عربي English Türkçe اردو فارسى
Logo
Latest News
Business

Tunisian Parliament Approves 2021 Budget With Deficit Forecast at 7% GDP

The central bank in Tunis | REUTERS/Zoubeir Souissi/File Photo
The central bank in Tunis | REUTERS/Zoubeir Souissi/File Photo
TT
20
TT

Tunisian Parliament Approves 2021 Budget With Deficit Forecast at 7% GDP

The central bank in Tunis | REUTERS/Zoubeir Souissi/File Photo
The central bank in Tunis | REUTERS/Zoubeir Souissi/File Photo

Tunisia's Parliament has approved with 110 votes in favor, 21 against, and two abstentions, the 2021 budget law with a deficit forecast at 8 billion dinars, or 2.5 billion euros, over 7% of GDP. State expenditure, according to the official page of Parliament, will total 41 billion dinars while revenues should reach 33 billion dinars.

Calculated on a price of oil at 45 dollars per barrel, the budget law sets a growth target of 4% in 2021, after a historic drop of GDP of 7% forecast in 2020 due to the crisis sparked by the COVID-19 pandemic.

Debate on the draft legislation began at the end of November and was marked by strong political tension with at times clashes recorded between bickering parties. According to the new measures, corporate taxes will go from 15% for those who had to pay 25%. Moreover, deductions on capital gains on the sale of stocks and bonds were cut from 25% to 15%.

Deductions on payments, commissions, intermediation, rentals, and revenues from noncommercial activities as well as payments in exchange for services dropped from 15% to 10%.

These dispositions will concern revenues made from January 1, 2021, and declared in 2022 and over the subsequent years.

Withholding taxes will occur as of January 1, 2021. The State budget for 2021 does not provide for hires in the public sector with the exception of healthcare and the security sector.

The Tunisian Central Bank (BCT) has criticized a deficit that was deemed excessive in 2020 (14% of GDP) and excessive internal financing in the supplementary budget. The four-year financing plan of the International Monetary Fund (IMF) ended in the spring without defining a certain strategy of collaboration for the future and an IMF delegation is about to arrive in Tunis, the Tunisian economy minister said recently.

Tunisia over the past few years has relied heavily on international donors. During the presentation of the draft budget in Parliament on November 28, the head of government Hichem Mechichi said the text presents ''a quantified framework'' of the ''infructuous'' political consequences stemming from several years of economic, social, and political instability. From the revolution in 2011, nine governments have taken office, preventing the adoption of fundamental reforms to relaunch an economy in difficulty.

Most Viewed

 
Business

Trump Goes to War with the Fed

US Federal Reserve Chair Jerome Powell, seen in April 2025, said he considered Fed independence to be a matter of law. Brendan SMIALOWSKI / AFP
US Federal Reserve Chair Jerome Powell, seen in April 2025, said he considered Fed independence to be a matter of law. Brendan SMIALOWSKI / AFP
TT
20
TT

Trump Goes to War with the Fed

US Federal Reserve Chair Jerome Powell, seen in April 2025, said he considered Fed independence to be a matter of law. Brendan SMIALOWSKI / AFP
US Federal Reserve Chair Jerome Powell, seen in April 2025, said he considered Fed independence to be a matter of law. Brendan SMIALOWSKI / AFP

Donald Trump's simmering discontent with the US Federal Reserve boiled over this week, with the president threatening to take the unprecedented step of ousting the head of the fiercely independent central bank.

Trump has repeatedly said he wants rate cuts now to help stimulate economic growth as he rolls out his tariff plans, and has threatened to fire Fed Chair Jerome Powell if he does not comply, putting the bank and the White House on a collision course that analysts warn could destabilize US financial markets.

"If I want him out, he'll be out of there real fast, believe me," Trump said Thursday, referring to Powell, whose second four-year stint as Fed chair ends in May 2026.
Powell has said he has no plans to step down early, adding this week that he considers the bank's independence over monetary policy to be a "matter of law."

"Clearly, the fact that the Fed chairman feels that he has to address it means that they are serious," KPMG chief economist Diane Swonk told AFP, referring to the White House.

Stephanie Roth, chief economist at Wolfe Research, said she thinks "they will come into conflict," but does not think "that the Fed is going to succumb to the political pressure."

Most economists agree that the administration's tariff plans -- which include a 10 percent "baseline" rate on imports from most countries -- will put upward pressure on prices and cool economic growth, at least in the short term.

That would keep inflation well away from the Fed's long-term target of two percent, and likely prevent policymakers from cutting rates in the next few months.

"They're not going to react because Trump posted that they should be cutting," Roth said in an interview, adding that doing so would be "a recipe for a disaster" for the US economy.

- Fed independence 'absolutely critical' -
Many legal scholars say the US president does not have the power to fire the Fed chair or any of his colleagues on the bank's 19-person rate-setting committee for any reason but cause.

The Fed system, created more than a century ago, is also designed to insulate the US central bank from political interference.

"Independence is absolutely critical for the Fed," said Roth. "Countries that do not have independent central banks have currencies that are notably weaker and interest rates that are notably higher."

Moody's Analytics chief economist Mark Zandi told AFP that "we've had strong evidence that impairing central bank independence is a really bad idea."

- 'Can't control the bond market' -
One serious threat to the Fed's independence comes from an ongoing case in which the Trump administration has indicated it will seek to challenge a 1935 Supreme Court decision denying the US president the right to fire the heads of independent government agencies.

The case could have serious ramifications for the Fed, given its status as an independent agency whose leadership believes they cannot currently be fired by the president for any reason but cause.

But even if the Trump administration succeeds in court, it may soon run into the ultimate guardrail of Fed independence: The bond markets.

During the recent market turbulence unleashed by Trump's tariff plans, US government bond yields surged and the dollar fell, signaling that investors may not see the United States as the safe haven investment it once was.

Faced with the sharp rise in US Treasury yields, the Trump administration paused its plans for higher tariffs against dozens of countries, a move that helped calm the financial markets.

If investors believed the Fed's independence to tackle inflation was compromised, that would likely push up the yields on long-dated government bonds on the assumption that long-term inflation would be higher, and put pressure on the administration.

"You can't control the bond market. And that's the moral of the story," said Swonk.

"And that's why you want an independent Fed."