temporary freezing as well as unfreezing of funds involved in a declaration. If suspicion is confirmed, the commission will transmit its conclusions to Tunis district attorney of the Republic. This Commission is chaired by the Governor of the Central Bank and is made up of a third tier magistrate, representatives of the administration (Finance, Interior, Customs) and of the Financial Market Council (CMF) and an expert specialised in fighting financial infringements. Organisational details and operating modalities for its three structures are set by decree n°2004-1865 of 11 August 2004 : - The orientation committee is chaired by the Governor of the Central Bank, made up of a third tier magistrate, representatives of the Central Bank and the administration (Finance, Interior, Customs), the Financial Market Council and an expert specialised in guarding against financial infractions. It is in charge of drafting guidelines and examining programmes to prevent illegal financial circuits serving to finance terrorism and launder funds. - Then there is an operational unit made up of staff from the Central Bank and the administration (Interior and Customs) who deal with investigation of declarations made to the commission and presentation of proposals for follow-up. The unit is also in charge of ensuring that a data base is established and managed as per the law of
1 Cf. Article n°44 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 2 Cf. Article n°43 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 169 10 December 2003, listing private individuals and corporate entities that are suspected of having a link to terrorist financing or money laundering, looking in particular at declarations concerning suspicious or unusual operations or transactions. - And finally there is a general secretariat headed by the director general in charge of legal services at the Central Bank of Tunisia. It is in charge of supervising the work of the operational unit, receiving declarations of suspicious or unusual operations or transactions, managing the commission’s administrative, financial and technical affairs, preparing the ground for decisions and implementing them. The secretariat general prepares an activity report annually, submitted to the CTAF for approval. Funding for the Tunisian Commission for Financial Analysis is allotted in the form of credits, charged to the Central Bank’s budget.1 3. Adjustment of preferential conditions for mobilising long-term savings To ensure greater rationality, tax incentives to subscribers of life insurance policies (as per article 39 of the tax code on private individual income and corporate tax) had been modified. New regulations in this area will henceforth allow for repurchase by any insured person of the relevant policy prior to expiry of the initially set ten-year period. But he or she must pay any taxes that are due on deducted portions of insurance, along with any related penalties. However late penalties are not due if the insured person repurchases the policy following the occurrence of unforeseen events2. Repurchase of the insurance contract requires that an attestation be issued by the tax service, certifying that the tax status of the person in question is in order as regards insurance premiums that have benefited from the deduction. It should be recalled that article 39, paragraph I, sub-paragraph 2 of the tax code on private individual income and corporate tax provides for deduction from the tax base of premiums for private or collective life insurance contracts based on life expectancy and that include one of the following benefits : - payment of funds to the insured party in case of survival for at least 10 years; - payment of a life annuity to the insured party, with an effective start no less than 10 years later; - and payment of funds to the spouse, ascendants or descendants of the insured person if the latter dies. Tax incentives are granted notably for deduction from the tax base of portions of premiums paid for a life insurance policy, up to a ceiling of 800 dinars a year, plus 400 dinars for the spouse and 200 dinars for each dependant child. Furthermore, to encourage companies to display greater transparency (while also promoting public calls for savings and the accompanying appearance of new stocks
1 Cf. Decree n°2004-1865 of 11 August 2004, published in the Official Journal of the Tunisian Republic n°66 of 17 August 2004. 2 Cf. Article n°61 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 170 on the Stock Market), it was decided to prolong until 31 December 2009 tax incentives for companies that open their capital to the public. It should be recalled that those who do so for a minimum of 30% (the minimal level to qualify for quotation on the stock market) are eligible for a reduction of the rate on corporate earnings from 35% to 20%; this is also the case for those companies whose shares are already posted on the board but with an opening rate below 30%, on condition that the addition is not below 20% without the opening rate being lower than 30%1. C. GREATER CONVERTIBILITY OF THE DINAR AND MORE FLEXIBLE REGULATIONS FOR EXCHANGE AND FOREIGN TRADE The process for liberalisation of external finances has proceeded step-by-step, dealing with several aspects of exchange and foreign trade regulations, while also introducing new improvements in the area of procedures. 1. STRENGTHENING OF THE PROCESS TO LIBERALISE THE EXTERNAL ACCOUNT a. Current transactions Ceilings were once again raised, as follows : - The tourist allocation was raised from 1000 to 2000 dinars a year, cumulative over two successive years. Children under 10 receive half this amount2. - The amount that can be transferred annually abroad per patient for living expenses during medical care went up from 750 to 1000 dinars. The allocation for the person accompanying the patient went up at the same time from 500 to 750 dinars by trip3. - The maximum amount for transfers abroad of living expenses for students has gone up from 700 to 1000 dinars per month of university or school year, with the annual allocation for installation costs rising from 1500 to 2000 dinars. The ceiling for tuition and study costs, previously set at 6000 dinars, will from now on correspond to the amount (exclusive of living costs) billed by the foreign educational institution, on the basis of an official document remitted by the institution to the student. The relevant transfers will be made in line with the due dates indicated in the document4. - The annual amount of the allocation for export business travel increased from 15% to 25% of revenue from export of goods or services for the current year that is linked to the activity for which the allocation is requested, with a ceiling of 180,000 dinars per year (compared to 120,000 dinars previously). Similarly, the amount of the allocation for promoter’s business travel, granted just once per initiative, went up from 5000 to 10,000 dinars.
1 Cf. Article n°42 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 2 Cf. Central Bank of Tunisia circular to authorised intermediaries n°2004-05 of 1st November 2004. 3 Cf. Central Bank of Tunisia circular to authorised intermediaries n°2004-06 of 1st November 2004. 4 Cf. Central Bank of Tunisia circular to authorised intermediaries n°2004-07 of 1st November 2004. 171 Allocations for travel in the framework of concluding transactions abroad as well as importer’s business travel allocations have been entirely liberalised1. b. Capital transactions Further flexibility was also introduced for measures governing capital account : Non resident subscription to bonds equivalent to Treasury bonds Under the terms of decree n°2003-2391 of 17 November 2003, foreigners have been authorised to subscribe to bonds equivalent to Treasury bonds, within certain limits, set in 2004 by the Central Bank at 5% of each line, after the results of auction are announced. Such investors are guaranteed to be able to transfer all funds thus invested. The relevant authorised intermediary is then in charge of transferring reimbursement of principal as well as interest, after ensuring that the initial investment was indeed made on the basis of imported foreign currency2. Tunisian investments abroad To encourage Tunisian operators to invest abroad it was decided to increase the amount that can be freely transferred by export companies and to extend the possibility of investing abroad to non-exporting companies in order to meet their financing needs for activities abroad. In effect, companies that posted a turnover at export of at least 50,000 dinars over the previous year can transfer funds abroad to finance investments in the form of liaison or representational offices as well as branches, affiliates or sharehol- dings in the capital of companies established abroad. Ceilings for these transfers are set at between 30,000 and 150,000 dinars for the first category of investment and between 60,000 and 300,000 dinars for the second category (compared to 20,000-100,000 dinars and 40,000-200,000 dinars previously). Non exporting resident companies with turnover in foreign currency amounting to less than 50,000 dinars can transfer between 10,000 and 50,000 dinars to finance liaison or representational offices and between 20,000 and 100,000 dinars for investments in the form of branches, affiliates or shareholdings3. External borrowings Ceilings for borrowing abroad, set at 10 million dinars for financial institutions and 3 million dinars for other companies by circular to authorised intermediaries n°93-16 of 7 October 1993, have been modified. Under the terms of new regulations, lending institutions can borrow an unlimited amount of funds from non residents as long as the loan is for a period of more than 12 months, while other institutions are held to a 10 million dinar limit. All loan recipients must first undergo voluntary evaluation by Fitch North Africa, Moody’s, Standard and Poor or Fitch Ratings. Authorised
1 Cf. Central Bank of Tunisia circular to authorised intermediaries n°2005-02 of 3 January 2005. 2 Cf. Central Bank of Tunisia circular to authorised intermediaries n°2004-03 of 19 July 2004. 3 Cf. Central Bank of Tunisia circular to authorised intermediaries n°2005-05 of 16 February 2005 and Minister of Finance exchange notice published in the Official Journal of the Tunisian Republic n°5 of 18 January 2005. 172 intermediaries are also authorised to use convertible dinar holdings belonging to non residents to grant loans to resident companies1. Professional accounts The maximum rate for foreign exchange resources that can be credited to a professional account will henceforth cover all company income from exports or borrowings, compared to 70% previously2. 2. IMPROVED CIRCUITS FOR PROCESSING FOREIGN TRADE TRANSACTIONS New improvements have been introduced for procedures governing foreign trade, while inflows of imported merchandise is subject to greater control, meant to guard against any kind of irregularity. a. Use of the integrated system for automated processing of foreign trade formalities for the purposes of verification As for financial settlement of import and export of merchandise and the clearing up of foreign trade files and with a view to verifying the entry and departure of the goods at issue, authorised intermediaries can henceforth refer in so far as possible to customs entries as recorded in the integrated system for automated processing of foreign trade formalities3. b. Determination of surveillance procedures prior to import In virtue of the terms of article 30 of law n°98-106 of 18 December 1998 (which stipulates that any imports of any product evolving in a way that could be prejudicial to national producers must be subjected to prior surveillance), the Ministry of Trade has subjected import of hardware, paper and a number of vehicles to such prior surveillance4. Thus for any banking domiciliation of a related import transaction, the authorised intermediary must request an information form issued by the Ministry of Trade. But the import transaction is not to be held up if the difference between the value or quantity of items to be imported and those mentioned in the information form is determined to be less than 5% 5. D. FINANCING OF THE ECONOMY To provide the financing required by an economy constantly on the move, the framework and procedures in place must be constantly adapted to changing needs. In this same train of thought, new measures have been taken, especially for agriculture, housing and micro-projects.
1 Cf. Central Bank of Tunisia circular to authorised intermediaries n°2005-03 of 4 January 2005. 2 Cf. Central Bank of Tunisia circular to authorised intermediaries n°2005-01 of 3 January 2005. 3 Cf. Central Bank of Tunisia circular to authorised intermediaries n°2005-04 of 17 January 2005. 4 Cf. Ministry of Trade notice published in the Official Journal of the Tunisian Republic n°81 of 8 October 2004. 5 Cf. Minister of Trade directive of 12 August 2004, published in the Official Journal of the Tunisian Republic n°68 of 24 August 2004 and Central Bank of Tunisia note to authorised intermediaries n°2004-19 of 13 December 2004.
173 1. Support measures for agriculture and fishing a. Institution of a new category of credit eligible for refinancing from the Central Bank to benefit aquaculture To encourage cage farming of certain varieties of fish, crustaceans and shellfish, a line of credit has been established, valid for periods ranging from 8 to 24 months according to the nature of the aquaculture project. Financing is provided in two portions, covering 70% of the cost for purchasing alevin as well as costs for raising the fish and paying insurance premiums. For short-term loans, the maximum amount that can be granted by a bank to finance a tilapia freshwater aquaculture project with a 100 ton production capacity is limited to 130,000 dinars : 35,000 for buying alevin and 95,000 to cover expenditure for raising the fish and to cover insurance costs. The amount of the loan has a ceiling of 850,000 dinars for a bass and sea bream hatchery, with a pre-fattening unit having a capacity of five to seven million alevin, depending on their size. The scale for medium-term loans to finance farming of bass and sea bream in cages, mussels and oysters, clams and jumbo shrimp varies according to the project’s activity and production capacity, ranging between 7000 and 860,000 dinars. It should be specified that these scales are the maximum that can be granted by a bank, keeping in mind that the actual amount of funds released is adjusted depending on provisional expenditure by the fish farmer and project profitability1. b. New scales for complementary loans for seasonal crops The amount for complementary loans for seasonal crops, meant for supplementary fertilisation and fungicide treatments, for the 2004-2005 cereal campaign has gone up from 45 to 81 dinars per hectare for irrigated cereals and dry-land farming of cereals in zone I and from 35 to 71 dinars per hectare for dry-land farming of cereals in zone II. The due date for reimbursement is set for 31 August 20052. c. Orientation of agricultural production in line with data from agricultural production maps so as to ensure better yields In order to make agricultural land more profitable by encouraging farming that makes the most of the specific, comprehensive particularities of the nature of the land, it has been decided to classify this land as defined in law n°83-87 of 11 November 1983, on the basis of agricultural production maps. These maps constitute the basis for strategically orienting agricultural production and determining its development prospects. They will help in particular to orient production activities and to define the incentives with a view to reaching the targeted objectives. In this framework, mechanisms to support and shore up agricultural production have been put in place. They deal in particular with the setting up of recommended activities, mainly organising the intervention of the various parties, building up of buffer stocks to
1 Cf. Central Bank of Tunisia circular to banks n°2004-10 of 31 December 2004. 2 Cf. Central Bank of Tunisia note to banks n°2005-05 of 25 January 2005. 174 alleviate irregular supply, and establishing agricultural production contracts between farmers and industrial or commercial companies, in line with appropriate regulations1. 2. Changes in the field of intervention of the national fund to upgrade housing (FNAH) The objective being sought is to widen the field of intervention of the fund and to ensure greater harmony in its means of intervention, so as to adapt them to the needs of the current context. This involves in particular maintaining the country’s real estate heritage, carrying out programmes to replace buildings that could collapse and repairing housing damaged by natural disasters. The national fund to upgrade housing (FNAH) was set up under the terms of the law of 23 August 1956 and it will in the future contribute to the financing of projects to do away with rudimentary housing under the umbrella of the approved national programme. It will provide support to both private owners and communities who undertake to safeguard, restore, rehabilitate or improve housing for their own proprietors. The new forms of intervention can be summarised as follows :
Type of financing Activity to be financed Beneficiary granted by FNAH Programmes and projects to do away with rudimentary housing Subsidy Operations to safeguard, restore, rehabilitate and improve the situation relating to maintenance of housing or acquisition of equipment Private owner Loan and subsidy Operations to restore or rehabilitate premises meant essentially for housing or acquisition of equipment on behalf of the owners of these premises Community Loan Temporary housing of families that live in buildings in danger of falling down or that have been evicted from buildings demolished to avoid this danger Community Loan Demolition of buildings in ruin or that are in danger of falling down and hauling away of rubble Community Subsidy Work to improve housing conditions for citizens and their environment Community Loan and subsidy Urban rehabilitation and renovation by Institution or specia- the State lised structure Loan and subsidy Repair of damage to housing from natural disasters or unforeseeable events and temporary housing of displaced families Subsidy
1 Cf. Orientation law n°2004-60 of 27 July 2004, published in the Official Journal of the Tunisian Republic n°60 of 27 July 2004. 175 Management of FNAH resources and claim collection have been handled by a lending institution acting as a bank, in the framework of an agreement signed with the State1. It should be noted that modalities and conditions for granting loans and subsidies are set by decree. 3. Increase in the maximum amount of micro financing granted by associations To further encourage private initiative, especially in setting up micro-projects, the maximum amount of micro financing granted by associations has gone up from 2000 to 4000 dinars. Similarly, the ceiling for loans to improve living conditions has been raised from 500 to 700 dinars2. E. EMPLOYMENT AND INVESTMENT PROMOTION To further stimulate investment promotion and employment, notably, for graduates of higher education, new measures were taken in 2004. 1. Incentives for job creation Measures taken in this area concern recruitment of graduates of higher education as well as reinsertion for those who have lost their jobs. a. Incentives available to private sector companies and associations to recruit graduates of higher education It has been decided to prolong for an additional five year the period of applicability for State assumption of a portion of the employers contribution to the legally constituted social security system for companies in industry, handicrafts and services in priority regional development areas. This share has been set at graded levels of 15 per- centage points for each additional year, ranging from 80% for the first year to 20% for the last year3. In this same context, in order to improve the supervisory rate for private sector companies working in the sectors cited in the first article of the investment incentives code, these companies can take advantage of State assumption of a portion of the employer’s contribution to the legally constituted social security system for a period of seven years. This share applies to wages for newly recruited staff who hold Tunisian nationality and a degree from an institution of higher education for a course lasting at least two years after the baccalaureate (or equivalent). The rate of assumption is 100% for the first two years, then 85%, 70%, 55%, 40% and 25% respectively for the next five years4. This incentive is also available to several categories of association that recruit graduates of higher education, notably development associations, those
1 Cf. Law n°2004-77 of 2 August 2004, published in the Official Journal of the Tunisian Republic n°63 of 6 August 2004. 2 Cf. Minister of Finance directive of 23 November 2004, published in the Official Journal of the Tunisian Republic n°95 of 26 November 2004. 3 Cf. Article 19 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 4 Cf. Article 20 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 176 empowered to grant micro-credit, those that disseminate digital culture, and those that provide support to the handicapped1. b. Reinsertion into professional life for wage earners who have lost their job for economic reasons Private sector companies that have recruited (under a reinsertion contract) wage earners having lost their jobs for economic or technical reasons or following the definitive or sudden closing of the company where they worked without benefiting from the procedures set out in the labour code can take advantage of State assumption for one year of 50% of wages paid to eligible recruits, up to a ceiling of 200 dinars per person per month and the relevant employer contributions to the legally-constituted social security scheme. State intervention is charged to industrial development and competitiveness fund resources (with allotments transferred to the National Agency for Employment and Independent Work) in line with the annual workplan2. 2. Investment promotion a. Ongoing incentives for a number of activities To encourage promoters to continue to invest in promising activities with relatively high rates of integration the period over which the 20% investment premium can be enjoyed by promoters who invested before 31 December 2004 has been extended to 31 December 20093. b. Encouragement of investments made by new promoters Financial incentives in the form of premiums, reimbursable allotments and participation in capital for new promoters of intangible investment and priority investment in technology have been further enhanced by the establishment of two new premiums4. The first, set at 50% of the cost of the investment, concerns assistance in marketing, computerisation, office automation and other activities such as product certification. The second concerns investment in technology, granted at the same rate, with a ceiling of 100,000 dinars, as per investment in design material and (mainly) production management stations. At the same time, conditions for granting of formerly established premiums have been improved. Thus the investment premium went up to 10% of the cost of equipment, with a ceiling of 100,000 dinars vs. 6% of the cost of the project and a maximum of 300,000 dinars invested in the past. Considered as a contribution to
1 Cf. Article 21 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 2 Cf. Article 22 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004 and decree n°2005-158 of 26 January 2005, published in the Official Journal of the Tunisian Republic n°9 of 1st February 2005. 3 Cf. Article n°24 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 4 Cf. Article n°25 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 177 study costs, the premium for studies and technical assistance that was previously set at 1% of the cost of investment (with a ceiling of 5000 dinars for investments that do not exceed 1 MTD) was raised to 70% of the cost of studies and assistance with a ceiling of 20,000 dinars. Aside from these two increases, State assumption of one third of the cost of land and premises needed for the project and acquired from authorised developers, with a ceiling of 30,000 dinars is granted1. These incentives (already available to companies in the fields of industry, services, agriculture and fishing) have been extended to new promoters in handicrafts2. The maximum for a project fostered by new promoters in manufacturing industries and handicrafts, and service activities was raised from 1 MTD to 4 MTD, inclusive of revolving funds, aside from the project site. Reimbursable allotments to new promoters are granted in the following manner : * for the first portion of investment (up to 500,000 dinars) the amount of the allotment is not to exceed 70% of corresponding capital ; * for the rest of the investment (up to 4 MTD vs. 1 MTD previously), the allotment is subject to a ceiling of 20% of additional capital. In both cases, the promoter has to provide a personal input in line with current regulations. c. Incentives for investments by small and medium-scale businesses Investors who fund small and medium scale handicraft companies benefit from the same incentives as those granted to companies that work in industry, services and agriculture/fishing. These companies which were previously eligible only for participation in capital and the premium for the cost of studies and technical assistance will in the future have the possibility of receiving a reimbursable allocation and a premium for both intangible and priority technology investments3. FOPRODI financing will henceforth be granted to small and medium scale companies whose investment to launch or extend operations does not exceed 4 MTD (vs. 3 MTD in the past). There are three premiums. The first, introduced in 1999, represents 70% of the global cost of the study and technical assistance, with a ceiling of 20,000 dinars. The two others, provided for by the 2005 finance law are each set at 50% of the cost of both intan- gible and priority technology investments, with a ceiling of 100,000 dinars for the latter. Small and medium scale businesses with investment costs that do not exceed 500,000 dinars can choose between participation in capital or reimbursable allotment for a period of 12 years (with a five-year grace period). The latter, bearing a 3% annual interest rate and a ceiling of 30% of minimum capital, is granted to one or more
1 Cf. Decree n°2005-166 of 26 January 2005, published in the Official Journal of the Tunisian Republic n°10 of 4 February 2005. 2 Cf. Article n°26 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 3 Cf. Article n°27 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 178 shareholders, private individuals holding Tunisian nationality among those who have contributed to the project by providing core funds of at least 10% of minimum capital1. F. MISCELLANEOUS MEASURES Other measures were also taken in 2004, targeting in particular an improvement in the business environment and enhanced competitiveness. 1. Creation of the National Tourism Commission To guarantee and improve the infrastructure needed to promote and develop tourism, a promising sector for the economy and an essential source of foreign currency, a national tourism commission was set up to take charge of consultations on development of the sector between the various parties concerned. This new structure is meant to propose measures that will help to implement choices and orientations of the government’s policy in tourism, to define priorities and coordinate the development and promotion of the sector in tourist zones throughout the country and on various foreign markets that provide tourists. Chaired by the Minister of Tourism and Handicrafts, this commission is made up of 31 members representing various ministries, the Central Bank of Tunisia and the profession2. 2. Encouragement for corporate restructuring and heightened transparency To encourage companies to proceed with restructuring and thus improve their competitiveness, it was decided under certain conditions to deduct from the profit of the company that received assets in the framework of a merger or split : - depreciation put off during deficit periods, - and deficits recorded at the merged or split company that could not be deducted from profits for the year of merger or split3. It should be noticed that companies that generate a VAT credit for their export operations or upgrading investments in the framework of the upgrading programme approved by the steering committee (COPIL) are eligible for total restitution of this loan. Those companies whose credit is generated by normal corporate activity or investments other than those tied to upgrading receive a rebate of only 50%, with payment of an advance of 15%. To encourage these companies to be more transparent, it was decided to raise from 15% to 25% the rate of the advance for companies whose accounts are by law subject to audit, under certain conditions4.
1 Cf. Decree n°2005-165 of 26 January 2005, published in the Official Journal of the Tunisian Republic n°10 of 4 February 2005. 2 Cf. Directive of the Minister of tourism and handicrafts dated 19 May 2004, published in the Official Journal of the Tunisian Republic n°42 of 25 May 2004. 3 Cf. Article n°36 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 4 Cf. Article n°45 of law n°2004-90 of 31 December 2004, published in the Official Journal of the Tunisian Republic n°105 of 31 December 2004. 179 II. LIQUIDITY AND BALANCE OF THE FINANCIAL SYSTEM
With resources growing at a faster pace than uses, the financial system’s liquidity improved considerably in 2004 compared to the previous year. A. TRENDS IN FINANCIAL SYSTEM LIQUIDITY* To ensure ever-better analysis of bank liquidity, the Issuing Institution in 2004 adopted a new approach to managing banking liquidity. This involves a new definition of autonomous factors by reclassifying certain headings on the balance sheet. Thus the heading «Treasury current account balance» has been replaced by a new item entitled «Net balance of public administrations». This is a more general concept that includes not only the Treasury current account balance but also all other claims and debts on public administration, which were previously part of the heading «Other net factors». Similarly the heading «Net assets in foreign currency» has become one of the main components of the heading «Net assets on abroad» which also includes all assets and commitments of the Central Bank on abroad, previously part of «Other net factors». Application of this new approach thus allowed for distinguishing between autonomous liquidity factors (grouping the two above- mentioned headings, bills and coins in circulation and a residual heading «Other net factors»), monetary policy operations, and assets in banks current account held at the Central Bank. TRENDS IN BANK LIQUIDITY1 FACTORS (Daily averages in MTD) Quarterly averages in 2004 Variations Description Year 2003 Year 2004 I II III IV 2004/2003 Bills and coins in circulation -2,764 -2,947 -2,983 -3,136 -3,053 -3,029 -265 Net balance of public administrations +505 +437 +559 +219 +431 +411 -94 Of which :Treasury current account balance -371 -431 -307 -661 -457 -464 -93 Net assets on abroad +1,719 +1,926 +1,993 +2,515 +3,107 +2,385 +666 Of which:Net assets in foreign currency +3,279 +3,428 +3,925 +4,408 +4,752 +4,128 +849 Other net factors +307 +196 +130 +99 -104 +80 -227 = Total autonomous factors (A) -233 -388 -301 -303 +381 -153 +80 Calls for bids +256 +388 +284 +345 -233 +196 -60 1-7 day-allowance uptakes 0 0 0 0 0 0 0 Pawn of 3 month Treasury bonds +125 +163 +168 +75 0 +101 -24 Net tapping transactions +7 -9 +1 +34 -5 +5 -2 Open market transactions +12 +8 +19 +26 +28 +21 +9 = Monetary Policy Operations (B) +400 +550 +472 +480 -210 +323 -77 = Assets in banks current account (A)+(B) +167 +162 +171 +177 +171 +170 +3 1. The (-) sign indicates a restrictive effect and the (+) sign indicates an increase.
* The analysis was made on the basis of average data. 180 With the expansionary impact of the heading «Net assets on abroad», bank liquidity improved on average by 80 MTD in 2004. While this increase was not as high as the year before, it would have been higher if it had not been for the restrictive effects exerted simultaneously by all the other bank liquidity autonomous factors. In this context monetary policy operations involved 323 MTD in 2004 vs. 400 MTD a year earlier. Assets in banks current account thus improved over this same period by 3 MTD to 170 MTD. During the year bank liquidity evolved in four distinct phases : The first period, covering the first four months of the year, saw a 298 MTD tightening in bank liquidity, since the 215 MTD increase in bills and coins in circulation and the 236 MTD drop in net assets on abroad were not enough offset by the 266 MTD increase in the net balance of public administration. The heading «Net assets on abroad» fell by 236 MTD, from 1,936 MTD in December 2003 to 1,700 MTD in April 2004, exercising a proportionate restrictive effect on bank liquidity. This situation was due mainly to the high level of redemption of external debt, especially the SAMURAI I debenture loan in the amount of 348.2 MTD. It should be pointed out that encashment of the debenture loan floated on the European market in April (450 million euros) had no impact on this heading and thus on liquidity, given that it is included under the heading «Tunisian Government account in foreign currency». But this loan along with other drawings (especially from the ADB in January 2004 in the framework of the programme to support economic competitiveness in the amount of 36 million euros) and higher exports, especially of foodstuffs meant a substantial increase in net assets in foreign currency, which increased over the period under review by 242 MTD. TRENDS IN BANK LIQUIDITY 1 FACTORS (Data at the end of period in MTD) Dec. 2 0 0 4 Variations Description Dec. 2004 2003 March June Sept. Dec. Dec. 2003 Bills and coins in circulation -2,809 -3,017 -3,011 -3,070 -3,111 -302 Net balance of public administrations +325 +606 +464 +18 +228 -97 Of which :Treasury current account balance -550 -260 -411 -857 -664 -114 Net assets on abroad +1,984 +1,673 +2,185 +3,295 +2,904 +920 Of which:Net assets in foreign currency +3,503 +3,219 4,122 +4,886 +4,733 +1,230 Other net factors +238 +175 +121 -187 -99 -337 = Total autonomous factors (A) -262 -563 -241 +57 -78 +184 Calls for bids +270 +420 +250 0 0 -270 1-7 day-allowance uptakes 0 0 0 0 0 0 Pawn of 3 month Treasury +165 +168 +68 0 0 -165 bonds Net tapping transactions 0 +69 0 0 +90 +90 Open market transactions +5 +19 +21 +28 +28 +23 = Monetary Policy Operations (B) +440 +676 +339 +28 +118 -322 = Assets in banks current account (A)+(B) +178 +113 +99 +84 +40 -138 1 The (-) sign indicates a restrictive effect and the (+) sign indicates an increase. 181 Similarly, in increasing to 2,989 MTD in April 2004, bills and coins in circulation had a restrictive effect of 215 MTD on bank liquidity. Over the period under review, this factor fluctuated between a minimum of 2,804 MTD and a maximum of 3,085 MTD. The increase was due to higher household expenditure for the Aid-el-Idha holiday, the high level of manual exchange during the African Nations Cup held in Tunisia and the significant volume of withdrawals by farmers to meet expenses tied to a good agricultural campaign, especially for olive oil production. On the other hand, the net balance of public administration, amounting to 602 MTD in April 2004, improved bank liquidity by 266 MTD. This was the result of the 272 MTD drop in the Treasury current account balance, down from 535 MTD to 263 MTD during the period under review. This drop was due mostly to repayment of the above-mentioned SAMURAI I debenture loan. AUTONOMOUS FACTORS IMPACT ON BANK LIQUIDITY DURING THE FOUR-DISTINCT PHASE EVOLUTION 1 (Daily average in MTD) April 2004 June 2004 Aug. 2004 Dec. 2004 Description Dec. 2003 April 2004 June 2004 Aug. 2004 Bills and coins in circulation -215 +14 -233 +174 Net balance of public administrations +266 -65 -321 +214 Of which :Treasury current account balance +272 -72 -328 +201 Net assets on abroad -236 +486 +243 +516 Of which:Net assets in foreign currency +242 +415 +300 +241 Other net factors -113 -32 -23 -234 = Total autonomous factors (A) -298 +403 -334 +670 Calls for bids +173 -378 +408 -610 1-7 day-allowance uptakes 0 0 0 +1 Pawn of 3 month Treasury bonds +86 -27 -63 -77 Net tapping transactions +2 +11 +1 -33 Open market transactions +10 +1 +7 0 = Monetary Policy Operations (B) +271 -393 +353 -719 = Assets in banks current account (A)+(B) -27 +10 +19 -49 1 The (-) sign indicates a restrictive effect and the (+) sign indicates an increase. «Other net factors», in falling from 263 MTD in December 2003 to 150 MTD in April 2004, caused a 113 MTD tightening in bank liquidity. Thus the trend in autonomous factors for the first four months of the year meant that banks needed more central money, leading to a 271 MTD increase in the volume of monetary policy operations. Consequently, assets in banks current account were down by 27 MTD to 159 MTD. The second period covered May and June, with a considerably better bank liquidity, influenced by the expansionary effect of net assets on abroad. These amounted to 2,186 MTD in June, 486 MTD more than in April. This increase was due mainly to higher net assets in foreign currency in the wake of encashment of drawings on external borrowings. This included in particular the 49.4 million euro subordinated loan contracted by the Arab International Bank of Tunisia (BIAT), along with higher earnings from tourism and worker remittances from Tunisians resident abroad. Similarly, bills and coins in circulation fell from 2,989 MTD in April to 2,975 MTD in June, improving bank liquidity by 14 MTD. But the net balance of public administration fell by 65 MTD in June 2004, with a proportionate shrinking of the
182 cash position of banks. This was influenced by the 72 MTD increase in the Treasury current account balance under the influence essentially of encashment of major tax revenue. The favourable evolution of autonomous factors of bank liquidity over the period under review meant less recourse by banks to refinancing by the Issuing Institution. The total came to 303 MTD in June, which meant a higher balance for banks current account at the Central Bank, up 10 MTD to 169 MTD. The third period, covering July and August, was marked by a 334 MTD tightening in bank liquidity, under the influence of the restrictive effects of both bills and coins in circulation and the net balance of public administration. Higher net assets on abroad helped to lessen the extent of this decrease. The net balance of public administration came in at 217 MTD in August, 321 MTD lower than in June, which had a proportionate restrictive effect on bank liquidity. The lower figure for this factor was due almost entirely to a 328 MTD increase in balance of the Treasury current account in conjunction with encashment of income from net subscriptions to Treasury bonds (131 MTD), drawings on external resources (especially the 36 million euro loan contracted with the ADB in the framework of the programme to support economic competitiveness) and the first portion of income from Tunisie Telecom (120 MTD). Similarly, bills and coins in circulation, which amounted to an average 3,208 MTD in August, contributed to bank liquidity tightening by 233 MTD. The increase in this factor which reached its maximum for the year (3,234 MTD) in August was characterised by the higher volume of manual exchange and household expenditure over the summer. On the other hand, net assets on abroad increased by 243 MTD to 2,429 MTD in August, leading to bank liquidity improvement. This increase was due to the greater volume of net assets in foreign currency, following encashment of earnings from tourism, remittance of savings from wages by Tunisians resident abroad and mobilisation of external borrowings, notably the syndicated loan encashed by the National Agricultural Bank (BNA) in August (70 million euros). The evolution of autonomous factors reflected the greater need for liquidity on the part of banks, leading to 353 MTD increase in financing from the Central Bank. Over the last four months of the year, bank liquidity improved significantly, especially in September, more or less creating overliquidity during the last quarter of the year. The 516 MTD increase in net assets on abroad for the period under review meant a proportionate improvement in bank liquidity. This increase was the result of the drop in the Tunisian Government’s foreign currency account. (which was debited in September in favour of the Treasury’s current account, up to the remaining balance of the debenture loan in euros encashed in April) and the higher level of net assets in foreign currency following encashment end September of the second portion of payment for the mobile phone GSM license (223 million dollars), mobilisation of
183 external resources (notably the 75 million dollars syndicated loan to ETAP), and confirmation of a 49 MTD grant from the European Union. The net balance of public administration rose to 431 MTD in December 2004, 214 MTD more than in August, leading to a proportionate improvement in bank liquidity. This happened, mainly, because of the 201 MTD drop in the balance of the Treasury current account, due for the most part to net redemption of Treasury bonds (161 MTD) and disbursements to meet the State’s external financial commitments. This drop would have been greater if it had not been for substantial input from tax revenue in conjunction with the transfer of funds to the Treasury from the Government foreign currency account as mentioned above and of Central Bank profits from 2003 (104.5 MTD). Bills and coins in circulation dropped from 3,208 MTD in August to 3,034 MTD in December, contributing to 174 MTD improvement in bank liquidity. It should be specified that for the period under review this factor has experienced diverging trends. After following a downward trend from early September until 21 October, this factor then increased under the influence of higher household expenditure during Ramadan and until the Aid-el-Fitr holiday. After that, bills and coins in circulation continued on a fairly steady downward trend until the last 10 days of December, when they again picked up to close for the year at 3,111 MTD. The comfortable bank liquidity that resulted from these factors, especially the overliquidity of the last quarter, led the Issuing Institution to absorb excessive liquidity, amounting to 159 MTD for the last four months. Thus assets in the current account of banks dropped by 49 MTD to 140 MTD in December 2004. B. MONETARY POLICY OPERATIONS 1 On 1st June 2004 the Central Bank modified the way it calculates average rates weighted by the amount of day-to-day and other duration loans on the money market. The new method of calculation is based on rounding off to the nearest 1/100th of a percentage point, rather than the previous 1/32th. This will allow for greater fluctuation in interbank market rates and constitute a preliminary step in introducing the mixed distribution method for calls for bids that the Issuing Institution decided to use starting the second half of the year. This is because banks, which have a narrower range of rates, will have more flexibility in presenting their submissions to calls for bids that will henceforth be based on price and no longer on quantity and collateral. It was in this new regulatory framework that the volume of monetary policy operations fluctuated, reflecting comfortable bank liquidity in 2004. Thus recourse by banks to Central Bank refinancing was down, from 400 MTD in 2003 to 323 MTD in 2004. Almost two thirds of these funds (61%) were in the form of calls for bids, with the balance made up of pawn of three-month Treasury bonds (31%), open market transactions (7%) and, in a subsidiary manner, net tapping transactions (1%). Public
1 The analysis was made on the basis of average data. 184 securities (that is to say Treasury bonds) continued to make up most of the counterparts of monetary policy operations, the balance being made up of sound current claims on the private sector. QUARTERLY TRENDS IN THE VOLUME OF MONETARY POLICY OPERATIONS (Daily averages in MTD) Year Quarterly averages 2004 Year Description 2003 I II III IV 2004 Calls for bids 256 388 284 345 -233 196 1-7 day-allowance uptakes 0 0 0 0 0 0 Pawn of 3 month Treasury bonds 125 163 168 75 0 101 Net tapping transactions 7 -9 1 34 -5 5 Open market transactions 12 8 19 26 28 21 Total 400 550 472 480 -210 323 Transactions on the interbank market, which were up slightly from 2003 to 2004 (2.6%) compared to 11% from 2002 to 2003, continued to be handled almost exclusively by deposit banks. In line with trends in bank liquidity, the development of monetary policy operations fell into four distinct phases over the year. For the first four months, with banks facing tight liquidity, monetary policy operations were up : from an average of 425 MTD in December 2003 to 696 MTD in April 2004, the maximum average level for the year. Over this period interbank transactions grew by 66 MTD, influenced by the higher level of forward transactions, while sight transactions were down. Bank refinancing, meanwhile, was handled mainly by calls for bids (71%) and pawn of three-month Treasury bonds (28%). Open market transactions, up from 5.2 MTD in January to 18.9 MTD in April following, notably, firm purchase of Treasury bonds on 12 March in the amount of 13.9 MTD, continued to represent just a minor part of total monetary policy transactions. On the other hand the second period, corresponding to May and June, was characterised by a net improvement in banking liquidity, with 393 MTD less in bank recourse to Central Bank refinancing. This drop involved mainly funds for calls for bids, down from 504 MTD in April to 126 MTD in June, representing 42% of the overall volume of refinancing, a share that was slightly lower than that of pawn of three-month Treasury bonds (46%). TREND IN THE VOLUME OF MONETARY POLICY OPERATIONS (Data of end of period in MTD) 2 0 0 4 Description Dec.2003 March June Sept. Dec. Calls for bids 270 420 250 0 0 1-7 day-allowance uptakes 0 0 0 0 0 Pawn of 3 month Treasury bonds 165 168 68 0 0 Net tapping transactions 0 69 0 0 90 Open market transactions 5 19 21 28 28 Total 440 676 339 28 118
185 The outstanding balance of open market transactions over this period was up slightly, increasing from 18.8 MTD at the end of April to 21.3 MTD in June, following a firm purchase of Treasury bonds involving 2.5 MTD. The increase in banking needs in July and August, in conjunction with a significant drop in supply from banks holding surplus funds, meant greater recourse to the Issuing Institution, mainly in the form of calls for bids (408 MTD). This was also the case on the interbank market, where there was a lower level of transactions over this period, both for sight and forward transactions, down from 203 MTD and 329 MTD respectively in June to 156 MTD and 230 MTD in August. TRENDS IN THE VOLUME OF MONETARY POLICY OPERATIONS ACCORDING TO THE FOUR- DISTINCT PHASE EVOLUTION (Daily averages in MTD) April 2004 June 2004 Aug. 2004 Dec. 2004 Description Dec.2003 April 2004 June 2004 Aug. 2004 Calls for bids +173 -378 +408 -610 1-7 day-allowance uptakes 0 0 0 +1 Pawn of three-month Treasury bonds +86 -27 -63 -77 Net tapping transactions +2 +11 +1 -33 Open market transactions +10 +1 +7 0 Total +271 -393 +353 -719 Continuing on a downward trend, the average outstanding balance of three-month Treasury bonds pawns fell from 141 MTD in June to 78 MTD in August. Two purchase transactions for 38 MTD and 35 MTD respectively and repayment of 29 MTD were made in August, at the end of which the outstanding balance stood at 27.6 MTD. Coming in at 27.6 MTD in August, the outstanding balance of open market transactions increased by 7.1 MTD over the period under review, following a firm purchase transaction involving bonds equivalent to Treasury bonds in the amount of 6.2 MTD on 16 July 2004. Over the last four months of the year, faced with the excessive liquidity prevailing on the market, the Issuing Institution had to intervene to absorb liquidity, launching negative calls for bids and proceeding with fine-tuned tapping operations. Funds absorbed from calls for bids came to a minimum of 177 MTD and a maximum of 658 MTD, 119 MTD on average. The Central Bank also proceeded during this period to tap liquidity through early redemption of three-month Treasury bonds, corresponding to 77 MTD on 22 September 2004 and 35 MTD on 23 September 2004, the latter corresponding to full settlement of the outstanding balance of these transactions. Open market transactions show no variation whatsoever over the period under review, remaining at the 27.6 MTD level reached in August 2004, maintained until the end of the year. Central Bank intervention rates did not change in 2004. The main transactions for refinancing, namely calls for bids, continued to bear a 5% rate while 1 to 7 day 186 allowance uptakes bore a 6% rate, injection operations a 5.03% rate and tapping operations a 4.97% rate. The day-to-day interbank market rate fluctuated throughout the year between a minimum of 4.97% and a maximum of 5.03%, with the average rate remaining at 5%. The rate for pawn of three-month Treasury bonds, which remained stable at 5.09375% until 30 August, dropped slightly the following day to 5.08%, where it remained until the end of the year. C. TRENDS IN BANKING ACTIVITY AND AT OTHER FINANCIAL INSTITUTIONS There were 870 bank branches in Tunisia at the end of 2004, one per 11,400 inhabitants (compared to 857 and 11,500 a year earlier). There were 8 new branches in central eastern Tunisia, 3 in the northwest and 2 in the greater Tunis area. 55 new cash dispensers and automatic teller machines were installed, bringing the total to 615. 1. Deposit banks There were changes in the structure of the banking system in 2004, which now counts 17 deposit banks after three development banks turned into all-purpose banks. But to ensure continuity and homogeneity, the analysis of data at deposit banks exceptionally for this year will be made on the basis of the 14 pre-existing deposit banks1. a. Use of funds and resources 2004 was characterised by core resources at banks growing at a faster pace than outlays. Thus for the third straight year there was less recourse to financing from the Issuing Institution in any of its various forms. (i) Use of funds In amounting to 23,857 MTD at the end of 2004, use of funds at banks was up 8.5% over the 2003 figure, compared to 5.9% a year earlier. This faster pace reflects higher growth in financing of the economy, claims on the State and cash accounts. USE OF FUNDS AND RESOURCES (In MTD) 2 0 0 4 Description 2003 March June Sept. Dec. Financing of the economy 19,534 19,992 20,464 20,663 20,857 Claims on the State 1,655 1,704 1,753 1,967 2,076 Cash accounts 1,405 1,255 1,195 1,265 1,699 Other net headings -608 -676 -651 -701 -775 Total uses = Total resources 21,986 22,275 22,761 23,194 23,857 Monetary and quasi-monetary resources 16,383 16,400 17,022 17,786 18,297 Special resources 2,209 2,224 2,243 2,210 2,230 Provisions 1,444 1,466 1,560 1,586 1,570 Available capital stock equity 1,515 1,528 1,618 1,612 1,670 Refinancing 435 657 318 0 90
1 ATB, BFT, BNA, BS, BT, AB, BIAT, STB, UBCI, UIB, BH, CB (on shore branch), BTS and ABC (on shore branch). 187 Financing of the economy Representing 87.4% of uses at the end of 2004, financing to the economy was up steadily throughout the year, aside from a decrease in November. This amounted to 20,857 MTD at the end of the year, up 6.8% vs. 6.2% the year before, under the influence of the rebound in economic activity. This increase reflected the higher level of loans granted from ordinary resources, while loans from special resources were somewhat lower for the second year in a row. The securities portfolio grew more slowly throughout the year. Broken down by sector of activity, new loans went to services (57.9%), industry (33.5%) and agriculture/fishing (8.6%). The outstanding balance of loans from ordinary resources increased from 16,499 MTD at the end of 2003 to 18,013 MTD in 2004, up 9.2% vs. 8.4% a year earlier. FINANCING OF THE ECONOMY (In MTD) 2 0 0 4 Description 2003 March June Sept. Dec. Loan from ordinary resources 16,499 16,983 17,478 17,759 18,013 Loan from special resources 1,901 1,858 1,811 1,727 1,668 Securities portfolio 1,134 1,151 1,175 1,177 1,176 Total 19,534 19,992 20,464 20,663 20,857 The discount portfolio at banks grew at a faster pace in 2004: 8.5% vs. 7.9% in 2003. After increasing steadily between February and July by a total of 263 MTD, the pattern became irregular for the rest of the year. This included a significant 713 MTD increase in December, more than three quarters of the overall increase for the year, after the usual year-end window dressing operations. Non performing loans1 increased in 2004 by 14.5% to 4,620 MTD, compared to 14.6% a year earlier. Writing off, handing over of claims to collection companies and State assumption of banking claims on a number of public enterprises encountering difficulties involved just 142 MTD in 2004 vs. 513 MTD the year before. The outstanding balance of loans from special resources amounted to 1,668 MTD in 2004, down 12.3% vs. -10.8% the year before, in line with credit granted from external loan funding: -19.9% vs. -8.6%. Inversely, loans from State funds, which fell by 15.6% in 2003, rose by 5.7% in 2004, following the higher level of loans made by the special agricultural development fund (FOSDA) and the national fund to promote handicrafts and small trades (FONAPRA) in the amount of 11 MTD and 10 MTD respectively. Consequently the share of long-term loans from special resources was down, from 73.4% in 2003 to 68.7% in 2004, in favour of short and medium-term loans. The securities portfolio held by banks went up slightly in 2004, (3.7% vs. 9.6%). This was attributable to the volume of bank shareholdings (36 MTD in 2004 vs. 61 MTD in 2003).
1 Frozen, bad and contested claims, unpaid securities at first and second presentation and arrangement, rescheduling and consolidation. 188 Claims on the State State indebtedness to deposit banks came in at 2,076 MTD in 2004, 421 MTD more than the 2003 figure, compared to 106 MTD a year earlier. This increase was due solely to the higher outstanding balance of Treasury bonds held in portfolio, since banks were virtually the only holders of net subscriptions. The share of medium and long term Treasury bonds held by deposit banks in their portfolio increased by 6 percentage points, to 83% in 2004. This was due to the State’s tendency to give preference to longer terms at the expense of shorter durations. Cash accounts The balance of banks cash accounts was up by 20.9% in 2004 (compared to 5.7% the year before), amounting to 1,699 MTD due mainly to the higher figure (+327 MTD) in «foreign currency accounts». This figure would have been higher if it had not been for the 132 MTD drop in the bank ordinary current account, compared to +22 MTD a year earlier, in line with the lower level of refinancing from the Central Bank. CASH ACCOUNTS (In MTD) 2 0 0 4 Description 2003 March June Sept. Dec. Cash 160 163 154 172 161 Ordinary current accounts 181 106 84 65 49 Postal current account deposits 9 7 7 9 6 Foreign currency accounts 377 386 417 468 704 Minus : Other BCT financing 9 8 6 39 3 Bank correspondents (net amount) 660 543 456 505 771 Head offices, branches&agencies (net amount) 27 58 83 85 11 Total 1,405 1,255 1,195 1,265 1,699 (ii) Resources Reflecting the sustained increase in monetary resources, especially quasi-money, deposit bank core resources grew significantly in 2004 by 10.3% vs. 6.4% in 2003. At the same time, refinancing from the Central Bank was down, as was the case the year before. Monetary and quasi-monetary resources Monetary and quasi-monetary resources amounted to 18,297 MTD at the end of 2004, up 11.7% vs. 7.9% a year earlier. Monetary resources, which were up by just 5.6% in 2003, saw their growth rate more or less double in 2004 to 10.3%. After dropping in January by 237 MTD compared to the December 2003 figure, resident sight deposits continued on an upward trend for the rest of the year, aside from September and November, when there was a downturn. The increase involved in particular deposits by private parties, individual companies and the public sector. Non-resident sight deposits were up 17.2% over the previous year’s level to 1,179 MTD, after having increased by just 3.1% in 2003.
189 Quasi-monetary resources came in at 12,889 MTD in December 2004, up 12.3%, three percentage points over the previous year. This overall increase is made up of differing trends among the various components. Forward deposits and other resident financial products grew in 2004 at a faster pace (12.9% vs. 7.8% in 2003). This trend was in evidence throughout the year, reflecting the strong increase in both public enterprise deposits (notably structures of social security provisions) and those of the private sector (mainly by private individuals, individual enterprises and private companies). MONETARY AND QUASI-MONETARY RESOURCES (In MTD) 2 0 0 4 Description 2003 March June Sept. Dec. Monetary resources 4,903 4,866 5,174 5,144 5,408 Residents’ sight deposits 3,897 3,859 4,120 4,052 4,229 Non residents’ sight deposits 1,006 1,007 1,054 1,092 1,179 Quasi-monetary resources 11,480 11,534 11,848 12,642 12,889 of which : Residents’ forward deposits & other financial products 3,932 3,956 4,120 4,434 4,438 Residents’ savings accounts 4,484 4,514 4,568 4,635 4,774 Residents’ home savings accounts 870 897 912 929 954 Residents’ certificates of deposit 668 601 707 894 1,020 Bonds & borrowings with a duration of more than 1 year (residents) 353 352 336 335 321 Non residents’ forward deposits and other financial products 356 367 382 438 437 Total 16,383 16,400 17,022 17,786 18,297 Non-resident forward deposits and other financial products also continued to rise in 2004, by 22.8% vs. 10.9% in 2003. Savings accounts continued to grow at the same 7% rate as the year before, amounting to 5,733 MTD. In particular, resident home savings accounts and special savings accounts grew at practically the same pace as the year before : 9.7% and 6.4% respectively vs. 9.6% and 6.3% in 2003. At the same time, the outstanding balance of resident certificates of deposit increased in 2004 by 52.7%. After fluctuating over the first 10 months of the year, in an upward trend, (the period during which the maximum for the year - 1,037 MTD - was reached) it fell in November before increasing again in December to close for the year at 1,020 MTD. This increase involved subscriptions for all economic agents except individual enterprises, which fell by about 4 MTD. Resident bonds and borrowings with a duration over one year were down 9.1% in 2004, compared to -6.4% in 2003. This was attributable to reimbursement on due dates and no new issues. The 384 MTD in non-resident bonds and borrowings with a duration of over one year were up by 115 MTD (vs. 170 MTD in 2003), in line with National Agricultural Bank (BNA) issue of a 70 million syndicated loan denominated in euros in August 2004.
190 Special resources At a total of 2,230 MTD in 2004, special resources recorded a 1% increase vs. -9.3% the year before. This increase reflected the higher level of State funds (6.2% vs. -11.8%) in the wake of contributions to the 21-21 employment fund (+28 MTD) and to the rural development fund (+17 MTD). Available capital stock equity Capital stock equity at deposit banks was up by 155 MTD in 2004, the result of the high level of capital stock equity (+169 MTD) offset by that of fixed assets and worthless securities net of amortisation (+14 MTD). The increase in corporate capital at Citibank in November (+15 MTD) and at the International Banking Union (UIB) in December (+36 MTD) led to higher capital stock equity at deposit banks, from 1,987 MTD in 2003 to 2,156 MTD in 2004, up 8.5% vs. 2.4% a year earlier. The Arab International Bank of Tunisia (BIAT) issued a subordinated borrowing subscribed to partially in June by the International Financial Corporation (41.5 million euros) and in December by PROPARCO, an affiliate of the French Development Agency (8.3 million euros). The additional 29 MTD allotted to reserves from 2003 profit led to a total that increased from 740 MTD to 769 MTD. This figure would have been higher if it had not been for the increase in capital at UBCI generated by incorporation of reserves in July (+15 MTD). This increase was due mainly to higher special regime reserves (+19 MTD) and tax-free reserves for reinvestment (+7 MTD). The drop in the ratio of coverage of fixed assets and worthless securities net of amortisation by capital stock equity that began in 2000 continued in 2004 with the ratio falling down from 23.8% in 2003 to 22.5 % in 2004. COVERAGE OF FIXED ASSETS AND WORTHLESS SECURITIES NET OF AMORTISATION BY CAPITAL STOCK EQUITY (In MTD unless otherwise indicated) 2 0 0 4 Description 2003 March June Sept. Dec. (1) Capital stock equity 1,987 1,999 2,092 2,092 2,156 of which : Paid-up capital 952 953 953 969 1,020 Reserves 740 758 785 770 769 Issuing premiums 278 278 278 278 278 Subordinated borrowing 0 0 64 64 77 (2) Fixed assets & worthless securities net of amortisation 472 471 474 480 486 Buildings & furniture 863 878 889 906 923 Worthless securities 16 16 18 17 19 Amortisation -407 -423 -433 -443 -456 Ratio of fixed assets and worthless securities net of amortisation 2/1 (in %) 23.8 23.6 22.7 22.9 22.5 Available capital stock equity (1-2) 1,515 1,528 1,618 1,612 1,670 Provisions Provisions built up by deposit banks continued to grow in 2004, although more slowly than in 2003 (8.7% vs. 27.3%). This lower rate was due mainly to a drop in total provisions for non performing, bad and contested loans that were taxed (-20.1% 191 vs. +10.3%) and slower growth in tax-free loans (11.8% vs. 43.7%). Slower growth in provisions would have been more marked if it has not been for a rebound in provisions for depreciation of securities : 61.8% vs. -8.1%. Financing by the Central Bank of Tunisia Recourse by deposit banks to financing from the Issuing Institution amounted to 90 MTD in 2004, a drop of 345 MTD compared to its level the year before, in relation to the better cash position prevailing throughout the year, notably over the final quarter. Intervention by the Central Bank was irregular over the year. To meet the needs of banking, the Issuing Institution provided the liquidity required on the money market over the first eight months of the year, the period during which the maximum for the year was recorded : 918 MTD on 6 April 2004. Starting in September these needs decreased, to the point of excessive liquidity over the last quarter of the year, leading the Central Bank to absorb excess funds through negative calls for bids and periodic tapping operations. b. Management 1 In the wake of faster growth in loans granted in 2004 (an average +7.3%, compared to 4.4% in 2003), deposit banks enjoyed an 8.8 MTD (1.6%) increase in their interest margin, up from the 22.2 MTD (3.9%) drop recorded the year before. This was the result of an increase in interest and similar income (26.9 MTD or 2.2%) that was higher than that of accrued interest and similar charges (18.1 MTD or 2.7%). The level of interest and similar income would have been even higher if it had not been for the drop in the money market rate, which had an impact on loan yields, down from 6.8% in 2003 to 6.3% in 2004. Accrued interest and similar charges, despite the drop in treasury costs linked to the lower level of average indebtedness carried by deposit banks on the money market (down from 372.4 MTD in 2003 to 334.9 MTD in 2004) were up 18.1 MTD (2.7%). This was in line with higher costs on deposits, with 25.6 MTD from the loyalty premium that was added to the rate of remuneration for special savings accounts starting in January 2004. NET BANKING PROCEEDS In MTD Variation 2004/2003 Description 2003 2004 In MTD In % (+) Interest and similar income 1,230.8 1,257.7 26.9 2.2 (-) Accrued interest and similar charges 681.3 699.4 18.1 2.7 (=) Interest margin 549.5 558.3 8.8 1.6 (+) Net commissions on banking transactions 208.1 226.2 18.1 8.7 (+) Net gains on commercial securities portfolio and financial transactions 124.8 155.8 31.0 24.8 (+) Investment portfolio income 44.0 49.8 5.8 13.2 (=) Net banking proceeds 926.4 990.1 63.7 6.9
1 Provisional figures for 2004. 192 Thanks to the higher level of net commissions on banking transactions (+18.1 MTD or 8.7%) and the sharp rise in net profits on the commercial securities portfolio and financial transactions (31 MTD or 24.8%) - linked to the significant increase in the average outstanding balance of Treasury bonds compared to 2003 - deposit banks posted net banking proceeds of 990.1 MTD, an increase of 63.7 MTD or 6.9%. Operating costs amounted to 566.1 MTD, an increase of 41.1 MTD or 7.8% compared to 21.6 MTD (4.3%) in 2003. This sizeable increase is attributable to the higher level of staff costs (up 35.3 MTD or 9.2% of which 19.2 MTD or 54.7% were indemnities paid by a number of banks for voluntary departures on early retirement in the framework of reorganising the staff. Despite a sizeable increase in operating costs, the operating ratio virtually stabilised in 2004 (57.2%). NET FISCAL YEAR RESULTS In MTD Variation 2004/2003 Description 2003 20041 In MTD In % Net banking proceeds 926.4 990.1 63.7 6.9 (+) Other operating proceeds 15.3 17.2 1.9 12.4 (- ) Operating costs 525.0 566.1 41.1 7.8 * Staff cost 383.5 418.8 35.3 9.2 * General operating costs 141.5 147.3 5.8 4.1 (-) Allocation for amortisation 53.0 54.5 1.5 2.8 (-) Allocation for provisions and result of correction on claims assets (off balance sheet and liabilities) 176.4 225.9 49.5 28.1 (-) Allocation for provisions and result of correction of assets on investment portfolio 3.7 17.8 14.1 381.1 (=) Operating result 183.6 143.0 -40.6 -22.1 (+) Balance in gain (+) loss (-) from other current items 3.0 -3.1 -6.1 -203.3 (-) Tax on profit 36.1 30.4 -5.7 -15.8 (=) Net fiscal year income 150.5 109.5 -41.0 -27.2 (=) Result after accounting changes 150.5 109.5 -41.0 -27.2 Encouraged by the increase in their net banking proceeds and with a view to improving coverage of risk, deposit banks stepped up their efforts to build up provisions, with allocations in 2004 amounting to 243.7 MTD or 24.6% of net banking proceeds vs. 180.1 MTD or 19.4% in 2003. The major effort to build up provisions and higher staff costs had a negative impact on operating income at deposit banks, down by 40.6 MTD or 22.1% to 143 MTD. Thus net income for deposit banks in 2004 was down in the same proportions : -41MTD to 109.5 MTD. The drop in income for deposit banks had a negative effect on profitability for the third straight year. Thus return on equity (ROE) fell from 7.7% in 2003 to 5.1% in 2004 and return on assets (ROA) was down from 0.6% to 0.4%.
1 Provisional figures. 193 PROFITABILITY INDICATORS (In %) Description 2002 2003 2004 Return on equity 8.0 7.7 5.1 Return on assets 0.7 0.6 0.4 Risk coverage ratio 9.8 9.3 11.8 On another front, there was an effort in 2004 to strengthen financial bases in order to remain in line with prudential standards, by means of sizeable increases in capital and mobilisation of resources in the form of subordinated loans. This effort yielded a 269.3 MTD (13.9%) increase in gross basic capital stock equity at deposit banks, amounting to 2,212.5 MTD. This meant a sizeable increase in the level of the average ratio of risk coverage, up from 9.3% at the end of 2003 to 11.8% at the end of 2004. As for the quality of its portfolio, risk was held down in 2004 by reducing the share of non performing loans in total commitments by 0.4 of a percentage point to 23.6% at the end of 2004, compared to 24% at the end of 2003. Net of provisions and reserved bank charges, the share of non performing loans amounted to 14.4%.
INDICATORS OF BANKS’ PORTFOLIO QUALITY (In %) Descroption 2002 2003 2004 Share of non performing loans in total commitments 20.9 24.0 23.6 Share of non performing loans net of provisions and reserved charges in total commitments 12.9 15.2 14.4 Rate of coverage of non performing loans by provisions and reserved charges 43.9 43.1 45.2 The major effort on the part of deposit banks to build up provisions and to put aside bank charges led to a higher rate of coverage of non performing loans by provisions and reserved bank charges. This rate rose by 2.1 percentage points to 45.2% at the end of 2004. 2. Venture capital banks1 In the framework of venture capital bank restructuring, four banks received approval to act as all-purpose banks in the framework of law n°2001-65 governing lending institutions and the fifth bank has moved ahead significantly in its programme targeting this same end, having now completed financial restructuring. a. Use of funds and resources Venture capital banks enjoyed faster growth, with 47 MTD (36.2%) more in loan approvals after two straight years of slower growth, yielding a total of 177 MTD at the end of 2004. This increase involved medium and long term loans (+28.9%), financing in the form of leasing (+21.4%) and shareholdings. The tourism and real estate sector accounted for the largest share of approvals (46.1%), followed by the industrial sector (27.4%) and the other services (24.1%) vs. a practically equal split of approvals in 2003 between industry, tourism and real estate.
1 Provisional figures for 2004. 194 But commitments were down (although at a slower pace than in 2003 : -14 MTD or -11.6% in 2004 vs. -41 MTD or -25.2% in 2003), falling to 107 MTD at the end of 2004. This was mainly because of the drop in medium and long term loan commitments (-11.1%) and financing in the form of leasing (-18.8%). Disbursements were also down slightly, by 2 MTD (-1.7%) to 115 MTD at the end of 2004, attributable mainly to the decrease in disbursements for medium and long term loans (-3%) the effect of which was partially neutralised by the increase of financing in the form of leasing (+2 MTD). Breakdown of these disbursements by sector shows that tourism/real estate continued to account for the largest share (44.5%), despite an 8.2 percentage point increase in the share of the industrial sector to 34.2%. APPROVALS, COMMITMENTS AND DISBURSEMENTS OF VENTURE CAPITAL BANKS (In MTD unless otherwise indicated) Variation Description 2003 2004 2003/2002 2004/2003 In MTD In % In MTD In % Approvals 130 177 -47 -26.6 47 36.2 Loans 114 147 -29 -20.3 33 28.9 Shareholding 2 13 -10 -83.3 11 - Leasing 14 17 -8 -36.4 3 21.4 Commitments 121 107 -41 -25.3 -14 -11.6 Loans 99 88 -34 -25.6 -11 -11.1 Shareholding 6 6 -7 -53.8 0 0.0 Leasing 16 13 - - -3 -18.8 Disbursements 117 115 -44 -27.3 -2 -1.7 Loans 101 98 -30 -22.9 -3 -3.0 Shareholding 5 4 -10 -66.6 -1 -20.0 Leasing 11 13 -4 -26.7 2 18.2 Financing of the economy by venture capital banks was down 32 MTD (3.6%) from the 2003 yearend figure, coming to 869 MTD at the end of 2004. This was attributable mainly to implementation by the fifth venture capital bank of a programme to restructure finances by selling off part of its non performing loans to its affiliated collection company, as was the case for the four other banks that completed their programmes in 2002 and 2003. This drop involved industry (-14.1%), agriculture (-13.1%) and services (-5.7%) compared to the slight increase in financing made available to tourism and real estate (+3.1%). The securities portfolio, made up mainly of shareholdings, dropped to 169 MTD at the end of 2004, a decrease of 5 MTD or 2.9% from the figure at the end of 2003. This was due to sale by the fifth venture capital bank of a portion of its non performing shares to its affiliated closed-end investment company as part of its financial restructuring. Claims on the State (which included mainly assumption of a number of claims on public enterprises and interest breaks for tourist units) increased by 20% or 16 MTD to 96 MTD at the end of 2004, following new subscriptions to Treasury bonds worth 14 MTD.
195 USES AND RESOURCES (In MTD) 2 0 0 4 Description 2003 March June Sept. Dec. Financing of the economy 901 925 925 933 869 Loans to the economy 727 751 751 758 700 Securities portfolio 174 174 174 175 169 Claims on the State 80 83 92 92 96 Total uses = Total resources 981 1,008 1,017 1,025 965 Capital stock equity 510 530 531 536 505 of Which : reserves 111 111 111 111 111 Provisions 60 67 123 116 44 Domestic borrowings 143 197 188 166 173 Bonds and borrowings on more than one year 53 53 72 72 48 Net borrowings from banks 90 144 116 94 125 Special resources 122 119 122 125 130 of which : External borrowings fund 122 119 122 125 130 Other net resources 146 95 53 82 113 The outstanding balance of domestic borrowings amounted to 173 MTD at the end of 2004, an increase of 30 MTD or 21% compared to the previous year’s figure. This increase was due notably to net bank borrowing, up 35 MTD to 125 MTD at the end of 2004. However there was a slight (5 MTD or 9.4%) drop in bonds and borrowings with a duration of more than one year, for a 2004 year-end figure of 48 MTD. External loans were up 8 MTD or 6.6%, to 130 MTD at the end of 2004, the result of drawings made by a venture capital bank on an ADB line of credit, lessened by reimbursements made by other venture capital banks. Capital stock equity at venture capital banks fell by 5 MTD or 1%, down to 505 MTD at the end of 2004, influenced in particular by the 30 MTD reduction in capital at one venture capital bank to absorb losses resulting from financial restructuring activities and a 20 MTD increase in capital at another venture capital bank. COVERAGE OF FIXED ASSETS AND WORTHLESS SECURITIES NET OF AMORTISATION BY CAPITAL STOCK EQUITY (In MTD) 2 0 0 4 Description 2003 March June Sept. Dec. 1- Capital stock equity 510 530 531 536 505 of which : Paid-up capital 399 419 419 419 389 Reserves 111 111 111 111 111 2- Fixed assets and worthless securities net of amortisation 19 19 19 19 19 of which : Buildings and furniture 38 38 39 39 39 Amortisation -19 -19 -20 -20 -20 Available capital stock equity (1-2) 491 511 512 517 486 b. Management Activity at venture capital banks generated an interest margin of 37.5 MTD in 2004, up 4.3 MTD or 13%. This was influenced by both the 3.5 MTD (6.4%) increase in interest and similar income and the 0.8 MTD (3.7%) drop in accrued interest and similar charges. The increase in the interest margin combined with revenue from the 196 investment portfolio that was 2 MTD higher (mainly from profits paid out by collection companies affiliated to these banks) generated an increase in net banking proceeds of 5.3 MTD or 12.7% compared to 2003, coming in at 47 MTD as of the end of 2004. NET BANKING PROCEEDS In MTD Variation 2004/2003 Description 2003 2004 In MTD In % (+) Interest and similar income 54.9 58.4 3.5 6.4 (-) Accrued interest and similar charges 21.7 20.9 -0.8 -3.7 (=) Interest margin 33.2 37.5 4.3 13.0 (+) Net commissions on banking transactions 2.8 1.2 -1.6 -57.1 (+) Net gains/losses on commercial securities portfolio and financial transactions 0.3 0.9 0.6 200.0 (+) Investment portfolio income 5.4 7.4 2.0 37.0 (=) Net banking proceeds 41.7 47.0 5.3 12.7 The operating ratio was up 3.3 percentage points to 41.5%, following net banking proceeds that grew at a faster pace than operating costs. The latter amounted to 19.5 MTD at the end of 2004, 70.8% of which were for staff costs. Venture capital banks posted earnings of 17.8 MTD at yearend 2004, after losses of 37.1 MTD a year earlier, given the lower level of net effort to build up provisions and the result of correction of assets compared to 2003 : 8.5 MTD in 2004 vs. 59.5 MTD in 2003.
NET FISCAL YEAR RESULT In MTD Variation 2004/2003 Description 2003 2004 In MTD In % (=) Net banking proceeds 41.7 47.0 5.3 12.7 (-) Allocation for provisions and result of correction of assets on claims off balance sheet & liabilities 62.7 9.2 -53.5 -85.3 (-) Allocation for provisions and result of correction of assets on investment portfolio -3.2 -0.7 2.5 78.1 (+) Other operating proceeds 1.1 1.0 -0.1 -9.1 (-) Operating costs 18.7 19.5 0.8 4.3 * Staff costs 13.1 13.8 0.7 5.3 * General operating costs 5.6 5.7 0.1 1.8 (-) Allocation for amortisation & provisions on fixed assets 1.6 1.6 0.0 0.0 (=) Operating result -37.0 18.4 55.4 149.7 (+) Balance in gain/loss from other current items 0.4 0.2 -0.2 -50.0 (-) Tax on profits 0.5 0.8 0.3 60.0 (=) Result of current activities -37.1 17.8 54.9 148.0 (=) Net fiscal year results -37.1 17.8 54.9 148.0 The 20.7 MTD (4.4%) increase in net capital stock equity at venture capital banks meant a total of 492.6 MTD as of the end of 2004. This yielded a risk coverage ratio of 0.9 of a percentage point, reaching 55.2% at the end of 2004, a level well above the regulatory ratio of 8%. The portfolio held by venture capital banks improved in quality, as can be seen in the share of non performing loans in total commitments. This fell from 29.6% at the end of 2003 to 20.5% at the end of 2004, following completion by the fifth venture capital
197 bank of its financial restructuring programme, as was the case for the other four banks that completed this exercise in 2002 and 2003. (In %) Description 2002 2003 2004 Ratio of risk coverage 54.6 54.3 55.2 Share of non performing loans in total commitments 30.5 29.6 20.5 Share of net non performing loans in total commitments 11.8 17.9 15.7 Rate of coverage of non performing loans 69.5 48.3 28.3 3. Leasing companies1 a. Use of funds and resources Leasing companies made more money available for financing of the economy in 2004, posting a much brisker pace after a drop in 2002 and 2003. This is evident in the penetration rate of leasing in private GFCF, which reached 11.3% in 2004 vs. 10.1% in 2003. This was in line with the increase in outlays by the sector at the rate of 16.5% to reach a level comparable to 2001 : 497.7 MTD vs. 427.2 MTD in 2003. This increase in disbursement is attributable to renewed demand especially for moveable goods, in line with the cycle governing depreciation of these goods and recovery in investment linked to favourable economic conditions. But there was no increase for real estate leasing, with a share down from 15.9% in 2003 to 11.5% in 2004. (In MTD unless otherwise indicated) Description 2002 2003 2004 Disbursements 462.3 427.2 497.7 Of which : real estates 72.1 68.1 57.1 Private GFCF 4,184 4,217 4,387 Rate of penetration (in %) 11.0 10.1 11.3 The outstanding balance of leasing was up 4.8% in 2004 to 1,138.1 MTD vs. 1,085.6 MTD in 2003, influenced by the higher level of disbursements. This level of activity was financed mainly by borrowed resources amounting to 847.3 MTD, including 40.2% in bond resources following greater recourse by companies in the sector to the bond market. These companies absorbed 63% of total issues in 2004 and they also turned more to external resources, especially from the European Investment Bank and the African Development Bank, up eight percentage points to 23.6%. This absorbed a portion of short term bank resources, meaning better mastery of transformation risks. (In MTD unless otherwise indicated) Description 2002 2003 2004 Outstanding balance of leasing 1,055.0 1,085.6 1,138.1 Capital stock equity 161.8 162.4 156.5 Borrowed resources 802.5 833.2 847.3 Of which : External resources (share in %) 7.5 15.6 23.6 Bank resources (share in %) 33.7 27.6 24.9 Bond resources (share in %) 45.8 42.1 40.2
1 Provisional figures for 2004. 198 b. Management Along with renewed activity in the sector, operating indicators were up, as seen in the way leasing yields evolved upward by 0.2 of a percentage point to 9.8%, corresponding to a gross margin of 107.2 MTD. In effect, the increase in disbursements neutralised the combined effects of an aging portfolio for the sector and the drop in exit conditions linked to competitiveness. Financial costs stagnated at the same level as end 2003 : 59.9 MTD, despite the increase in the sector’s borrowed resources in the wake of virtual stagnation in the cost of these resources at the same level as 2003, for an average of 7.2% in 2004, with an interest margin that increased by 6.1 MTD (14.7%) to 47.7 MTD or 4.4% of the average outstanding balance of loans. NET PROCEEDS In MTD Variation 2004/2003 Description 2003 2004 In MTD In % (+) Proceeds on leasing transactions 482.7 528.7 46.0 9.5 (-) Allocation for amortisation of leased fixed assets 381.1 421.5 40.4 10.6 (=) Gross margin 101.6 107.2 5.6 5.5 (+) Factoring commissions 0.1 0.4 0.3 300 (-) Net financial charges 60.1 59.9 -0.2 -0.3 (=) Interest margin 41.6 47.7 6.1 14.7 (+) Investment proceeds 2.6 2.3 -0.3 -11.5 (+) Other operating proceeds 1.2 1.6 0.4 33.3 (=) Net proceeds 45.4 51.6 6.2 13.7 Consequently, the sector’s net margin amounted to 51.6 MTD, 18.3 MTD or 35.5% of which served to cover operating costs. Staff costs account for 55.7% of this total, having increased by 4.1% in 2004 as new posts were created. NET FISCAL YEAR RESULT In MTD Variation 2004/2003 Description 2003 2004 In MTD In % (=) Net proceeds 45.4 51.6 6.2 13.7 (-) Net allocation for provisions 15.5 27.8 12.3 79.4 (-) Operating costs 17.3 18.3 1.0 5.8 * Staff costs 9.8 10.2 0.4 4.1 * General operating charges 7.5 8.1 0.6 8.0 (-) Allocation for amortisation 2.2 2.4 0.2 9.1 (=) Operating result 10.4 3.1 -7.3 -70.2 (+) Balance in gain/loss from other ordinary items 0.3 0 -0.3 -100.0 (-) Tax on profits 2.6 3.0 0.4 15.4 (=) Net fiscal year result 8.1 0.1 -8.0 -98.8 Although additional risks have been more or less kept down compared to the last two years, leasing companies in 2004 stepped up their net efforts to build up provisions, which ate up 53.9% of the net margin : 27.8 MTD, of which 39.9% or 11.1 MTD to one company undergoing financial restructuring. This effort had amounted to 15.5 MTD or 34.1% of the net margin in 2003. This effort to build up provisions had a heavy impact on results for the year, down from 8.1 MTD in 2003 to just 0.1 MTD in 2004, influenced by losses at two companies amounting to 10.9 MTD and leading to a drop in profitability indicators for the sector. 199 But if losses at one of the two companies undergoing financial restructuring are excluded, results in the sector would have increased by 28.4% compared to the 2003 figure, amounting to 10.4 MTD. (In %) 2004 Description 2002 2003 Loss inclusive Loss exclusive Leasing yield 10.2 9.6 9.8 10.2 ROA 0.9 0.7 0.0 1.1 ROE 6.4 5.2 0.1 7.4 c. Financial situation On the prudential side, the average solvency ratio stood at 14.9%, keeping in mind that a number of companies increased their capital in 2004 in order to have a higher level of capital stock equity. (In %) Description 2002 2003 2004 Share of non performing loans 24.1 25.2 23.7 Share of non performing loans net of provisions and reserved margins 17.1 16.6 13.3 Rate of coverage of non performing loans 34.7 40.6 50.5 Solvency ratio 16.4 16.0 14.9 Portfolio quality increased somewhat, with stagnation of unpaid bills at the same 130.8 MTD level as in 2003. The share of non performing loans dropped by 1.5 percentage point, down to 23.7% and their coverage by provisions and reserve margins increased a considerable 9.9 percentage points to 50.5%, a satisfactory level given that companies in the sector are owners of financed goods, a large portion of which is made up of rolling stock, for which there is an active secondary market. 4. Offshore banks 1 a. Use of funds and resources Activity at offshore banks again concentrated on cash transactions, amounting to US$ 827.6 million or 47.3% of their total assets. Investments at banks increased at the same pace as the year before : 4.9%, to reach US$ 768.6 million, of which $233.6 million or 30.4% were handled on the Tunis Stock Exchange (compared to 37.2% at the end of 2003). US$ 445.8 million (60.4% of their total bank resources in 2004) were collected from Tunis Stock exchange by the offshore sector more than half of which were traded on the Tunis Exchange. Interventions by these banks in the form of loans recorded an increase of US$ 58.2 million or 10.6%, up to $ 608.9 million from loans granted to non residents and residents. It should be noted that the latter account for almost two thirds of all offshore bank loans. The outstanding balance of the securities portfolio was up US$ 8 million (4.9%) to $172.1 million of which $100.5 million (58.4%) for residents in the form of holdings in the capital of resident companies (US$6.7 million) and $93.8 million in subscriptions to
1 Provisional figures for 2004. 200 bonds issued by the Central Bank of Tunisia on behalf of the State on US, Japanese and European markets. OFFSHORE BANK USE OF FUNDS In million USD Variation 2004/2003 Description 2003 2004 In M$US In % Cash transactions 772.2 827.6 55.4 7.2 Cash holdings and ordinary accounts 39.4 59.0 19.6 49.7 Investment at Banks 732.8 768.6 35.8 4.9 Banks set up in Tunisia 272.4 233.6 -38.8 -14.2 Banks set up abroad 460.4 535.0 74.6 16.2 Loans 550.7 608.9 58.2 10.6 To residents 372.0 393.3 21.3 5.7 To non residents 178.7 215.6 36.9 20.6 Securities portfolio 164.1 172.1 8.0 4.9 Other uses 95.1 142.4 47.3 49.7 Total 1,582.1 1,751.0 168.9 10.7 Financing of the Tunisian economy by offshore banks (loans and shareholdings) grew at a slower pace than the year before (US$4.6 million or 0.9% at the end of 2004 vs. $25.7 million or 5.5% at the end of 2003), amounting to US$493.8 million or 63.2% of total financing provided by this sector as at the end of 2004. It should be noted that offshore banks with Tunisian shareholders provide 76.8% of the financing granted by offshore banks to the Tunisian economy compared to 70.8% at the end of 2003.
Offshore banks with Other offshore Tunisian Total offshore banks banks Description shareholding Share Share Share In M$US In M$US In M$US (in %) (in %) (in %) Loans + shareholdings 511,9 65,5 269,1 34,5 781,0 100,0 Residents 379,4 76,8 114,4 23,2 493,8 63,2 Non Residents 132,5 46,1 154,7 53,9 287,2 36,8 Along with the higher level of uses, resources went up to US$1751 million at the end of 2004, of which $738.5 million or 42.2% were in the form of bank resources. Client deposits were up slightly over the previous year’s figure (US$13.7 million or 2.7% vs. $69.1 million or 15.7%), influenced by the drop in non resident deposits (US $ -16 million or -3.8%) and the increase in resident deposits to about US $115.6 million or 22.1% of total deposits vs. 16.9% at the end of 2003. 90.7% of these deposits were made by two non resident banks. OFFSHORE BANK RESOURCES In million USD Variation 2004/2003 Description 2003 2004 In M$US In % Investment at Banks 577.0 738.5 161.5 28.0 Banks set up in Tunisia 374.7 445.8 71.1 19.0 Banks set up abroad 202.3 292.7 90.4 44.7 Clients’ deposits 509.7 523.4 13.7 2.7 Resident 85.9 115.6 29.7 34.6 Non resident 423.8 407.8 -16.0 -3.8 Capital stock equity 210.0 232.0 22.0 10.5 Provisions 96.6 92.4 -4.2 -4.3 Other resources 188.8 164.7 -24.1 -12.8 Total 1,582.1 1,751.0 168.9 10.7
201 b. Management In line with evolving activity, the interest margin in 2004 posted an increase of US$ 2.4 million after dropping over the past two years. This was the result of accrued interest and similar costs that were US$ 3.2 million lower, due mainly to one offshore bank losses on interest rate swap transactions that were lower than the year before. NET BANKING PROCEEDS In million USD Variation 2004/2003 Description 2003 2004 In M$US In % (+) Interest and similar income 39.7 38.9 -0.8 -2.0 (-) Accrued interest and similar charges 25.2 22.0 -3.2 -12.7 (=) Interest margin 14.5 16.9 2.4 16.6 (+) Net commissions on banking operations 12.6 13.0 0.4 3.2 (+) Net gains on commercial securities portfolio and financial transactions 13.2 12.6 -0.6 -4.5 (+) Investment portfolio income 11.3 11.2 -0.1 -0.9 (=) Net banking proceeds 51.6 53.7 2.1 4.0 Net banking proceeds for offshore banks grew by $2.1 million (4%) to $53.7 million, influenced by the lower level of net gains on the commercial securities portfolio and financial transactions and of investment portfolio income that neutralised the increase in net commissions on banking transactions. Operating costs remained virtually the same as in 2003, at US$ 20 million, absorbing 37.2% of net banking proceeds vs. 38.4% a year earlier. It should be noted that net commissions easily covered staff costs. NET FISCAL YEAR RESULT In million USD Variation 2004/2003 Description 2003 2004 In M$US In % (=) Net banking proceeds 51.6 53.7 2.1 4.0 (-) Allocation for provisions and result of correction of assets on claims off-balance sheet and liabilities 25.9 -8.2 -34.1 -131.7 (-)Allocation for provisions and result of correction of assets on investment portfolio 0.0 -0.1 -0.1 - (+) Other operating proceeds 0.0 0.0 0.0 - (-) Operating charges 19.8 20.0 0.2 1.0 * Staff costs 11.5 11.5 0.0 0.0 * General operating costs 8.3 8.5 0.2 2.4 (-)Allocation for amortisation 2.2 2.1 -0.1 -4.5 (=) Operating result 3.7 39.9 36.2 - (+) Balance in gain/loss from other current items -0.5 0.0 0.5 100.0 (-) Tax on profits 0.2 0.0 -0.2 -100.0 (=) Result of current activities 3.0 39.9 36.9 - (+) Balance in gain/loss from extraordinary items 0.0 0.0 0.0 - (=) Net fiscal year result 3.0 39.9 36.9 - Offshore banks generated net profits of US$ 39.9 million vs. $3 million in 2003, given the recovery in provisions built up by an offshore bank in line with the quality of its portfolio and building up by another offshore bank of net allotments to provisions at a lower level than in 2003. Consequently, profitability indicators improved. 202 (In %) Description 2002 2003 2004 ROA 1.0 0.2 2.6 ROE1 6.2 6.6 7.9 Offshore banks kept in line with prudential rules, especially the solvency ratio that came in on average at 34.2% at the end of 2004, well above the regulatory ratio of 8%. The quality of assets improved, as seen in the share of non performing loans in total commitments, down from 19.8% at the end of 2003 to 16.8% at the end of 2004, with their rate of coverage by provisions and reserved bank charges coming in at 75.8% at the end of 2004 compared to 73.5% at the end of 2003. (In %) Description 2002 2003 2004 Risk coverage ratio 45.7 44.9 34.2 Share of gross non performing loans in total commitments 20.1 19.8 16.8 Share of non performing loans net of provisions and reserved charges in total commitments 8.3 6.5 4.7 Rate of coverage of non performing loans by provisions and reserved charges 63.8 73.5 75.8 5. Factoring companies and merchant banks a. Factoring companies2 The factoring sector increased its contribution to the financing and managing of commercial claims at a faster pace than in 2003, as seen in the volume of purchased invoices for a total of 274 MTD in 2004, up 17.5% vs. 8.4% a year earlier. This was due to the 25.2% increase in domestic activity, while international activity dropped by 25.1%. Activity in the sector was extended in 2004 to non-recourse factoring with an outstanding balance of 4.9 MTD at the end of 2004, with risks covered by the companies in the sector through subscription to a loan insurance policy at an insurance company. Consequently, the outstanding balance of financing increased by 15.6% (vs. 6.6% in 2003) to 71.7 MTD at the end of 2004, of which 95.1% is domestic factoring. Intervention by the sector involved 344 agents for 17,617 buyers in 2004 vs. 283 agents for 15,471 buyers a year earlier. (In MTD unless otherwise indicated) Variation Description 2003 2004 In MTD In % Volume of purchased invoices 233.2 274.0 40.8 17.5 Outstanding balance of financing 62.0 71.7 9.7 15.6 Capital stock equity 14.8 16.7 1.9 12.8 Borrowed resources 58.2 60.8 2.6 4.5 Of which : Short term borrowings from banks (in%) 52.1 39.3 -12.8 -24.6 Commercial paper (in %) 26.4 44.5 18.1 68.6 Bond resources (in %) 9.6 6.9 -2.7 -28.1
1 Offshore banks holding legal and financial autonomy. 2 Provisional figures for 2004. 203 This activity was financed largely by borrowed resources, the outstanding balance of which amounted to 60.8 MTD as the end of 2004, representing 3.6 times capital stock equity in the sector. 83.8% of this total was made up of short term resources in the form of commercial paper and bank borrowings. In line with progress in the sector, income was up by 1.6 MTD over 2003 for a total of 9.8 MTD. 65% (6.4 MTD) of this latter figure is from financing commissions, generating a loan yield of 9.6%, up 0.5 of a percentage point over 2003 despite the drop in conditions of exit from the sector, influenced by rapid rotation in financing. The interest margin was up by 0.7 MTD or 26.9% to 3.3 MTD, in line with financing commissions that grew faster than financing costs. Growth in the volume of purchased invoices brought about a 22.2% increase in factoring commissions, for a total of 3.3 MTD, an average commission of 1.2%.
Description In M T D Variation 2003 2004 In MTD In % Financing commissions 5.4 6.4 1.0 18.5 Financial charges 2.8 3.1 0.3 10.7 Interest margin 2.6 3.3 0.7 26.9 Factoring commissions 2.7 3.3 0.6 22.2 Other operating proceeds 0.1 0.1 - - Net Factoring proceeds 5.4 6.7 1.3 24.1 Net proceeds from factoring amounted to 6.7 MTD, an increase of 1.3 MTD or 24.1%, due in equal parts to trends in the interest margin and commissions from factoring. Operating costs absorbed 35.8% of these net proceeds : 2.4 MTD, of which 54.2% or 1.3 MTD were for staff costs, up 18.2% from 2003, with a supervisory rate of 59.3%. Despite the higher quality of its portfolio (thanks to greater success in keeping down additional risk), the factoring sector built up provisions at a level comparable to 2003 : 1 MTD.
In M T D Variation Description 2003 2004 In MTD In % (=) Net factoring proceeds 5.4 6.7 1.3 24.1 (-) Operating charges 2.0 2.4 0.4 20.0 * Staff costs 1.1 1.3 0.2 18.2 * General operating costs 0.9 1.1 0.2 22.2 (-) Allocation for amortisation 0.3 0.3 - - (-) Allocation for provisions net of refunds 1.1 1.0 -0.1 -9.1 (=) Operating results 2.0 3.0 1.0 50.0 (-) Taxes 0.7 0.7 - - (=) Net results 1.3 2.3 1.0 76.9 The factoring sector generated profits of 2.3 MTD, 76.9% more than in 2003, which contributed to higher profitability indicators.
204 (In %) Indicators 2003 2004 Return on loans 9.1 9.6 ROA 1.9 3.0 ROE 10.0 16.2 The sector posts satisfactory financial conditions, with a 2.7 percentage point drop in the share of non performing loans to 6.9% and coverage of these claims by provisions that was up 23.2 percentage points to 68%. This does not include building up of provisions of a general character, which represented almost two fifths of the overall outstanding balance of provisions. This helped the sector to keep in line with prudential ratios, especially the solvency ratio (22.2%), which in any case was well above the regulatory minimum. (In %) Indicators 2003 2004 Share of non performing loans in total commitments 9.6 6.9 Share of non performing loans net of provisions and observed margins 5.5 2.3 Rate of coverage of non performing loans 44.8 68.0 Solvency ratio 22.1 22.2 b. Merchant banks Activity at merchant banks in 2004 involved mainly work in the areas of privatisation and consulting for public enterprises (notably the Bank of the South, SNDP and SOTETEL) and assistance to the public administration in organising colloquiums in the field of finance. This sort of business generated overall proceeds that were up 9.1% compared to their level in 2003, to 1.2 MTD, taking into account income from investment of cash surpluses available within the sector. Despite the 10% increase in operating costs (notably general operating costs that were up 20% to 0.6 MTD, in the wake of the sector’s move to subcontracting for certain initiatives and recourse to consortium arrangements for others), merchant banks managed to post profits of 0.1 MTD in 2004.
(In MTD unless otherwise indicated) Variation Description 2003 2004 In MTD In % Total operating proceeds 1.1 1.2 0.1 9.1 Net banking proceeds 1.1 1.2 0.1 9.1 Operating charges 1.0 1.1 0.1 10.0 * Wage bill 0.5 0.5 0.0 - * General operating costs 0.5 0.6 0.1 20.0 Allocations for provisions and amortisation 0.2 0.0 -0.2 -100.0 Net results -0.1 0.1 0.2 200.0
205 III. MONEY AGGREGATES AND THEIR COUNTERPARTS
The financial system in 2004 was marked by a sustained increase in net foreign assets, along with a sharp rise in State indebtedness and a moderate increase in financing of the economy. Consequently all resources, notably those of a monetary or quasi-monetary nature, grew at a faster pace.
FINANCIAL SYSTEM1 RESOURCES AND THEIR COUNTERPARTS MTD Variation (%) Description 2002 2003 2004 2003/2002 2004/2003 M4 AGGREGATE 18,757 19,814 21,694 5.6 9.5 Money supply, broad sense (M3) 18,302 19,457 21,466 6.3 10.3 Money supply, strict sense (M2) 16,682 17,859 19,846 7.1 11.1 Money M1 6,619 6,992 7,686 5.6 9.9 Fiduciary money 2,518 2,664 2,968 5.8 11.4 Bank money 4,101 4,328 4,718 5.5 9.0 Quasi-money 10,063 10,867 12,160 8.0 11.9 M3-M2 1,620 1,598 1,620 -1.4 1.4 M4-M3 455 357 228 -21.5 -36.1 OTHER RESOURCES 7,497 7,665 8,341 2.2 8.8 TOTAL RESOURCES=TOTAL COUNTERPARTS 26,254 27,479 30,035 4.7 9.3 NET FOREIGN ASSETS * 1,909 2,279 3,127 370 848 DOMESTIC LOANS 24,345 25,200 26,908 3.5 6.8 Net claims on the State* 3,391 3,289 3,825 -102 536 Financing of the economy 20,954 21,911 23,083 4.6 5.3 Loans to the economy 19,770 20,696 21,848 4.7 5.6 Securities portfolio 1,184 1,215 1,235 2.6 1.6 * For these aggregates, variations are expressed in MTD. A. THE M3 AGGREGATE In amounting to 21,466 MTD at the end of 2004, the M3 aggregate posted growth of 10.3% vs. 6.3% in 2003 and an expected 8.7%. But in terms of averages, this aggregate grew at a lower 8.6% rate in 2004 compared to 7.2% in 2003 for nominal economic growth rates of 9.1% and 7.6% respectively. Consequently the liquidity rate of the economy, measured by the ratio (M3/GDP), regressed from 58.9% in 2003 to 58.6% in 2004. On the other hand, the inflation rate was somewhat higher: 3.6% in 2004 vs. 2.7% in 2003.
1 As defined in this context, the financial system is limited to resident financial institutions represented by the Central Bank of Tunisia, the deposit banks, the postal cheques centre (CCP), the joint-venture development banks, leasing companies and the Postal Savings Centre (CEP). 206 TRENDS IN THE LIQUIDITY RATE OF THE ECONOMY MTD In % YEARS M3 (annual GDP (in current Liquidity rate Inflation rate* average) prices)* (M3/GDP) 2000 14,262 26,685 53.4 2.9 2001 16,323 28,757 56.8 2.0 2002 17,697 29,933 59.1 2.7 2003 18,963 32,212 58.9 2.7 2004 20,596 35,143 58.6 3.6 * Source : Ministry of Development and International Cooperation and INS
TRENDS IN INFLATION RATE, AND IN M3 AND GDP ( In % ) GROWTH IN CURRENT PRICES ( In % ) 20 20
16 16 M3
12 12 GDP
8 8
4 4 Inflation 0 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
1. Money supply M2 By the end of 2004 money supply M2 was up significantly, by 11.1% vs. 7.1% a year earlier, reflecting greater availability of both monetary and quasi-monetary resources. Indeed, while available money grew by just 5.6% in 2003, they were up 9.9% (694 MTD) in 2004, about half of which occurred in December, in line with developments of their two components. Fiduciary money increased by 11.4% compared to 5.8%. After a strong increase in January due mainly to expenditure for the Aid El Idha holiday, a good olive oil season and the soccer Africa Cup that took place in Tunisia, this aggregate evolved in a chequered manner. But it did follow the usual seasonal patterns, especially over the summer when fiduciary money reached the highest point of the year : 3,028 MTD in August, with higher household expenditure and greater manual exchange. Compared to the M1 aggregate, fiduciary money amounted to 41.4% in January and 38.6% in December 2004 vs. 38.1% in December of the previous year. Meanwhile, bank money grew at a higher 9% rate, compared to 5.5% in 2003, this development being the result of increases in sight deposits at banks as well as renewed growth in deposits at postal cheque centre.
207 BANK MONEY AND ITS MAIN COMPONENTS Of which : Bank money Sight deposits in postal Period Sight deposits at banks cheque centre MTD Variation*(%) MTD Variation*( %) MTD Variation*(%) 2002 4,101 -6.1 3,678 -6.4 416 -3.3 2003 March 4,034 -1.6 3,561 -3.2 465 11.8 June 4,124 0.6 3,702 0.7 413 -0.7 September 4,495 9.6 4,052 10.2 429 3.1 December 4,328 5.5 3,917 6.5 402 -3.4 2004 March 4,410 1.9 3,877 -1.0 514 27.9 June 4,645 7.3 4,141 5.7 493 22.6 September 4,545 5.0 4,070 3.9 460 14.4 December 4,718 9.0 4,256 8.7 438 9.0 * Compared to the level in December of the previous year. Sight deposits at banks, the main component of bank money continued to grow in 2004 at a faster pace than in 2003 : 8.7% vs. 6.5%. QUASI-MONEY AND ITS MAIN COMPONENTS Of which : Forward deposits Quasi-money Certificates of and other financial Savings deposits Period deposit products Variat.* Variat.* Variat.* Variat.* MTD MTD MTD MTD (%) (%) (%) (%) 2002 10,063 8.1 3,653 24.1 664 -20.8 5,219 4.2 2003 March 10,192 1.3 3,811 4.3 498 -25.0 5,264 0.9 June 10,389 3.2 3,872 6.0 641 -3.5 5,277 1.1 September 10,582 5.2 3,974 8.8 664 0.0 5,325 2.0 December 10,867 8.0 3,936 7.7 668 0.6 5,583 7.0 2004 March 10,913 0.4 3,961 0.6 601 -10.0 5,681 1.8 June 11,226 3.3 4,128 4.9 707 5.8 5,766 3.3 September 11,843 9.0 4,447 13.0 894 33.8 5,841 4.6 December 12,160 11.9 4,465 13.4 1,020 52.7 6,024 7.9 * Compared to the level in December of the previous year. Quasi-money also grew at a faster pace in 2004, up 11.9% vs. 8% the year before. There were differing rates of increase for the main components : forward deposits and other financial products grew by 13.4% compared to 7.7% and certificates of deposit by 52.7% vs. 0.6%. After fluctuating for the first seven months of the year, the outstanding balance of the latter increased before dropping in November, then increasing again the following month. From 668 MTD in December 2003, it reached a maximum of 1,037 MTD in October, closing for the year 2004 at 1,020 MTD. These investments, made for a minimum of 10 days and a maximum of five years, are in fact similar to sight deposits. They continue to attract savings thanks to their relatively high rate of return. Deposits at the Postal Savings Centre grew at a faster pace (13.5% vs. 9%) while those in special savings accounts at banks increased at about the same rate as the previous year. It should be mentioned that the sharp increase usually encountered in December after annual interest is entered was somewhat different in 2004, spread 208 out over the four quarters of the year in line with new regulations governing quarterly recording of interest. SAVINGS ACCOUNTS Savings at the Postal Special savings accounts Other savings accounts Period Savings Centre MTD Variat.*(%) MTD Variat.*(%) MTD Variat.*(%) 2002 4,064 4.0 1,014 8.7 141 -15.6 2003 March 4,082 0.4 1,039 2.5 143 1.4 June 4,081 0.4 1,051 3.6 145 2.8 September 4,126 1.5 1,052 3.7 147 4.3 December 4,321 6.3 1,105 9.0 157 11.3 2004 March 4,352 0.7 1,174 6.2 155 -1.3 June 4,402 1.9 1,204 9.0 160 1.9 September 4,466 3.4 1,212 9.7 163 3.8 December 4,598 6.4 1,254 13.5 172 9.6 * Compared to the level in December of the previous year. 2. The M3-M2 aggregate This aggregate rose by 1.4% in 2004, after falling by this same rate the year before. The trend was favoured by slight increase in home savings (9.7% vs. 9.6%), which seems to be edging back to its usual growth rate after the exceptionally high 22.7% recorded in 2002. On the other hand, the outstanding balance of debenture loans was down in 2004, although at a lower rate than the year before : -8.2% vs. -12%, following reimbursement of securities that had fallen due and that were only partially renewed. It should be pointed out in this regard that such subscriptions amounted to only some 98 MTD.
THE «M3-M2» AGGREGATE AND ITS COMPONENTS Bonds & Savings for M3-M2 Home savings borrowings for projects and Period more than one year investments MTD Variat.* (%) MTD Variat.* (%) MTD Variat.* (%) MTD Variat.* (%) 2002 1,620 20.0 794 22.7 819 17.8 7 -12.5 2003 March 1,642 1.4 812 2.3 823 0.5 7 0.0 June 1,632 0.7 828 4.3 797 -2.7 7 0.0 September 1,629 0.6 846 6.5 777 -5.1 6 -14.3 December 1,598 -1.4 870 9.6 721 -12.0 7 0.0 2004 March 1,645 2.9 897 3.1 741 2.8 7 0.0 June 1,648 3.1 912 4.8 729 1.1 7 0.0 September 1,659 3.8 929 6.8 724 0.4 6 -14.3 December 1,620 1.4 954 9.7 662 -8.2 4 -42.9 * Compared to the level in December of the previous year. B. THE «M4-M3» AGGREGATE Made up solely of commercial paper after transferable Treasury bonds (BTC) were definitively paid off in 2003, this aggregate was down by 129 MTD in 2004 due to the drop in financing between businesses.
209 MONEY MARKET INSTRUMENTS (held by the public) (In MTD) Variation Description 2002 2003 2004 2003/2002 2004/2003 Treasury bonds 53 - - -53 - Commercial paper 402 357 228 -45 -129 Overall outstanding balance 455 357 228 -98 -129 C. NET FOREIGN ASSETS The upward trend that began in 2001 continued at a steady pace, with net foreign assets up 848 MTD in 2004 vs. 370 MTD a year earlier. This was led by a drop in the current deficit along with higher net capital inflows, due in particular to the large volume of funds raised abroad. After fluctuating slightly over the first two months of 2004, net foreign assets were down in March, due mainly to repayment of the 348.2 MTD «SAMURAI I» debenture loan. Since then, they continued to grow pretty steadily until October, when they reached the maximum level for the year: 3,264 MTD. Starting in November they dipped once again, ending the year at 3,127 MTD.
FOREIGN ASSETS AND LIABILITIES (In MTD) International reserves External liabilities Net foreign assets Of which : Other Of which : Period Foreign currency foreign Deposits Total Total Amount Variat.* assets assets by non Amount Variat* residents 2002 3,109 3,053 198 1,046 2,246 1,380 1,909 312 2003 March 3,479 3,411 358 906 2,067 1,360 2,318 409 June 3,232 3,171 118 960 2,109 1,420 2,083 174 Sept. 3,414 3,359 306 938 2,068 1,381 2,284 375 Dec. 3,605 3,550 497 942 2,268 1,443 2,279 370 2004 March 3,310 3,255 -295 890 2,273 1,443 1,927 -352 June 4,238 4,154 604 962 2,477 1,505 2,723 444 Sept. 5,024 4,954 1,404 960 2,723 1,601 3,261 982 Dec. 4,818 4,760 1,210 984 2,675 1,681 3,127 848 * Compared to the level in December of the previous year. The increase that marked 2004 was due mainly to encashment of a debenture loan in April (450 million euros), the second portion of the sale of the GSM mobile telephone license in September (223 million dollars), external loans taken out in the framework of the programme to support economic competitiveness (72 million euros) and other private loans, especially the subordinated loan issued by BIAT (49.4 million euros) and subscribed to in June and December and syndicated loans for BNA (70 million euros) in August and to ETAP (75 million dollars) in December. Thus net assets in foreign currency were up markedly in 2004, reaching 4,733 MTD at the end of the year, the equivalent of 107 days of imports. This compares to 3,503 MTD and 90 days in December 2003.
210 NET ASSETS IN FOREIGN CURRENCY (In MTD) (DAYS) 107 98 4500 100 91 90 4000 80 3500 77 74 74 80 3000
3 60
2500 3 7 2000 3 4, 0 40 5 1500 3 2 747 011 3, 2 810 4 3 227 2, 3, 0 1000 2, 2, 2, 20 500 2, 0 0 1997 1998 1999 2000 2001 2002 2003 2004 Net assets in foreign currency Days of imports D. DOMESTIC LOANS Domestic loans were up by 6.8% in December 2004, reaching 26,908 MTD. This compares to 3.5% a year earlier, due to strong rise in net claims on the State along with a slight increase in loans to the economy. 1. Net claims on the State State indebtedness to the financial system increased anew in 2004, up 536 MTD vs. a drop of 102 MTD a year earlier. This trend was the result in particular of the higher outstanding balance of Treasury bonds held by banks (+444 MTD vs. +42 MTD) as well as of the increase in savings at the Postal Savings Centre (+149 MTD vs. +91 MTD). Representing just 26% in December 2003, the share of the outstanding balance of Treasury bonds held by banks in the overall outstanding balance grew in 2004 to 32%, as it was almost only banks that subscribed to net issues of these bonds. Reflecting the increasingly large share that the State has opted to contract from domestic loan sources to finance the deficit, net subscriptions of Treasury bonds had increased by 106 MTD for a total of 462 MTD at the end of 2004 vs. 356 MTD at the end of 2003. This breaks down to positive net subscriptions to bonds equivalent to Treasury bonds (BTA) for +1,069 MTD vs. +824 MTD, with net subscriptions to short-term Treasury bonds (BTCT) having been on the negative side (-572 MTD vs. -350 MTD). Reflecting the policy to reprofile domestic public debt, the share of medium and long-term securities (notably BTA) in the overall outstanding balance of State securities increased from 71.9% at the end of 2003 to 86.2% at the end of 2004. NET CLAIMS ON THE STATE (In MTD) Of which : Net claims on the State Period Treasury current account Treasury bonds Amount Variat.* Amount Variat.* Amount Variat.* 2002 3,391 -81 413 27 1,161 -229 2003 March 3,417 26 125 -288 883 -278 June 3,234 -157 479 66 1,037 -124 September 3,492 101 314 -99 1,100 -61 December 3,289 -102 550 137 1,203 42 2004 March 3,809 520 260 -290 1,252 49 June 3,747 458 411 -139 1,309 106 September 3,494 205 857 307 1,543 340 December 3,825 536 664 114 1,647 444 * Compared to the level in December of the previous year.
211 2. Financing of the economy In reaching 23,083 MTD at the end of 2004, financing to the economy posted a 5.3% (1,172 MTD) increase, vs. 4.6% (957 MTD) a year earlier. This increase was greater than that in 2003 but below the target of 6%. This global result was made up of differing trends in the various components. In particular, while loans from ordinary resources grew by 8.2% (1,497 MTD) vs. 7% (1,195 MTD) in 2003, the outstanding balance of loans from special resources and that of commercial paper continued to fall, by 10.7% and -129 MTD respectively, compared to the previous year’s figures of -10% and -45 MTD. FINANCING OF THE ECONOMY MTD Variation (%) Description 2002 2003 2004 2003/2002 2004/2003 Loans to the economy 19,770 20,696 21,848 4.7 5.6 Loans from ordinary resources 17,125 18,320 19,817 7.0 8.2 Loans from special resources 2,243 2,019 1,803 -10.0 -10.7 Commercial paper * 402 357 228 -45 -129 Securities portfolio 1,184 1,215 1,235 2.6 1.6 Total 20,954 21,911 23,083 4.6 5.3 * For this aggregate, variations are expressed in MTD. Banks overall contributed more to financing of the economy and their share in the global volume of loans from the financial system increased from 90.8% in 2003 to 93% in 2004. It should be noted that the drop in loans from the Issuing Institution was the result mainly of the comfortable cash position enjoyed by banks over the last quarter of the year. LOANS TO THE ECONOMY MTD Variation (%) Origin 2002 2003 2004 2003/2002 2004/2003 Central Bank 986 839 413 -14.9 -50.8 Banks 17,740 18,784 20,310 5.9 8.1 Leasing companies 1,044 1,073 1,125 2.8 4.8 Total 19,770 20,696 21,848 4.7 5.6
212 IV. TOTAL INDEBTEDNESS
This global indicator of financing of the State as well as that of other non-financial economic agents amounted to 47,374 MTD at the end of 2004, up 7.3% over the 2003 yearend figure, compared to 5.1% from one year to the next. This increase, attributable in varying degrees to State indebtedness and to that of other non financial economic agents, reflects the steady climb recorded for both domestic and external resources. TOTAL INDEBTEDNESS (In MTD unless otherwise indicated) Variation in % Structure in % Description 2002 2003 2004 2003/02 2004/03 2003 2004 Total domestic financing 27,666 28,846 30,540 4.3 5.9 65.4 64.5 -State 6,572 6,784 7,338 3.2 8.2 15.4 15.5 -Other non financial economic agents 21,094 22,062 23,202 4.6 5.2 50.0 49.0 From the financial system 23,890 24,843 26,680 4.0 7.4 56.3 56.3 -State 3,338 3,289 3,825 -1.5 16.3 7.5 8.1 -Other non-financial economic agents 20,552 21,554 22,855 4.9 6.0 48.8 48.2 On capital markets 3,776 4,003 3,860 6.0 -3.6 9.1 8.2 *Money market 455 357 228 -21.5 -36.1 0.8 0.5 -State 53 0 0 -100.0 - 0.0 0.0 -Other non-financial economic agents 402 357 228 -11.2 -36.1 0.8 0.5 *Financial market (primary) 3,321 3,646 3,632 9.8 -0.4 8.3 7.7 -State 3,181 3,495 3,513 9.9 0.5 7.9 7.4 -Other non-financial economic agents 140 151 119 7.9 -21.2 0.4 0.3 External financing 14,331 15,294 16,834 6.7 10.1 34.6 35.5 -State 11,688 12,529 13,209 7.2 5.4 28.4 27.9 -Other non-financial economic agents 2,643 2,765 3,625 4.6 31.1 6.2 7.6 Total indebtedness 41,997 44,140 47,374 5.1 7.3 100.0 100.0 -State 18,260 19,313 20,547 5.8 6.4 43.8 43.4 -Other non-financial economic agents 23,737 24,827 26,827 5.6 8.1 56.2 56.6 Source : Central Bank of Tunisia, Capital Market Council (CMF), Ministry of Development and International Cooperation. The outstanding balance of domestic financing amounted to 30,540 MTD at the end of 2004, up 5.9% compared to 4.3% a year earlier, as the financial system was tapped for greater input (7.4% vs. 4%). Capital markets, on the other hand, contributed less : -3.6% vs. +6% the year before. Still, the share of domestic financing in total indebtedness fell from 65.4% to 64.5%, due to the drop in domestic financing for other non-financial economic operators, which fell from 50% to 49%. The State’s share increased from 15.4% to 15.5%. Financing from the financial system to the State was up sharply, from 3,289 MTD to 3,825 MTD, due to the higher outstanding balance of Treasury bonds held by banks. Indeed, banks were the sole subscribers to net issues of these bonds, to the detriment of the public whose net subscriptions were down. In parallel, the pace of financing by the financial system to other non-financial economic agents increased in 2004, up 6% vs. 4.9% the year before, in the wake of the higher volume of loans from ordinary banking resources, up 8.2% vs. 7% the year before. 213 The outstanding balance of financing from the capital market was down 3.6% in 2004, amounting to 3,860 MTD, after a 6% increase in 2003. This drop characterised financing from both the money market and the primary market. The sustained drop in money market financing (-36.1% vs. -21.5%) was the result of the persistent decline in inter-company financing, with treasury bills facing more and more competition from other investment products, especially certificates of deposit. After posting a strong 9.8% increase in 2003, the outstanding balance of mobilised resources from the primary market fell in 2004 by 0.4%. This drop affected State financing and especially that of other non financial economic agents, given their low level of bond issues, with the volume of subscriptions falling from 27.5 MTD in 2003 to 6 MTD in 2004 and with several cases of major early repayment involving 24.6 MTD. External financing amounted to 16,834 MTD at the end of 2004, up 10.1% over the 2003 yearend figure, compared to 6.7% a year earlier. Its share of the total thus rose from 34.6% to 35.5%, on the strength of financing for non-financial economic agents other than the State increasing by 31.1% in 2004 vs. 4.6% the year before. This was mainly due to TUNISIANA’s mobilising of new external resources to extend its network, along with several drawings abroad, notably the $75 million syndicated loan to ETAP. The State’s external indebtedness amounted to 13,209 MTD in 2004, growing at a slower 5.4% rate than the 7.2% recorded in 2003. Concurrently with mobilisation of a major volume of external resources, notably debenture loans (450 million euros) and two new portions of loans amounting to 72 million euros in the framework of the programme to support economic competitiveness (PACE), the State reimbursed important maturities in 2004, notably the 348.2 MTD SAMURAI I debenture loan. With the faster pace of growth in GDP expressed in current prices (9.1% in 2004 vs. 7.6% in 2003), the share of total indebtedness in this aggregate fell from 137.1% to 134.8%. But the rate of external indebtedness calculated with reference to gross national available income (GNAI) was 47.5% in 2004 vs. 47.1% in 2003. MAIN FINANCING PARAMETERS OF NON-FINANCIAL ECONOMIC AGENTS (In % unless otherwise indicated) Description 2002 2003 2004 Total indebtedness/GDP in current prices 140.3 137.1 134.8 *State 61.0 60.0 58.5 *Other non-financial economic agents 79.3 77.1 76.3 Total domestic loans/GDP 92.4 89.6 86.9 *State 21.9 21.1 20.9 *Other non-financial economic agents 70.5 68.5 66.0 External financing/GDP 47.9 47.5 47.9 *State 39.1 38.9 37.6 *Other non-financial economic agents 8.8 8.6 10.3 State domestic financing/Total domestic loans 23.8 23.5 24.0 Domestic financing of other non-financial economic agents/Total domestic loans 76.2 76.5 76.0 External financing/GNAI 47.6 47.1 47.5 GDP in current prices (n MTD) 29,933 32,212 35,143 GNAI in current prices (in MTD) 30,130 32,498 35,473
214 V. DISTRIBUTION OF CREDIT
According to the credit Registry and the individual loan Registry, the outstanding balance of loans granted by the financial system to the economy amounted to about 23 billion dinars at the end of 2004. This represented an increase of 5.9%, a rate that was just slightly higher than the year before. This faster pace of growth was evident in the outstanding balance of investment loans, while operating loans grew at a slower pace. TREND IN LOANS BY SECTOR OF ACTIVITY (IN MTD)
14,000 13,401 11,970 12,637 12,000 11,280 9,799 10,000 6,990 7,299 8,000 6,971 7,737 6,571 6,000 4,000 1,712 1,658 1,580 1,769 1,841 2,000 0 2000 2001 2002 2003 2004
Services Industry Agriculture and fishing With 8.3% growth compared to 3.6% at the end of 2003, the outstanding balance of medium and long term loans exceeded 12.3 billion dinars in 2004. The increase benefited the services sector with the outstanding balance growing at a faster pace (7.5 percentage points). Investment loans to agriculture/fishing sector grew at the same 1.6% rate as a year before. On the other hand, loans to industry went up by just 3.9%, 2 percentage points less than in 2003. The faster growth characterising the outstanding balance of medium and long term credit to the service sector is based on the soaring increase in loans to private parties. With an outstanding balance up from 3.1 billion dinars at the end of 2003 to more than 3.6 billion at the end of 2004, the increase came to 17.3% vs. just 8.4% a year earlier. More than a quarter of the outstanding balance of these loans was held by private parties in all branches of the services sector. The drop of more than 5 percentage points in the rate of increase for the outstanding balance of short-term loans is attributable to the 1.4% drop in loans to the services sector and slower growth in loans to agriculture and fishing, down from 22.3% in 2003 to 6.1% at the end of 2004. On the other hand, the rate of increase for the outstanding balance of operating loans to the industrial sector was up by 3.2 percentage points. Broken down by sector, the total outstanding balance of loans showed a slight drop in the share of industry, down from 33.7% to 33.6%, with that of the services sector up from 58.2% to 58.3%. Loans to agriculture and fishing remained stable at 8.1%. 215 With three development banks becoming all-purpose banks, deposit banks further strengthened their role as the number one purveyor of financing to economic agents. In effect, the outstanding balance of loans granted by this category of banks reached almost 21 billion dinars: 91.3% of the total outstanding balance vs. 88.7% the year before. This increase was achieved to the detriment of development banks, whose share dropped from 3.5% to just 0.9%. On the other hand, the role of leasing companies and non-resident banks in financing the economy remained stable at 5.1% and 2.7% respectively. BREAKDOWN OF THE OUTSTANDING BALANCE OF LOANS TO THE ECONOMY BY SECTOR AND BY TERM (In MTD unless otherwise indicated) Variation Share of total 2 0 0 4 Description 2003 (in %) (in %) March June Sept Dec 2003/2002 2004/2003 2003 2004 Agriculture & fishing 1,769 1,801 1,801 1,934 1,841 12.0 4.1 8.1 8.1 Short term 965 997 996 1,139 1,024 22.3 6.1 4.4 4.5 Medium & long term 804 804 805 795 817 1.6 1.6 3.7 3.6 Industry 7,299 7,437 7,682 7,663 7,737 4.7 6.0 33.7 33.6 Short term 4,639 4,782 5,022 5,000 4,974 4.0 7.2 21.4 21.6 Medium & long term 2,660 2,655 2,660 2,663 2,763 5.9 3.9 12.3 12.0 Services 12,637 12,814 13,045 13,152 13,401 5.6 6.0 58.2 58.3 Short term 4,708 4,902 4,844 4,803 4,641 10.1 -1.4 21.7 20.2 Medium & long term 7,929 7,912 8,201 8,349 8,760 3.0 10.5 36.5 38.1 Of which : loans to individuals 3,073 3,153 3,354 3,499 3,605 8.4 17.3 14.2 15.7 Total 21,705 22,052 22,528 22,749 22,979 5.8 5.9 100.0 100.0 Short term 10,312 10,681 10,862 10,942 10,639 8.3 3.2 47.5 46.3 Medium & long term 11,393 11,371 11,666 11,807 12,340 3.6 8.3 52.5 53.7 Of which : loans to individuals 3,073 3,153 3,354 3,499 3,603 8.4 17.3 14.2 15.7 In rising from 10.6 billion dinars in 2002 to 11.1 billion in 2003 then 11.5 billion in 2004, the outstanding balance of loans to companies that belong to business groups increased by 4.7% then 3.6%, rates that were below those recorded for the overall outstanding balance. Thus its share fell from 51.7% to 51.1% then 50% over the same period. At the end of 2004 the share of private companies in the volume of loans from the financial system was up slightly to 95.8% vs. 95.7% in 2003 and consequently so was that of public companies, with privatisation shrinking from 4.3% to 4.2% over this same timeframe. This trend was recorded in various sectors of activity except for agriculture, which recorded a higher share for public companies in the overall total of loans to the economy, especially for cereals, in line with financing for the agricultural season. With a total of more than 22 billion dinars at the end of 2004 (compared to 20.8 billion in 2003), the outstanding balance of loans to private companies recorded an increase of 5.9% vs. 5.1% a year earlier. This faster pace of growth concerned industry and services, especially for investment loans, which increased by 4.4 percentage points
216 following measures to reschedule debt that public authorities decided to take in favour of tourism and strengthening of the programme to upgrade private companies in the various sectors of activity. But the outstanding balance of operating loans to private companies in agriculture and fishing was down. BREAKDOWN OF THE OUTSTANDING BALANCE OF LOANS TO PUBLIC AND PRIVATE COMPANIES (In MTD unless otherwise indicated) 2 0 0 3 2 0 0 4 Variation (in %) Medium Medium Description Short Short & long Total & long Total 2003/2002 2004/2003 term term term term Agriculture&fishing 965 804 1,769 1,024 817 1,841 12.0 4.1 Public companies 228 45 273 324 49 373 36.5 36.6 Private companies 737 759 1,496 700 768 1,468 8.4 -1.9 Industry 4,639 2,660 7,299 4,974 2,763 7,737 4.7 6.0 Public companies 195 98 293 190 100 290 62.8 -1.0 Private companies 4,444 2,562 7,006 4,784 2,663 7,447 3.2 6.3 Services 4,708 7,929 12,637 4,641 8,760 13,401 5.6 6.0 Public companies 141 228 369 88 223 311 - 3.1 - 15.7 Private companies 4,567 7,701 12,268 4,553 8,537 13,090 5.9 6.7 Of which : loans to individuals - 3,073 3,073 - 3,605 3,605 8.4 17.3 Total 10,312 11,393 21,705 10,639 12,340 22,979 5.8 5.9 Public companies 564 371 935 602 372 974 22.9 4.2 Private companies 9,748 10,022 20,770 10,037 11,968 22,005 5.1 5.9 Of which : loans to individuals - 3,073 3,073 - 3,605 3,605 8.4 17.3 The outstanding balance of loans to public companies, which stood at 935 MTD at the end of 2003 rose to 974 MTD at the end of 2004, up just 4.2% compared to 22.9% the year before. This major slowdown was attributable to the drop in the outstanding balance of loans to public companies operating in services and industry, while that of public companies in the agricultural sector recorded a slight increase (36.6% vs. 36.5%). A. FINANCING FOR AGRICULTURE AND FISHING The outstanding balance of loans made either directly or indirectly to agriculture and fishing was up from 1,769 MTD in 2003 to 1,841 MTD in 2004, an increase of 4.1% vs. 12% a year earlier. This slower growth was due to significant slowing in the rate of increase in indirect loans, while that for direct loans grew slightly faster. The outstanding balance of indirect loans increased from 608 MTD in 2003 to 656 MTD in 2004, up 7.9% vs. 38.5% a year before. New loans went to structures that collect and market agricultural products, the outstanding balance rising by 54 MTD. The outstanding balance of loans made directly to farmers and fishermen amounted to 1,185 MTD in 2004 vs. 1,161 MTD in 2003, an increase of 2.1% vs. 1.7 % a year before.
217 OUTSTANDING BALANCE OF LOANS TO THE AGRICULTURE AND FISHING SECTOR (In MTD) Medium & long Short term loans Total Description term loans 2003 2004 2003 2004 2003 2004 Direct loans 507 504 654 681 1,161 1,185 Indirect loans 458 520 150 136 608 656 .Agricultural products commerciali- sation structures 458 520 86 78 544 598 of which: National Oil Board 46 47 36 33 82 80 Cereals Board 165 270 165 270 Central Wheat Cooperative 44 29 4 4 48 33 Central Cooperative for Large Scale Cropping 91 72 30 28 121 100 .Agricultural equipment commercia- lisation companies 64 58 64 58 Total 965 1024 804 817 1,769 1,841 1. Short term loans The outstanding balance of operating loans for agriculture and fishing increased from 789 MTD in 2002 to 965 MTD in 2003 then 1,024 MTD at the end of 2004, up 22.3% then 6.1%. This slower growth, reflecting the higher level of indirect loans to structures that store and market agricultural products was also influenced by the drop in direct loans. In effect, the outstanding balance of operating loans made indirectly to agriculture and fishing rose 13.5% in 2004 (vs. 66% the year before) to 520 MTD. The increase involved the outstanding balance of loans to structures that market agricultural products, mainly the Cereals Board, in the framework of financing of the cereals campaign, considered to be no more than average compared to the previous year’s exceptionally good harvest.
BREAKDOWN OF LOANS TO AGRICULTURE AND FISHING BY CREDIT FORM IN 2004
36%
64%
Direct loans to farmers Indirect loans
218
The outstanding balance of operating loans made directly to farmers and fishermen was down from 507 MTD in 2003 to 504 MTD in 2004, a drop of 0.6% vs. 1.4% a year earlier, despite the decision to extend additional loans for seasonal crops to cover weeding and supplementary fertilisation1. Collection by the National Agricultural Bank worked in conjunction with a good agricultural campaign which helped farmers honour their previous commitments. 2. Investment loans Amounting to 817 MTD in 2004 vs. 804 MTD a year earlier, the outstanding balance of medium and long term loans grew at the same rate as in 2003 : 1.6%. This increase involved loans made directly to farmers and fishermen, while indirect loans were down. The outstanding balance of investment loans made directly to farmers and fishermen grew by 4.1% in 2004 vs. 4.3% in 2003, up from 627 MTD in 2002 to 654 MTD in 2003 then 681 MTD the following year. This was attributable to higher investment by farmers and fishermen in the wake of high agricultural production and the decision by public authorities to take measures to reschedule debt. In falling from 150 MTD in 2003 to 136 MTD in 2004, the outstanding balance of investment loans made indirectly to agriculture and fishing fell for the second straight year, down by 9.3% compared to 8.5% a year earlier. This drop was due to reimbursement of annuities related to investment loans by a number of agricultural companies. B. FINANCING FOR INDUSTRY The outstanding balance of loans to industry reached 7,737 MTD at the end of 2004, vs. 7,299 MTD end 2003, posting a 6% increase vs. 4.7% a year earlier. This faster pace involved operating loans, with slower growth for investment loans. New loans went to all sectors except energy, textile/clothing, leather/footwear and miscel- laneous industries.
BREAKDOWN BY BRANCH OF THE OUTSTANDING BALANCE OF LOANS TO THE INDUSTIAL SECTOR (In MTD) Medium & long Short term loans Total Description term loans 2003 2004 2003 2004 2003 2004 Mines 7 5 2 5 9 10 Energy & water distribution 156 154 155 152 311 306 Construction & public works 631 732 313 333 944 1,065 Agrofood industries 1,040 1,171 572 574 1,612 1,745 Textile, clothing, leather and footwear 617 596 237 250 854 846 Mechanical & electrical industries 914 1,026 457 492 1,371 1,518 Construction materials, ceramics & glass 447 466 446 449 893 915 Chemical & rubber 374 404 238 265 612 669 Miscellaneous industries 453 420 240 243 693 663 Total 4,639 4,974 2,660 2,763 7,299 7,737
1 Central Bank of Tunisia note to banks n° 1 of 21 January 2004. 219 The outstanding balance of operating loans, which had gone up by 4% in 2003 to 4,639 MTD, rose by 7.2% in 2004 to 4,974 MTD. This increase involved construction and public works, agrofood industries, mechanical and electrical industries, chemical, rubber and building material industries, and ceramics and glass. The outstanding balance of investment loans recorded a 3.9% increase to 2,763 MTD in 2004, compared to a 5.9% increase to 2,660 MTD the year before. This lower growth rate involved the outstanding balance of loans to building materials/ceramics/glass industries, mechanical/electrical industries and chemical/rubber industries. There was a lower outstanding balance of loans to energy and water distribution.
BREAKDOWN BY BRANCH OF THE OUTSTANDING BALANCE OF LOANS TO THE INDUSTRIAL SECTOR IN 2004
9% 4% 9% 14%
12%
22%
19% 11%
Mining Energy and water distritution BTP IAA Textile, clothing, leather & footwear IME IMCCV Chemical and rubber industries Miscellaneous industries 1. Mining The outstanding balance of loans to mining companies amounted to 10 MTD in 2004 vs. 9 MTD in 2003. This 11.1% increase was recorded after stagnation the previous year. It evolved in this manner because of the increase in medium term loans, offset by drops in short-term loans. After growing by 16.7% in 2003, the outstanding balance of operating loans to this branch of activity fell in 2004 by 28.6%, from 7 MTD to 5 MTD, affected by the drop in overdrafts by mining extraction companies. The outstanding balance of investment loans rose by 3 MTD in 2004 to 5 MTD (following a 1 MTD drop in 2003). This involved medium-term loans to mining companies. 2. Energy and water distribution The outstanding balance of loans to the energy and water distribution sector fell from 311 MTD in 2003 to 306 MTD in 2004, a drop of 1.6% after the previous year’s 56.3% increase. This drop involved both operating and investment loans, with the former’s outstanding balance dipping 1.2% in 2004 to 154 MTD. The increase in 2003 was due essentially to loans to the (STEG) Tunisian Electricity and Gas Company in foreign currency to purchase gas, to the Tunisian Refining Industries Company (STIR) in the framework of contracts signed with oil companies and to
220 mineral water companies. The decrease in 2004 was due to the lower level of overdraft at STEG, mineral water and oil companies. The outstanding balance of investment loans was up by 9.2% in 2003, then down by 1.9% in 2004. This was attributable to investment loans to a number of companies working in mineral water, oil and electricity. 3. Construction and public works The outstanding balance of loans to this branch of activity reached 1,065 MTD in 2004 vs. 944 MTD in 2003, an increase of 12.8% vs. 7.5% a year earlier. This faster pace characterised both short term and investment loans. Medium and long term loans were up by 6.4% in 2004, from 313 MTD in 2003 to 333 MTD in 2004, after stagnating in 2003. This was due to the increase in medium term loans to companies carrying out public works that wanted to invest in new equipment. The outstanding balance of operating loans was up 16% in 2004 vs. 11.7% in 2003. New loans took the form of advances against administrative claims and overdraft for companies in the field of public works. 4. Agrofood industries The outstanding balance of loans to agrofood concerns posted the highest level of loans to the industrial sector, up from 1,612 MTD in 2003 to 1,745 MTD in 2004, an increase of 8.3% vs. just 1.2% a year earlier. This faster pace characterised only short-term loans, with investment loans growing at a slower pace. In rising from 1,040 MTD in 2003 to 1,171 MTD in 2004 the outstanding balance of operating loans increased by 12.6% vs. 1.3% a year earlier. New loans were granted mainly in the form of current account overdrafts used to finance inventory and to prefinance exports. They went mainly to oil processing plants and export operations, manufacture of pasta, mills and carbonated drink plants. Amounting to 574 MTD in 2004 (up from 572 MTD in 2003), the outstanding balance of investment loans was up just 0.3% vs. 1.1% in 2003. This was because the granting of new loans to companies operating in the various activities of this branch (especially mills, pasta manufacturing facilities and a number of candy plants) was offset by repayment of current loans. 5. Textile, clothing, leather and footwear From 854 MTD in 2003 to 846 MTD in 2004, the outstanding balance of loans to companies in this branch continued to drop for the second straight year. This involved short-term loans, with medium and long term loans on the increase. The outstanding balance of operating loans dropped by 3.4% in 2004 (vs. 0.6% in 2003), amounting to just 596 MTD. This drop involved mainly current account overdrafts by textile and clothing companies. The outstanding balance of investment loans, after stagnating in 2003, was up 5.5% in 2004, coming in at 250 MTD. New loans were secured mainly to finance investments to set up new and extend existing apparel companies and to upgrade a number of companies in this branch.
221 6. Mechanical and electrical industries Increasing from 1,371 MTD in 2003 to 1,518 MTD in 2004, the outstanding balance of loans to companies in the mechanical and electrical sector went up by 10.7% vs. just 2.4% a year earlier. This rate of increase for the outstanding balance of operating loans posted faster growth, while that of investment loans grew more slowly. In effect, the outstanding balance of operating loans rose from 914 MTD in 2003 to 1,026 MTD in 2004, an increase of 12.3%, vs. -2.2% a year earlier. This was due mainly to the higher outstanding balance of loans in the form of current account overdrafts, trade discount on Tunisia, and financing of stock. Loan funds were made available to various companies in this branch, especially metal industries, general mechanics, and metal construction. Investment loans were up by 7.7%, vs. 13.1% in 2003, going mainly to mechanical and metal industries. 7. Building materials, ceramics, and glass industries The outstanding balance of loans to construction/ceramics/glass companies increased from 893 MTD in 2003 to 915 MTD in 2004, up 2.5% vs. 6.4% a year earlier. Slower growth was attributable to the lower rate of increase for investment loans, while the outstanding balance of short-term loans grew from 447 MTD to 466 MTD. The outstanding balance of investment loans rose by 0.7% vs. 11.8% in 2003. New loans were devoted to financing upgrading programmes at a number of cement plants and to extension or setting up of other companies, notably in ceramics and bricks. 8. Chemical and rubber industries The outstanding balance of loans to companies in this branch of activity increased from 612 MTD in 2003 to 669 MTD in 2004, an increase of 9.3% vs. 8.9% a year earlier. Faster growth was attributable to a higher rate of growth for the outstanding balance of short-term loans, while investment loans experienced slower growth. Up from 374 MTD in 2003 to 404 MTD in 2004, the outstanding balance of operating loans rose by 8% vs. 4.8% the year before. New loans went mostly to plastics and tire plants (in the form of bank discount and advances to current accounts) and to chemical companies (in the form of advances to current accounts). The outstanding balance of investment loans increased from 238 MTD to 265 MTD over this period, an 11.3% increase vs. 16.1% a year earlier. New loans went mainly to plastics companies. 9. Miscellaneous industries The outstanding balance of loans to miscellaneous industries was down for the second straight year, by 4.3% in 2004 after a drop of 0.1% in 2003, corresponding to 694 MTD in 2002, 693 MTD in 2003 and 663 MTD in 2004. This ongoing decrease was attributable to the slower pace of increase in the outstanding balance of operating loans, while that of investment loans showed a slight increase. The outstanding balance of operating loans was down 7.3%, from 453 MTD in 2003 to
222
420 MTD in 2004, vs. a very slight 0.2% increase a year earlier. This drop involved mostly wood and paper processing plants, in the form of current account overdrafts. As for the outstanding balance of medium and long term loans, it was up by a slight 1.3% in 2004 after falling by 0.8% in 2003. New loans went to paper production plants in the framework of financing of upgrading and extension initiatives. C. FINANCING FOR SERVICES The outstanding balance of loans to the tertiary sector rose from 12.6 billion dinars at the end of 2003 to 13.4 billion dinars at the end of 2004, an increase of 6% vs. 5.6% a year earlier. This faster pace involved only investment loans, up from 7,929 MTD in 2003 to 8,760 MTD in 2004, an increase of 10.5% vs. 3% a year earlier. This was the case, although to differing degrees, for all branches of this sector.
BREAKDOWN BY BRANCH OF ACTIVITY OF OUTSTANDING BALANCE OF LOANS TO THE SERVICES SECTOR IN 2004 5% 27% 25%
10% 9%
24%
Transport & telecommunications Tourism Real estate Trade Other services Loans to individuals Operating loans fell from 4,708 MTD in 2003 to 4,641 MTD in 2004, down 1.4% after growing by 10.1% a year earlier. This drop involved all branches of activity except for trade. BREAKDOWN BY BRANCH OF THE OUTSTANDING BALANCE OF LOANS TO THE SERVICES SECTOR (In MTD) Medium & long Short term loans Total Description term loans 2003 2004 2003 2004 2003 2004 Transport & telecommunications 274 250 394 375 668 625 Tourism 1,040 1,027 2,241 2,306 3,281 3,333 Real estate promotion 467 454 707 744 1,174 1,198 Trade 2,228 2,321 771 912 2,999 3,233 Other services 699 589 743 818 1,442 1,407 Loans to individuals - - 3,073 3,605 3,073 3,605 Total 4,708 4,641 7,929 8,760 12,637 13,401
223 1. Transport and telecommunications Amounting to 625 MTD in 2004 vs. 668 MTD in 2003, the outstanding balance of loans to this sector fell by 6.4%, vs. -1.9% a year earlier, attributable to the lower volume of both investment and operating loans. In falling from 274 MTD in 2003 to 250 MTD in 2004, the outstanding balance of short-term loans recorded a decrease of 7% vs. an increase of 7% a year earlier. This drop involved a number of public enterprises, notably the Tunisian National Railway Company and Tunisair, as well as a number of private road transport companies. Down from 394 MTD in 2003 to 375 MTD in 2004, the outstanding balance of investment loans fell by 4.8% vs. 7.5% the year before. This concerned mainly Tunisair, the Tunisian Transport Company (STT), the Tunisian National Railway Company, other regional transport public enterprises and a number of private maritime and land transport companies. 2. Tourism The outstanding balance of loans to tourism rose from 3,281 MTD in 2003 to 3,333 MTD in 2004, up by just 1.6% compared to 5.1% the year before, with the increase in investment loans partially contained by the drop in short term loans. The outstanding balance of investment loans rose by 65 MTD from 2,241 MTD in 2003 to 2,306 MTD in 2004, a 2.9% increase compared to 2003’s 0.5% figure. The outstanding balance of short term loans fell from 1,040 MTD in 2003 to 1,027 MTD in 2004, a drop of 1.3% vs. +16.7% a year earlier. The drop in operating loans and the increase in investment loans were influenced mainly by the lower level of current account overdrafts (especially in the wake of a good season), the lower volume of unpaid bills by a number of hotels as debt in the sector was cleared up, and regularisation of advances on medium and long term loans made to finance new initiatives or to extend or renovate existing operations, following release of the relevant investment funds. 3. Real estate promotion The outstanding balance of 1,198 MTD in 2004 was 2% higher than the 1,174 MTD recorded in 2003, compared to 5.7% a year earlier. The slower pace of growth was due to the drop in the outstanding balance of operating loans, which was too steep to be offset by the increase in medium and long term loans. Up from 707 MTD in 2003 to 744 MTD in 2004, the outstanding balance of investment loans was up 5.2% vs. a drop of 1.9% a year earlier. This rebound was influenced by release of new investment loans to finance real estate and housing projects and to transformation of advances (in the form of overdrafts) to medium term loans for private and public real estate promoters. The outstanding balance of operating loans dropped from 467 MTD in 2003 to 454 MTD in 2004, down 2.8% vs. +19.7% a year earlier. 4. Trade Amounting to 3,233 MTD in 2004, up from 2,999 MTD in 2003, the outstanding balance of loans to commerce grew by 7.8% vs. 5.8% the year before. This faster pace of growth reflected trends in investment loans, while operating loans grew at a
224 slower pace. In reaching 2,321 MTD in 2004 (vs. 2,228 MTD in 2003), the outstanding balance of operating loans, especially in the form of current account overdrafts and bank discount, grew by 4.2% vs. 5.9% a year earlier. New loans went to companies working in the various branches of commerce except for trade in textiles and leather. The outstanding balance of investment loans came to 912 MTD in 2004 compared to 771 MTD in 2003, an increase of 18.3% vs. 5.5% a year earlier. This trend concerned miscellaneous commerce (57 MTD), trade in raw materials/materials/fuel (29 MTD), trade in agriculture and food (19 MTD), trade in hardware/machines/vehicles (19 MTD) and trade in textiles/leather (17 MTD). 5. Other services Down from 1,442 MTD in 2003 to 1,407 MTD in 2004, the outstanding balance of loans made available to companies in ‘other services’ dropped by 2.4% after increasing by 3.9% the year before. The increase in investment loans was accompanied by a drop in operating loans. In rising from 743 MTD in 2003 to 818 MTD in 2004, the outstanding balance of investment loans was up 10.1% compared to a drop of 1.3% a year earlier. New loans were granted mainly to finance the programme to launch new leasing companies and to renovate and set up a number of polyclinics. The outstanding balance of short term loans dropped from 699 MTD in 2003 to 589 MTD in 2004, a decrease of 15.7% after increasing by 10.1% a year earlier. This drop involved company account overdrafts, notably for leasing and factoring companies. 6. Loans to individuals Overall indebtedness of private parties to banks as recorded at the individual loan Registry amounted to 3,605 MTD at the end of 2004, a 17.3% increase vs. 8.4% a year earlier. New loans served mainly to finance new housing and to upgrade or extend existing housing, for an outstanding balance of 2,265 MTD at the end of 2004 compared to 2,091 MTD in 2003, +8.3% compared to +14.4% previously. ‘Other loans’ were used to cover current expenditure, to acquire building materials, household appliances and vehicles, up from 982 MTD in 2003 to 1,340 MTD in 2004, an increase of 36.5%.
225 VI. THE CAPITAL MARKET
The capital market posted a mixed balance sheet for 2004. The higher level of issues by public call for savings worked in conjunction with a low volume of trade in capital and slower growth in stock indexes. Furthermore, although there were no new listings for the second straight year, the Mechanical Workshops of the Sahel (AMS) was written off the market on 26 January 2004 after the public withdrawal bid issued in the framework of privatisation of the company. MAIN STOCK MARKET INDICATORS (In MTD unless otherwise indicated) Description 2000 2001 2002 2003 2004 - Volume of issues through public call for savings 2,789 2,976 2,752 2,305 2,800 - State (BTA and BTCT1) 2,522 2,510 2,473 2,123 2,596 - Corporate (capital securities and debenture loans) 267 466 279 182 204 - Volume of issues through public call for savings/national savings (in %) 45.3 43.8 41.6 32.5 35.7 - Volume of issues through corporates public call for savings /private sector’s gross fixed capital formation (in %) 7.0 11.1 6.7 4.3 4.7 - Overall volume of transactions 1,814 1,204 1,006 948 689 of which : Official quotation(b) 919 509 343 238 317 - Number of listed companies (in units) 42 45 46 45 44 - Stock market capitalisation(a) 3,889 3,276 2,842 2,976 3,085 - Stock market capitalisation/GDP (in %) 14.6 11.4 9.5 9.2 8.8 - BVMT index in points (base 465.77 on 31 March 1998) 1,424.91 996.09 782.93 939.78 974.82 - TUNINDEX in points (base 1,000 on 31 December 1997) 1,442.61 1,266.89 1,119.15 1,250.18 1,331.82 - Rotation rate (b/a) (in %) 23.6 15.5 12.1 8.0 10.3 - Liquidity rate (in %) 46 49 42 33 38 Mutual funds investing in securities (OPCVM) - Number (in unit) 28 34 35 36 34 - Managed assets 1,398 1,452 1,512 1,673 2,000 Sources : Tunis Stock Exchange (BVMT) and the Capital Market Council (CMF) 1 BTA : Bonds equivalent to Treasury bonds BTCT : Short-term Treasury bonds. A. CAPITAL MARKET ACTIVITY 1. The primary market After falling for two years in a row, the global volume of issues by public call for savings recorded an increase of 21.5% in 2004 for a total of 2,800 MTD, an evolution that concerned both bonds equivalent to Treasury bonds (BTA) and capital securities. As a ratio of national savings, the volume of issues by public call for savings showed a slight increase, up from 32.5% in 2003 to 35.7% in 2004. Similarly, its share in gross fixed capital formation (GFCF) rose from 30.6% to 35.7%. State issues were up sharply, from 2,123 MTD in 2003 to 2,596 MTD in 2004. This increase involved solely issues of BTA, the volume of which rose by 84.4% from 1,039 MTD to 1,916 MTD. On the other hand, issues of short-term Treasury bonds (BTC)
226 were down sharply for the third straight year, amounting to just 680 MTD vs. 1,084 MTD in 2003, a drop of 37.3%. The structure of issues reflects a marked preference on the part of the Treasury for long- term issues to the detriment of short-term products, which is part of the initiative to reprofile public debt that began several years ago. Thus the share of BTA bonds in total issues continued to grow, up from 2003 to 2004 to a 73.8% share of Treasury bond issues, compared to 48.9% in 2003 and 30.5% in 2002. Breakdown by duration shows a concentration on ten-year bonds equivalent to Treasury bond lines for a total of 1,320 MTD, 68.9% of the total value of BTA issued, along with the exclusive issue of 52-week BTCT. This prolonged the average duration of domestic debt beyond the target of four years set by the State’s indicative financing programme for 2004, the average duration for public debt having come in at four years and 11 months on 31 December 2004, compared to three years and five months at the end of 2003 and two years and nine months at the end of 2002. But despite the growing volume of Treasury bond issues, they were able to meet only about one third of demand from bidders, with the Central Bank of Tunisia mobilising in April 2004 (on behalf of the State) a debenture loan in the amount of 450 million euros on the international capital market. VOLUME OF ISSUES THROUGH PUBLIC CALL FOR SAVINGS1 (In MTD unless otherwise indicated) Description 2002 2003 2004 Variations 2003/2002 2004/2003 Volume of issues through public call for savings 2,752 2,305 2,800 -447 495 *Capital securities 46 57 93 11 36 . Banking sector issues 0 0 83 0 83 Number of transactions (units) 0 0 3 0 3 . Non-banking sector issues 46 57 10 11 -47 Number of transactions (units) 11 16 8 5 -8 *Claims securities 2,706 2,248 2,707 -458 459 a – Bonds 233 125 111 -108 -14 . Banking sector issues 100 0 20 -100 20 Number of transactions (units) 3 0 1 -3 1 . Leasing sector issues 96 97 85 1 -12 Number of transactions (units) 8 8 6 0 -2 . Other sectors issues 37 28 6 -9 -22 Number of transactions (units) 6 4 1 -2 -3 b – Public securities 2,473 2,123 2,596 -350 473 Bonds equivalent to Treasury bonds (BTA) 754 1,039 1,916 285 877 Short term Treasury bonds (BTCT) 1,719 1,084 680 -635 -404 Source : Capital Market Council (CMF) Despite strong demand for Treasury bonds and great enthusiasm on the part of tenderers for long-term securities in a context of more limited supply, there was an ongoing overall drop in the weighted average rate, at issues, affecting in particular long-term BTA. The weighted average rate for the line of ten-year BTA, falling due April 2014 at 7.5% (on which the Treasury made the largest drawings of the year),
1 Data are established on the basis of the date of visa issued by the CMF for capital securities and bonds and the date of auction for public securities. 227 went down from 7.401% in April to 6.963% for auction in December. On the other hand, the weighted average rate for BTCT remained at levels very near the money market average rate (which stabilised at 5% throughout the year), within a narrow range of between 5.098% and 5.246%. New regulations were issued to enlarge the base of people eligible to buy and subscribe to Treasury bonds. The circular to authorised intermediaries n° 2004-03 of 19 July 2004 authorised non-resident foreign-national private individuals and corporate bodies to subscribe to and purchase bonds equivalent to Treasury bonds, up to 5% of the outstanding balance of each line of issue calculated after announcement of auction results. But despite the establishment of this legal framework, there were neither purchase nor subscription transactions by non-resident foreigners in 2004. Private issues were up 12.1% to 204 MTD, compared to 182 MTD a year earlier. The share of these issues in private sector GFCF went up from 4.3% to 4.7% from one year to the next. Issues of capital securities were up by a sharp 63.2%, rising from 57 MTD in 2003 to 93 MTD in 2004. Issues in cash, launched solely by companies listed on the stock market, were up at a remarkable level, for a total of 70 MTD, 75.3% of the overall amount of issues, compared to 19 MTD and 33.3% in 2003. But there were only a few companies that proceeded with capital increases in cash in 2004, while the 68 MTD1 increase in fresh capital came, mainly, from two listed banks. On the bond segment, issues were low, down 11.2% from their level in 2003. This involved a decline from 125 MTD to 111 MTD, (well below 2002’s 233 MTD and 2001’s 297 MTD), the amount totally subscribed to2. 8 borrowings were launched by 7 companies on the bond market by public call for savings for relatively low individual amounts ranging from 6 MTD to 20 MTD, duration between five and seven years, fixed rates oscillating between 7% and 7.4% or variable rate ranging from 1.25% to 1.5% above the money market rate. Debenture loans issued by listed companies were worth 95 MTD, 85.6% of global volume issued, compared to 97 MTD and 77.6% the year before. Breakdown of issuers by sector shows that, as usual, leasing companies were the most active category on the bond market. Thus five leasing companies (four of which are listed on the stock market) proceeded to issue six debenture loans in the amount of 85 MTD, representing 76.6% of total issues. A bank listed on the market invested 20 MTD and an unlisted hotel 6 MTD, accounting for the remaining transactions. The structure of subscribers to debenture loan issues was virtually the same as the year before. Retirement funds were totally absent from the market, with no subscriptions to debenture loans at all in either 2003 or 2004, whereas open-end investment companies consolidated their position, taking on the largest portion of the global volume of subscriptions : 65.8% or 73 MTD.
1 These are capital increases in cash launched by the BIAT (32 MTD) and the UIB (36 MTD). 2 Of this total, 31 MTD were subscribed to in 2005.
228 The share of subscriptions by banks, on the other hand, after having risen to 24.8% in 2003, fell considerably in 2004, back to its 2002 level. Thus their subscriptions fell from 31 MTD in 2003 to 9 MTD in 2004, an 8.1% share of subscribed global volume. And the share of subscriptions by insurance companies was up slightly, from 12% in 2003 (to 15 MTD) to 14.4% in 2004 (to 16 MTD). The share of private individuals remained practically unchanged at 4.5%. Subscribers continued to prefer fixed-rate borrowings. In effect, five debenture loans out of the eight issued in 2004 came out at two different rates, one fixed and the other indexed on the money market rate. These borrowings involved 75 MTD, 88% of which was subscribed to (66 MTD) at a fixed rate. Early repayment of the outstanding 39 MTD for four debenture loans issued in the amount of 51 MTD1 was made for the first time in 2004. The Financial Market Council in May and September 2004 authorised BATAM (the Hela Electromenager et Confort Company) to put off repayment of two debenture loans issued in 1998 and 2000, made necessary by the delay in implementing the company’s recovery plan. 2. The secondary market The global volume of trade in capital in 2004 maintained the downward trend that began a few years earlier. It fell 27.3%, from 948 MTD a year earlier to 689 MTD. But activity on this market was characterised by different trends for different components. a. Official quotation Although there were no new listings, the striking event on the stock market was the writing off of the Mechanical Workshops of the Sahel (AMS), following a public withdrawal bid, bringing the total number of listed companies to 44. Then in October and November the Stock Market Governing Council authorised GIF Filter (the general industrial filtration company) and ASSAD (the Tunisian battery company) to accede to the first market of the stock quotation through public sale bid for capitalisation of 16.7 MTD and 27.1 MTD respectively, with entry on the stock market likely to be finalised in the first quarter of 2005. As for stock market indexes, the upward movement recorded at the end of 2003 continued in the first half of 2004. At the end of June TUNINDEX posted a 6% increase over its 31 December 2003 level before stagnating throughout the second half of the year. It closed for the year at 1331.82 points, up 6.5% over the previous yearend figure, vs. +11.7% a year earlier. BVMT, Tunis Stock Market index, which closed for the year at 974.82 points, evolved in a very similar manner, up 7.2% for the first half of the year before dipping by 3.2% over the second half. This yielded an increase for the year of 3.7% as of 31 December 2004, a rate well below the 20% gain recorded the year before.
1 This involves debenture loans BMG 99, BTKD 2000, CPSCL 2001 and VAGA 2003 for respective amounts of 3.6 MTD, 14 MTD, 14.48 MTD and 6.5 MTD.
229 Modest increases in indexes throughout 2004 were largely due to the considerable drop for leading stocks, such as SFBT and SOTETEL, which fell by 15.3% and 34.8% respectively. The overal volume of transactions posted on the official quotation in 2004, while not as impressive as the record high of 509 MTD recorded in 2001, was up a very respectable 33.2% to 317 MTD, 89.3% of which was generated by trade in shares. The increase was even higher for the number of securities traded, up from 13 million in 2003 to 21 million in 2004 (+63.5%). The higher level of activity on the official quotation was attributable to the greater volume of transactions in block, amounting to 50 MTD, 15.8% of trading. This compares to 21 MTD and 8.8% the previous year, along with renewed investor confidence, due in part to a rebound in foreign investments on the stock market.
TRENDS IN TRANSACTIONS ON THE SECONDARY MARKET (In MTD unless otherwise indicated) Variation in % Description 2002 2003 2004 2003/2002 2004/2003 Overall volume of transactions 1,006 948 689 -5.8 -27.3 *Number of securities handled (in thousand) 43,208 47,232 43,546 9.3 -7.8 .Official quotation 343 238 317 -30.6 33.2 *Number of securities handled (in thousand) 17,044 12,921 21,127 -24.2 63.5 .Unlisted companies 66 67 20 1.5 -70.1 *Number of securities handled (in thousand) 3,022 3,251 2,209 7.6 -32.1 .Registry transactions & declarations 597 643 352 7.7 -45.3 *Number of securities handled (in thousand) 23,142 31,060 20,210 34.2 -34.9 Source : BVMT An analysis of the breakdown of trade in capital securities shows concentration on a relatively small number of stocks, with seven listed companies accounting for more than half of the overall total of transactions.
Tunisiair is currently undergoing restructuring, having enjoyed renewed profit following several years of deficit. It was the most active stock on the board, both in terms of value and volume of shares traded. Other key stocks that enjoyed brisk trading were BT, SOMOCER and BIAT, notably because of the transaction to increase capital at BIAT and the eagerness of foreign investors to buy these stocks.
230 VOLUME OF TRANSACTIONS BY TYPE OF STOCK (In MTD unless otherwise indicated) Variation in % Description 2002 2003 2004 2003/2002 2004/2003 Overall market 1,006 948 689 -5.8 -27.3 .Shares & rights 994 921 653 -7.3 -29.1 .Bonds & public securities 12 27 36 125.0 33.3 Official quotation 343 238 317 -30.6 33.2 .Shares & rights 334 213 283 -36.2 32.9 .Bonds & public securities 9 25 34 177.8 36.0 Unlisted companies 66 67 20 1.5 -70.1 .Shares & rights 63 65 18 3.2 -72.3 .Bonds 3 2 2 -33.3 - Registry transactions & declarations (Shares & rights) 597 643 352 7.7 -45.3 Source : BVMT It should be noted that the banking sector continued to dominate trading on the official quotation. Its share in total trading came to 34%, the same percentage as the year before. Industry’s share was up slightly, from 29% in 2003 to 32% in 2004, despite the withdrawal of AMS. The services sector accounted for only 19% of trading, vs. 27% in 2003. The higher level of transactions on the stock market had a positive influence on the rotation and market liquidity rates, up from 8% and 33% in 2003 to 10.3% and 38% in 2004.
Daily trends in stock exchange indexes (In points)
1,500
1,200
900
600 Dec-02 June-03 Dec-03 June-04 Dec-04 BVMT index TUNINDEX
Stock market capitalisation was up by 3.7% over its 2003 level, amounting to 3,085 MTD despite the reduced number of listed companies. The share of the banking sector remained predominant, practically unchanged at 52%. But it must be pointed out that the share of market capitalisation in GDP continued on the downturn that has been in effect for several years, coming in at 8.8% for 2004 vs. 9.2% and 9.5% respectively for 2003 and 2002.
231 TRENDS IN SECONDARY MARKET INDICATORS End of period 2 0 0 4 Variation (%) Dec.2002 Dec.2003 Dec.2003 Dec.2004 March June Sept. Dec. Description Dec.2002 Dec.2003 -BVMT index (in points) 782.93 939.78 1,002.05 1,006.98 1,023.51 974.82 20.0 3.7 -TUNINDEX (in points) 1,119.15 1,250.18 1,302.41 1,324.63 1,315.52 1,331.82 11.7 6.5 -Stock market capitalisation (in MTD) 2,842 2,976 3,070 3,063 3,050 3,085 4.7 3.7 Source : BVMT Prices for 28 posted stocks grew between 3.1% and 175%, with a record increase for Magasin General, taking advantage of the announcement of total or partial State disengagement by selling off a controlling block of shares to private parties. However, 16 remaining stock posted negative yields ranging from -65.7% to -1.8%. It was Tunisie Lait that recorded the sharpest drop, due in particular to the high level of cumulative losses, which amounted to more than half of its capital stock equity, as per provisional financial statements as on 30 June 2004. b. Off-list quotations, registry transactions and declarations It was off-list quotations that suffered the most from the reduced volume of transactions. The global volume of capital trading on the off-list was down sharply from previous year figures, sinking to 20 MTD from 67 MTD in 2003, a drop of some 70%. The number of stocks traded also fell, by one third, down from 3.3 million in 2003 to 2.2 million in 2004. Registry transactions and declarations also fell from previous year levels : just 352 MTD in 2004 vs. 643 MTD a year earlier. Similarly, the number of stocks traded and contracts signed was down 34.9% to 20.2 million for 2004. It should be noted in this regard that the relatively low volume of registry transactions is due to the fact that, contrary to previous years, 2004 was characterised by the lack of major privatisation transactions. Monthly volume of the most important registry transactions was the highest both in September and December, with respective amounts of 64.2 MTD (39 MTD of which were tied to privatisation of the Enfidha Cement Plant) and 85.7 MTD. Sector-related breakdown of registry transactions puts construction/building materials in first place with 22.2% of global volume. This was followed by tourism and agrofood, with 17.9% and 10.2% of shares respectively. Foreign portfolio investment in 2004 was marked by the return of Arab capital. Thus both purchase and sale of shares on both the stock market and off-list transactions were up over 2003 figures, from 36.8 MTD to 62.7 MTD for the former and from 19.1 MTD to 32.9 MTD for the latter, with the net balance up from 17.7 MTD to 29.8 MTD. Registry transactions yielded a net balance of 21.6 MTD (vs. -10.8 MTD the year before), although the global volume of acquisitions and sales came to amounts well below 2003 figures. The net balance of foreign investment thus skyrocketed from 6.9 MTD to 51.4 MTD.
232 Acquisitions by foreigners in 2004 concerned mainly SOMOCER, SIAME, BIAT and BT stocks, which accounted for 78% of global volume of purchases on the market. It should be specified that these transactions were beneficial to SOMOCER and SIAME, which posted the highest increase in the rate of foreign participation. B. THE ACTIVITY OF MUTUAL FUNDS INVESTING IN SECURITIES (OPCVM) Although no new authorisations were issued in 2004, two mixed open-end investment companies SICAV were liquidated since their respective net assets were below 1 MTD for more than 90 days in the row. Thus the total number of mutual funds investing in securities (OPCVM) fell from 36 to 34 as of the end of 2004.
TREND IN OPCVM ACTIVITY 2 0 0 3 2 0 0 4
Bond Mixed Bond Mixed Description Total Total OPCVM OPCVM OPCVM OPCVM Managed assets(in MTD) 1,608 65 1,673 1,908 92 2,000 Number of OPCVM (in unit) 17 19 36 17 17 34 Number of shareholders (in unit) 25,456 2,069 27,525 27,549 2,211 29,760 Net assets per shareholder (in mTD) 63 31 61 69 41 67 Despite these withdrawals, favourable trends for activity at these mutual funds conti- nued in 2004. Assets handled by these structures were up 20%, from 1,673 MTD at the end of 2003 to 2,000 MTD at the end of 2004. Similarly, these entities continued to be attractive to investors, with the total number of shareholders up by 8% in 2004. Bond OPCVM continued to dominate in 2004, despite a slight drop in their share of assets (down from 96% a year before to 95%). Their share of total OPCVM shareholders remained stable at 92%. Average net assets for this type of mutual funds amounted to 112 MTD in 2004 and seven units, with assets of over 100 MTD accounting for 82% of managed assets. Average net assets for mixed OPCVM amounted to just 5 MTD in 2004 and activity at these structures remained concentrated on the three units that constitute 63% of the overall portfolio. BREAKDOWN OF OPCVM BY CLASS 2 0 0 3 2 0 0 4 Average Average Description OPCVM Shareholders OPCVM Shareholders net assets net assets Number number Number number in MTD in MTD 1- Bond OPCVM [1 to 10 MTD[ 3 5 484 2 5 482 [10 to 50 MTD[ 7 28 2,220 4 19 808 [50 to 100 MTD] 0 0 0 4 64 1,974 > 100 MTD 7 200 22,752 7 223 23,900 Sub-total 1 17 95 25,456 17 112 27,164 2- Mixed OPCVM < 1 MTD 3 0.9 209 3 0,8 40 [1 to 10 MTD] 12 11 157 3 19 462 > 10 MTD 3 11 157 3 19 462 Sub-total 2 18 4 2,069 17 5 2,211 General total 35 46 27,525 34 59 29,375
233 The increase in net OPCVM assets arises mainly from the collection effect resulting from the difference between subscriptions and buy-backs over the period, reflecting the success of relevant structures in attracting new capital. Thus a positive collection effect of 304 MTD was recorded for mutual funds, the result of 2,227 MTD in new subscriptions against 1,923 MTD in buy-backs. Net inflows of capital taken in were up 127% over the 2003 figure. TREND IN CAPITAL COLLECTED BY OPCVM (In MTD) 2 0 0 3 2 0 0 4 Description Bond Mixed Bond Mixed Total Total OPCVM OPCVM OPCVM OPCVM Subscriptions 1,719 51 1,770 2,115 112 2,227 Buy-backs 1,593 43 1,636 1,835 88 1,923 Net flows 126 8 134 280 24 304 The coupon effect gives an account of sums disbursed by these entities in the form of dividends. These dividends totalled 71 MTD in 2004, compared to 66 MTD the year before. Finally, the price effect measuring the impact of mutual fund management, mainly earnings from portfolio securities increased from 92 MTD in 2003 to 94 MTD in 2004. OPCVM NET ASSETS TREND ANALYSIS (In MTD) 2 0 0 3 2 0 0 4 Description Bond Mixed Bond Mixed Total Total OPCVM OPCVM OPCVM OPCVM Net assets, beginning of period 1,455 57 1,511 1,606 65 1,671 Collection effect +126 +8 +134 +280 +24 +304 Price effect +88 +4 +92 +89 +5 +94 Coupon effect -63 -3 -66 -68 -3 -71 Total effect +151 +9 +160 +301 +26 +327 Net asset, end of period 1,606 65 1,671 1,907 91 1,998 Bond OPCVM took in an additional 280 MTD in 2004, vs. 126 MTD the previous year. Dividends paid by these structures amounted to 68 MTD, up 5 MTD over the previous year. The price effect remained stable at about 89 MTD. Capital taken in by mixed OPCVM was up 24 MTD in 2004 vs. 8 MTD in 2003. Paid out dividends remained at about the same 3 MTD level and good performance at these mutual funds rose from 4 MTD in 2003 to 5 MTD in 2004. The make up of assets managed by bond OPCVM in 2004 shows a share in corporate bonds that fell from 27% in 2003 to 21% in 2004. This drop was to the advantage of bonds equivalent to Treasury bonds, whose shares increased from 29% in 2003 to 38% in 2004. Monetary and other short-term investments increased, with 23% of managed assets vs. 20% a year earlier. Liquidity represented only 14% of managed assets vs. 18% in 2003.
234 BREAKDOWN OF ASSETS MANAGED BY OPCVM (In MTD) 2 0 0 3 2 0 0 4 Description Bond Mixed Bond Mixed Total Total OPCVM OPCVM OPCVM OPCVM Shares 32 35 67 42 35 77 Corporate bonds 445 9 454 399 11 410 Bonds equivalent to Treasury bonds 463 8 471 728 22 750 Treasury bonds negotiable on the stock market 60 1 61 36 1 37 Monetary and other short term investment 315 5 320 442 9 451 Liquidity 294 7 301 261 15 276 Total 1,608 65 1,673 1,908 92 2,000 Source : CMF For mixed OPCVM, stocks dipped from a 54% share in December 2003 to 38% in December 2004, to the advantage of bonds equivalent to Treasury bonds whose share increased over this same timeframe from 12% to 24%. Monetary and other short-term investments as well as liquidity were up to 10% and 16% of the managed assets respectively vs. 8% and 11% a year earlier. The average yield for bond OPCVM continued on its downturn, posting 4.36% vs. 4.42% in 2003. Average yield for mixed OPCVM was up 6.48%, holding to the trend that began a year earlier. AVERAGE YIELD RATE OF OPCVMs (In %) Description 2002 2003 2004 Bond OPCVMs 4.54 4.42 4.36 Mixed OPCVMs -7.71 4.71 6.48 Source : CMF
235
FINANCIAL STATEMENTS OF THE CENTRAL BANK OF TUNISIA
FINANCIAL STATEMENTS OF THE CENTRAL BANK OF TUNISIA
A. LEGAL FRAMEWORK AND ACCOUNTING REFERENTIAL The financial statements of the Central Bank of Tunisia (BCT) are drawn up in line with the terms of law n°58-90 of 19 September 1958 that governs the founding and organisation of the Central Bank of Tunisia as well Tunisian accounting standards, with due account of the specific tasks of the BCT. Those areas not covered by specific Tunisian accounting standards will follow international accounting standards and generally accepted accounting principles. BCT’s financial statements include : - the balance sheet, - the off balance sheet commitment statement, - the income statement, - notes relating to the financial statements. To facilitate understanding of BCT financial statements, a number of modifications were made in 2004 financial year, notably : - Publication of the off balance sheet commitment statement and notes relating to financial statements as constituent elements of the Bank’s financial statements. - Specific entry of the Bank’s total core capital, separate from liabilities. - Breakdown of the former liability heading «Other sight and forward liabilities» into four distinct categories : • current accounts in dinars of foreign organisations, • commitments to authorised intermediaries in foreign currency, • foreign accounts in foreign currency, • other commitments in foreign currency. Personnel deposit accounts and similar accounts have been integrated under the heading of «Miscellaneous creditors». - «Differences on conversion and revaluation» have been entered individually under a specific liabilities heading. - «Provisions for banknotes, coins and medals manufacturing expenses» are now under a specific liabilities heading, although they were previously integrated under the heading «Memorandum accounts and accounts calling for adjustment». The purpose of this change was to show resources allocated to financing the above costs, which are no longer funded by the Bank’s operating budget.
238 - Reclassification of cost headings by advancing financial charges to administrative expenditure, the latter broken down under three headings : • staff costs, • general operating costs, • banknotes, coins and medals manufacturing expenses. B. ACCOUNTING PRINCIPLES AND RULES OF ASSESSMENT 1. GOLD HOLDINGS The value of Bank holdings in gold is assessed on the basis of the official price of gold, as per decree-law n°64-18 of 28 September 1964 governing definition of the dinar. In effect, article 2 of this decree stipulates that «official parity of the dinar is set at 1.69271 gram of fine gold for one dinar». Thus a gram of fine gold is the equivalent of 0.590768649 dinar. After devaluation of the dinar in 1986 and in application of decree n°86-785 of 18 August 1986, the official price of gold came in at 0.6498475 dinar per gram of fine gold. 2. ASSETS AND LIABILITIES IN FOREIGN CURRENCY Assets and liabilities denominated in foreign currency are converted to dinars at «Accounting reference rates» , which remain the same for one month. Accounting reference rates represent average rates (purchase rates + selling rates/2) set by the Central Bank on the last working day of each month. Assets and liabilities denominated in foreign currency are revaluated at the end of each month. Unrealised losses and gains resulting from monthly revaluation are recorded in the balance sheet account entitled «Differences on conversion». 3. ASSUMPTION OF PROCEEDS AND COSTS a. Keeping track of proceeds and costs is done in line with the accounting principle of «independence of financial year». Thus proceeds and costs are entered for the accounting year in which they were acquired or due. b. Proceeds and costs from transactions in foreign currencies are converted to dinars at the exchange rates in effect on the day they are transacted. c. On the closing date of the financial year, the balance of the account entitled «Differences on conversion» is treated as appropriate in the following manner : - debit balance : The entire balance is recorded as costs for the financial year. - credit balance : Only the amount remaining after establishing the portion of the above-mentioned balance to be carried over to the following financial year to cover possible losses on exchange that could be recorded during that period is to be accounted for in the result account as gain on exchange for readjustment of foreign currency accounts.
239 d. Differences between exchange rates in effect on the day of transaction and accounting reference rates are entered as a result, either gain or loss on exchange. In effect, these gains and losses arise from achieved transactions. 4. FIXED ASSETS Tangible and intangible fixed assets are accounted for by applying the rule of « historical cost », that is, the cost of acquisition or the actual amount disbursed in the case of construction. Except for land, depreciation of fixed assets is calculated in a linear manner on the basis of estimated lifespan for these assets, applying the usual rates for each category of fixed goods. For certain equipment specific to the Central Bank (cashier equipment, for example), applicable lifespan and depreciation rates are determined by referring to user practices. Tangible fixed assets are made up mostly of land, construction, technical equipment, computer equipment, cashier equipment, means of transport and office equipment. Intangible fixed assets are made up of computer software. 5. SECURITIES a. The available for sale securities portfolio denominated in foreign currency, which falls under the heading «foreign currency assets», is assessed at market prices on the closing date of the financial year. Unrealised losses from the difference between accounting value (possibly corrected by amortisation of premiums and discounts) and the market value of securities give rise to provisions for depreciation. Unrealised gains are not entered. b. Securities in dinars bought in the framework of open market transactions are assessed at market prices on the balance sheet’s closing date. Unrealised losses or gains resulting from revaluation are recorded in the balance sheet account «Differences on revaluation». 6. SHAREHOLDING PORTFOLIO The BCT shareholding portfolio is made up of stocks to which it has subscribed in the framework of article 53 of its statutes, representing its shares in the capital of a number of non resident institutions and companies as well as resident companies managing common banking services. These shares are accounted for at the cost of acquisition, corresponding to their nominal value. C. DETAILED EXPLANATION OF THE VARIOUS HEADINGS IN THE FINANCIAL STATEMENTS 1. NOTES RELATING TO FINANCIAL STATEMENTS NOTE 1 : IMF RESERVE POSITION The IMF reserve position is the portion in foreign currency of Tunisia’s share in the capital of this institution. It represents the difference between the total amount of Tunisia’s share (286.5 million SDR s) and IMF’s assets in dinars held in its n° 1
240 account on the books at the Central Bank. Like foreign currency assets, the IMF reserve position is part of Tunisia’s overall international reserves. If needed to prop up the balance of payments, these assets (denominated in SDRs) can be drawn on at IMF without any prior conditions having to be met, by converting them into those currencies that are the most easily converted. NOTE 2 : ASSETS AND INVESTMENTS IN SDRs This heading includes: - the balance of the account in SDRs opened in the name of the Central Bank of Tunisia on the books of the IMF, which on 31 December 2004 amounted to 6 million SDRs, the equivalent on that date of 11.1 million dinars; and - the amount in SDRs of the Central Bank’s contribution to the Poverty Reduction and Growth Facility – Heavily Indebted Poor Countries fiduciary fund administered by the International Monetary Fund. This contribution amounted to 2.4 million SDRs, the equivalent of 4.4 million dinars. NOTE 3 : FOREIGN CURRENCY ASSETS Assets in foreign currency are made up mainly of term deposits and securities. NOTE 4 : ECONOMIC COOPERATION ACCOUNTS This heading covers the outstanding balance of external financial aid made available to the Tunisian Government in the framework of bilateral economic cooperation with foreign countries, the management of which is handled by the Central Bank under the terms of implementation agreements signed by central banks or other financial institutions designated by their respective governments to ensure proper management of these funds. This is the counterpart of the heading «Economic Cooperation Accounts» that appears under liabilities on the balance sheet and that records Central Bank commitments to the foreign financial institutions intervening in this framework. Given the role of intermediary that has been assigned to it, transactions carried out in the above-mentioned framework will not generate any costs or proceeds at all for the Bank. The amount of the difference between assets and liabilities headings (19.6 MTD) represents the counter-value in dinars of balances for special accounts opened on behalf of the Central Bank of Tunisia on the books of relevant central banks or foreign financial institutions as at 31/12/2004. These balances represent foreign currency at the disposal of the Bank to finance import of goods and services in the framework of projects or programmes specified in bilateral economic cooperation agreements. They are considered to be foreign currency assets for specific use, accounted for on the books of the Bank in the account entitled «assigned foreign currency assets » under the heading «assets in foreign currency», with its counterpart recorded under the liabilities heading «economic cooperation accounts».
241 NOTE 5 : REFINANCING TO THE LENDING INSTITUTIONS RELATED TO MONETARY POLICY TRANSACTIONS This category shows the outstanding balance of financing to lending institutions in the framework of monetary policy transactions. The amount of 90 million dinars that appeared in this section as at 31 December 2004 represents the amount of the 24-hour liquidity injection transaction made on this date. NOTE 6 : CLAIMS PURCHASED FIRM The amount recorded under this heading corresponds to the outstanding balance of claims held on the National Oil Board (104.2 MTD) and the Cereals Board (218.7 MTD) that were the object of firm purchases by the BCT from the National Agricultural Bank and guaranteed by the State in December 1996. NOTE 7 : ADVANCE TO THE STATE PERTAINING TO MONETARY FUNDS SUBSCRIPTION This heading includes the counter-value in dinars of Tunisia’s share in the capital of the following two financial institutions : - International Monetary Fund : The total amount of Tunisia’s subscription to the capital of this institution came to 286.5 million SDRs, 266.3 million of which were subscribed to in dinars and credited to IMF account n° 1 and 20.2 million subscribed to in convertible currencies. - Arab Monetary Fund : The total amount of Tunisia’s subscription to this institution’s capital came to 7 million Arab accounting dinars, 0.1 million of which were subscribed to in local currency and credited to the AMF’s dinar account on the books of the Central Bank and 6.9 million subscribed to in convertible currencies. (The Arab accounting dinar is equal to 3 SDRs.) Subscriptions in dinars to the capital of these two institutions, recorded as credits to their respective accounts opened on the books of the Central Bank, undergo annual readjustment to take into account trends in SDR exchange rates for the Tunisian dinar, in line with rates set by the International Monetary Fund. NOTE 8 : STANDING ADVANCE TO THE STATE This category posts the amount of the permanent advance made to the State under the terms of the relevant agreement signed by the Central Bank and the Ministry of Finance on 29 June 1970, in line with law n° 70-22 of 7 May 1970 concerning reorganisation of public finances. In counterpart of this advance, the State pays interest at an annual rate of 0.5 %. NOTE 9 : REIMBURSABLE ADVANCE TO THE STATE Under this heading is recorded the outstanding balance of the reimbursable advance to the State paid in line with the above-mentioned agreement, against payment of interest at an annual rate of 3%.
242 NOTE 10 : POSTAL CURRENT ACCOUNT The amount recorded under this heading represents the balance of the current account opened in the name of the Central Bank of Tunisia on the books of the Postal Checks Centre. It is considered an indirect advance to the Treasury. NOTE 11 : CURRENT COLLECTION OF VALUES The amount recorded under this heading represents the net debit situation of values collection accounts, including cheques, especially checks drawn for the Treasury. The Central Bank deposits in the Treasury’s current account the amounts of cheques as they are received, then later handles their collection. NOTE 12 : BILLS TO BE ENCASHED The amount recorded under this heading represents the outstanding balance of securities subscribed to by the State, especially guaranteed bonds subscribed to settle taxes and other expenses. These securities are kept in the Central Bank of Tunisia portfolio until they fall due. NOTE 13 : SHAREHOLDING PORTFOLIO The amount recorded under this heading involves Central Bank of Tunisia holdings in the capital of the following institutions : - Tunisian Banking Union (UTB) : 7,153,000 euros
- The SWIFT Company : 750,000 euros
- The African Import-Export Bank : 10,000,000 US dollars
- The programme to finance Inter-Arab Trade : 1,250,000 dollars
- The inter-bank electronic clearing company (SIBTEL) : 105,000 Tunisian dinars
NOTE 14 : MISCELLANEOUS DEBITORS Under this heading is found mainly the outstanding balance for various kinds of loans made to the Bank’s employees that are financed from social fund reserves. This amounted to 22.1 million dinars as at 31 December 2004. NOTE 15 : MEMORANDUM ACCOUNTS AND ACCOUNTS CALLING FOR ADJUSTMENT (ASSETS) This heading includes mainly costs paid in advance, proceeds to be received, and other debit amounts waiting to be settled. NOTE 16 : GOVERNMENT ACCOUNTS This category consists mainly of the balance of the Treasury’s current account (663.7 MTD), the balance of Tunisian Government special accounts in foreign currency, which record drawings on foreign loans and grants to the State or to public institutions with a guarantee from the State (231.1 MTD), and the balances of other
243 accounts linked to various funds managed by the Central Bank on behalf of the State, such as the industrial promotion and decentralisation fund (FOPRODI) and the national fund to promote handicrafts and small trades (FONAPRA). NOTE 17 : ALLOCATION OF SPECIAL DRAWING RIGHTS This category includes the counterpart of cumulative amounts in SDRs allocated by the International Monetary Fund to Tunisia in its capacity of member state. Amounting to 34,243,000 SDRs as of 31 December 2004, these SDRs should be returned to the International Monetary Fund if cancelled. Allocations thus represent a commitment of unlimited duration to the International Monetary Fund. NOTE 18 : CURRENT ACCOUNTS IN DINARS OF FOREIGN ORGANISATIONS This heading includes the balances of accounts opened in dinars in the name of foreign organisations such as the International Monetary Fund, the World Bank, the African Development Bank and the Arab Monetary Fund. The balance of the International Monetary Fund’s n°1 account (which includes the amount of Tunisia’s subscription in dinars to the capital of the Fund) is the largest component of this category (491.1 MTD). NOTE 19 : COMMITMENTS IN FOREIGN CURRENCY TO AUTHORISED TUNISIAN INTERMEDIARIES This heading covers the sight holdings in foreign currency of authorised intermediaries as well as the outstanding balance of borrowings by the Central Bank on the foreign currency money market. NOTE 20 : FOREIGN ACCOUNTS IN FOREIGN CURRENCY These are accounts opened in either foreign currency or convertible Tunisian dinars in the name of non-resident banks or institutions. NOTE 21 : OTHER COMMITMENTS IN FOREIGN CURRENCY This heading includes both the outstanding balance of borrowings from the Arab Monetary Fund under the second and third facilities for structural adjustment (8.1 million SDRs and 15.5 million SDRs respectively) and the balance of the special deposit account in foreign currency opened in the name of the Abu Dhabi Fund for Arab Economic Development in the framework of an agreement signed with the Central Bank of Tunisia (18.6 million USD). NOTE 22 : DEPOSITORS OF PAID-IN BILLS This heading represents the counterpart of the assets heading entitled «Bills to be encashed». The difference between these two headings represents the value of securities that have fallen due and that are sent for collection, the amount not yet having been encashed. NOTE 23 : DIFFERENCES ON CONVERSION AND REEVALUATION This heading includes both the portion of the credit balance for «Differences on conversion» held as a provision to cover the risk of variations on exchange rates in 244 2005 (42 MTD) and the gains in value from revaluation at market price of securities purchased in the framework of open market transactions (0.2 MTD). NOTE 24 : MISCELLANEOUS CREDITORS This heading includes mainly the deposit accounts of the Bank’s employees and similar accounts, withheld tax to benefit the State, the amounts of contributions for social coverage pending payment, and the amounts of stop-seizure on current accounts. NOTE 25 : MEMORANDUM ACCOUNTS AND ACCOUNTS CALLING FOR ADJUSTMENT (LIABILITIES) This category includes mainly credit amounts awaiting regularisation, costs to be paid, proceeds received in advance and the counterpart of the International Monetary Fund’s reserve position. NOTE 26 : RESERVES This category is made up of : - the legal reserve : 3 MTD - the special reserve : 32.8 MTD - Social Fund reserves : 22.8 MTD - provision for construction of buildings : 18 MTD NOTE 27 : OFF BALANCE SHEET COMMITMENTS Off balance sheet commitments’ statement includes those made for guarantees and those made on foreign currency swap transactions: - Commitments for guarantees Recorded under this heading are debenture loans (capital and interest) issued by the Central Bank of Tunisia for the Tunisian Government on foreign financial markets (Japanese, American and European) and a number of State external borrowings (capital and interest) contracted in the framework of bilateral economic cooperation. These borrowings are managed by the Central Bank for the State against signed commitment by the foreign party (foreign bank or financial institution) to settle maturities of these borrowings. Since the Central Bank’s financial commitments in relation to the above- mentioned borrowings involve a similar commitment on the part of the State to meet all repayments for the relevant borrowings as well as the settlement of all related financial costs, the choice has been made to enter them on Bank books as off balance sheet commitments. These commitments are, in effect, considered as signature commitments, in line with the accounting convention «substance over form».
245 - Commitments on foreign currency swap transactions This heading includes commitments made (foreign currency to be provided) and commitments received (foreign currency to be acquired), in the framework of foreign currency swap transactions to cover exchange risk relating to a number of debenture loans denominated in Japanese yen. NOTE 28 : OTHER PROCEEDS ON FOREIGN CURRENCY TRANSACTIONS This category includes mainly commissions charged on exchange transactions (26.2 MTD) and net gain on exchange from the difference between exchange rates in effect on the date of foreign currency transactions and accounting reference rates (15.8 MTD). NOTE 29 : OTHER EXPENSES ON FOREIGN CURRENCY TRANSACTIONS This category includes mainly costs for instruments to cover exchange risk (exchange swap, foreign currency swap...) and costs for the spreading out of the premium for securities in foreign currency. 2. COMMENTARY ON THE MAIN VARIATIONS FOR FINANCIAL STATEMENTS The total of the Central Bank of Tunisia’s balance sheet came to 6,307.8 MTD as of 31 December 2004 vs. 5,468.3 MTD in 2003, an increase of 839.5 MTD or 15.4%. Operating income amounted to 155 MTD vs. 102.1 MTD in 2003, an increase of 52.9 MTD or 51.8%. These trends can be attributed mainly to the higher volume of exchange reserves and strong appreciation of the euro. a. Trends in balance sheet headings * Assets Assets in foreign currency were up 1210.2 MTD or 34.1%, from 3,550.1 MTD in 2003 to 4,760.3 MTD in 2004. This increase was due mainly to higher tourist earnings, higher exports for agriculture, and encashment of the second portion of the mobile phone (GSM) licence proceeds (USD 223 million) as well as drawings on external borrowings and especially the bond issue in the amount EUR 450 million benefiting the State. The increase in assets in foreign currency had the usual expansionary effect on bank liquidity, especially over the third quarter of the year, leading to reduced intervention by the Issuing Institution on the money market. Thus the outstanding balance of financing to lending institutions, exclusive of open market transactions, was down by 345 MTD from end 2003 to end 2004. On the other hand, the balance of the portfolio of Treasury bonds bought in the framework of open market transactions increased from 5.2 MTD in 2003 to 27.6 MTD as at 31 December 2004. It should be noted in this context that the annual average for global volume of refinancing dropped by 77.1 MTD, from 400.3 MTD in 2003 to 323.2 MTD in 2004.
246 The outstanding balance of claims purchased firm dropped by 80.7 MTD, following reimbursement by the Treasury of the eighth portion of claims on the Cereals Board and the National Oil Board. And the advance to the State for subscription to monetary funds increased by 11.6 MTD following annual readjustment of International Monetary Fund dinar accounts. This reflects appreciation of special drawing rights against the dinar. * Liabilities Banknotes and coins in circulation were up 302.1 MTD, from 2809 MTD at the end of 2003 to 3111.1 MTD at the end of 2004. Government accounts increased by 157.2 MTD, mainly because of the higher balance of the Treasury current account. Commitments in foreign currency to authorised intermediaries also increased, by 247.4 MTD, reflecting the higher volume of assets in foreign currency held by the banking system, deposited at the Central Bank. The increase in «differences on conversion and revaluation» was attributable mainly to the 42 MTD credit balance of the «Differences on conversion» account, after integration of the 93.9 MTD in the income account and maintaining of 42 MTD as a provision to cover the risk of variation in exchange rates in 2005. This compares to 10.8 MTD in 2003 as provision for the 2004 financial year. It should be noted that net gains in value from readjustment of accounts denominated in foreign currency for 2004 financial year amounted to 125.1 MTD, reflecting mainly strong appreciation of the European currency. And the increase under the heading «Memorandum accounts and accounts calling for adjustment» is due mainly to the remaining amount in foreign currency of income from the second portion of the GSM licence (123.8 million USD), which remains available to the Tunisian Treasury pending deposit into its dinar current account. b. Status of off balance sheet commitments Guarantee commitments increased by 837.1 MTD from the end of 2003 to the end of 2004, following in particular the recording of principal and interest on the debenture loan denominated in euros issued in 2004 for the Tunisian Government in the amount of 450 million euros. Commitments given and received on foreign currency swap transactions fell by 206.4 MTD and 176.3 MTD respectively, following reimbursement of payments that had fallen due in 2004 for coverage of debenture loans denominated in Japanese yen. c. Operating balance * Proceeds Total proceeds were up by 77 MTD, from 183 MTD in 2003 to 260 MTD in 2004, an increase of 42.1%. Despite the persistently low level of interest rates on international markets, proceeds from investment in foreign currency increased by 23.2 MTD, 15.4 MTD for interest on the securities portfolio and 7.8 MTD for interest on term deposits. These trends are due to a sizeable increase in foreign currency assets. 247 Gain on exchange from readjustment of accounts denominated in foreign currency and transferred from the «Differences on conversion» account to the result account amounted to 93.9 MTD. Other proceeds from foreign currency transactions fell by 27.3 MTD, due mainly to the lack of gain in value on sale of securities, attributable to lower prices on international markets. This had not been the case in 2003, when an amount of 25.6 MTD in gain in value was recorded. The 5.9 MTD drop in the level of «miscellaneous proceeds» was the result mainly of the lower volume of balances on non utilised budget lines, which amounted to 6.9 MTD in 2003 (related to 2002 and prior years), while the amount recorded in 2004 was just 1.1 MTD (related to the 2003 operating budget). * Costs Total costs amounted to 105.2 MTD, vs. 81.1 MTD in 2003, an increase of 24.1 MTD or 29.7%. This increase was due in large part to higher costs for foreign currency transactions (11.6 MTD of which 6.5 MTD came from the increase in costs for transactions to cover debenture loans denominated in Japanese yen and 2 MTD from the increase in carry back of current exchange swap transactions) as well as the constitution of provisions in the amount of 8 MTD following the drop in the value of securities in foreign currency. Staff costs amounted to 33.2 MTD vs. 30.5 MTD in 2003, an increase of 2.7 MTD, while general operating costs were up just 0.5 MTD. d. Breakdown of financial year results Following the above-mentioned trends, financial year results amounted to 155 million dinars vs. 102.1 million dinars in 2003. As per the terms of article 68 of the statutes of the Central Bank of Tunisia, the Executive Board approved breakdown of 2004 financial year results as follows : Financial year results 154,961,211 dinars Special reserve 2,500,000 dinars Social Fund reserves 2,000,000 dinars Provisions for banknotes, coins and medals manufacturing expenses 2,000,000 dinars Balance carried forward 61,211 dinars Share transferred to the State 148,400,000 dinars
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B A L A N C E S H E E T (In dinars) A S S E T S Notes 31/12/2003 31/12/2004 Variations Gold holdings 4,402,477 4,402,477 Subscriptions to international organisations 2,371,793 2,371,793 IMF reserve position 1 36,432,549 37,298,112 865,563 Assets and investments in special drawing rights 2 13,634,122 15,497,808 1,863,686 Foreign currency assets 3 3,550,145,086 4,760,304,931 1,210,159,845 Economic cooperation accounts 4 318,959,287 338,269,923 19,310,636 Refinancing to the lending institutions related to monetary policy transactions 5 435,000,000 90,000,000 -345,000,000 Securities purchased / open market 5,183,253 27,641,327 22,458,074 Claims purchased firm 6 403,618,333 322,894,667 -80,723,666 Advance to the State pertaining to Monetary Funds subscription 7 530,920,248 542,473,086 11,552,838 Standing advance to the State 8 25,000,000 25,000,000 Reimbursable advance to the State 9 3,053,125 2,553,125 -500,000 Postal current account 10 4,999,999 4,999,889 -110 Current collection of values 11 12,865,134 10,555,105 -2,310,029 Bills to be encashed 12 24,639,019 24,223,597 -415,422 Shareholding portfolio 13 24,659,667 25,189,945 530,278 Fixed assets 15,274,639 20,353,490 5,078,851 Miscellaneous debtors 14 20,786,531 22,216,149 1,429,618 Memorandum accounts and accounts calling for adjustment 15 36,328,993 31,567,362 -4,761,631 Total assets 5,468,274,255 6,307,812,786 839,538,531
LIABILITIES AND CORE CAPITAL Notes 31/12/2003 31/12/2004 Variations LIABILITIES Banknotes & coins in circulation 2,809,047,705 3,111,097,741 302,050,036 Bank and financial institutions current accounts 184,316,493 60,784,440 -123,532,053 Government accounts 16 769,572,974 926,772,873 157,199,899 Allocation of special drawing rights 17 61,725,747 63,393,860 1,668,113 Current account in dinar of foreign organisations 18 488,273,336 499,610,539 11,337,203 Commitments in foreign currency towards Tunisian authorised intermediaries 19 411,210,683 658,640,156 247,429,473 Foreign accounts in foreign currency 20 46,796,153 27,289,420 -19,506,733 Other commitments in foreign currency 21 60,760,576 66,046,573 5,285,997 Economic cooperation accounts 342,430,132 357,887,239 15,457,107 Depositors of paid-in bills 22 26,188,750 26,572,212 383,462 Differences on conversion and revaluation 23 10,816,240 42,218,711 31,402,471 Miscellaneous creditors 24 8,509,997 8,534,913 24,916 Provisions for banknotes, coins and medals manufacturing expenses 8,900,000 14,309,053 5,409,053 Memorandum accounts and accounts calling for adjustment 25 52,921,372 207,141,929 154,220,557 TOTAL LIABILITIES 5,281,470,158 6,070,299,659 788,829,501 CORE CAPITAL 6,000,000 6,000,000 Capital 26 76,157,560 76,551,916 394,356 Reserves 2,566,844 -2,566,844 Total core capital prior to financial year results 84,724,404 82,551,916 -2,172,488 Financial year results 102,079,693 154,961,211 52,881,518 Total core capital prior to allocation 186,804,097 237,513,127 50,709,030 Total liabilities and core capital 5,468,274,255 6,307,812,786 839,538,531
249 OFF BALANCE SHEET COMMITMENTS (In thousand dinars) Notes 31/12/2003 31/12/2004 Variations Commitments for guarantee 27 7,200,814 8,037,950 837,136 Debenture loans 6,686,360 7,533,599 847,239 Other external borrowings 514,454 504,351 -10,103 Commitments on foreign currency swap transactions 27 Commitments given on foreign currency swap transactions 1,017,579 811,169 -206,410 Commitments received on foreign currency swap transactions 722,950 546,693 -176,257
RESULT ACCOUNT (In dinars) Notes 31/12/2003 31/12/2004 Variations PROCEEDS Proceeds from intervention on the money market 22,574,846 20,837,968 -1,736,878 Interest on forward investments in foreign currency 72,416,072 95,654,358 23,238,286 Other proceeds on foreign currency 28 transactions 71,981,465 44,691,912 -27,289,553 Proceeds on transactions with international organisations 3,416,217 1,451,273 -1,964,944 Interest on claims on the State 224,094 209,094 -15,000 Interest on bank and financial institution accounts 246,510 283,230 36,720 Miscellaneous proceeds 8,284,164 2,412,502 -5,871,662 Returned provisions fort risks 4,000,000 -4,000,000 Returned provisions for banknotes, coins and medals manufacturing expenses 540,947 540,947 Provisions returned on securities 168,573 168,573 Gains on exchange/readjustment of foreign currency account 93,927,635 93,927,635 TOTAL PROCEEDS 183,143,368 260,177,492 77,034,124 COSTS Expenses related to money market intervention 424,794 4,087,020 3,662,226 Interest paid on transactions in foreign currency 5,927,398 6,946,949 1,019,551 Other expenses on transactions in foreign currency 29 21,791,352 33,411,069 11,619,717 Expenses on transactions with international organisations 5,095,726 3,282,503 -1,813,223 Miscellaneous expenses 1,514,657 135,371 -1,379,286 Personnel costs 30,542,469 33,263,877 2,721,408 General operating costs 7,357,022 7,890,969 533,947 Costs for banknotes, coins and medals manufacturing 6,250,000 6,490,947 240,947 Allocations for fixed asset amortisation 1,990,147 1,707,576 -282,571 Allocation for provisions/depreciation of securities 170,110 8,000,000 7,829,890 Total costs 81,063,675 105,216,281 24,152,606 Financial year results 102,079,693 154,961,211 52,881,518
250 AUDITOR’S STATEMENT FOR FISCAL YEAR 2004
Mr. Minister,
In compliance with the legal prescriptions and in fulfilment of the mission with which you have entrusted me, it is my honour to inform you that I have verified the accounts of the Central Bank of Tunisia drawn up as at 31 December 2004.
As per the law I have carried out a series of verifications and random checks to make sure that the balance sheet, the off- balance sheet, the profits and losses accounts and the table of distribution of results for the fiscal year are in compliance with the entries on the books of the Central Bank of Tunisia and with legal prescriptions.
This control helped me to note the consistency of the operations and their conformity with the statutory law.
Thus, the balance sheet, the off-balance sheet and the profits and losses accounts attached may be considered accurate, reflecting correctly the situation of the Central Bank of Tunisia as at 31 December 2004. The Auditor
Hédi BEN CHEIKH
251